The Contractor's Compass September 2014

THE

ASA’s

THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION

WWW.ASAONLINE.COM

SEPTEMBER 2014

Technology Innovation— The World of Construction 2.0 Using Technology as a System of Engagement Developments in Technology Streamline Prequalification Process Enlisting Subcontractors to Help Manage Workplace Safety Using Predictive Analytics Thriving Online by Understanding the Future of the Internet Legally Speaking: Using Technology to Monitor Receivables in a Way that Helps Your Legal Position

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THE

ASA’s

September 2014

Features Innovation—The World of Construction 2.0.................................. 8

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.

by Gregg Schoppman

Using Technology as a System of Engagement....................... 12

by Brian Chickowski

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).

Developments in Technology Streamline Prequalification Process................................................................... 16 Steven Yapdiangco

EDITORIAL STAFF Editor-in-Chief, Marc Ramsey

Equitable Subrogation: Court Ruling Falls Short of a ‘Bright Line’ Rule........................................................................ 19

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.

by Matthew B. Meaker

Safety in Numbers: Enlisting Subcontractors to Help Manage Workplace Safety Using Predictive Analytics........... 20

by John Watras

Thriving Online by Understanding the Future of the Internet..................................................................................... 22

FASA BOARD OF DIRECTORS Richard Wanner, President Letitia Haley Barker, Secretary-Treasurer Brian Johnson Robert Abney Anne Bigane Wilson, PE, CPC SUBSCRIPTIONS The Contractor’s Compass is a free monthly publication for ASA members and nonmembers. Subscribe online at www.contractorsknowledgedepot.com.

by George Minardos

Departments

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

CONTRACTOR COMMUNITY............................................................ 4 CONSTRUCTION IN THE COURTS................................................... 6

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.

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.

LEGALLY SPEAKING.......................................................................... 24 Using Technology to Monitor Receivables in a Way that Helps Your Legal Position

by Scott Wolfe

CONTRACT CORNER........................................................................ 27 Negotiate Better Contract Terms

Quick Reference

LAYOUT Angela M Roe angelamroe@gmail.com

ASA/FASA CALENDAR..................................................................... 28 COMING UP....................................................................................... 28

© 2014 Foundation of the American Subcontractors Association, Inc.

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Contractor Community

ASA Calls for 100 Percent Payment Bond on West Virginia P3 Project In a letter to the West Virginia Department of Highways, ASA called on the agency to assure subcontractor and supplier payment by requiring a 100 percent payment bond on the construction components of the Coalfields Expressway Grade and Drain Project, which will be a public-private partnership. The state law authorizing the use of P3s for transportation projects requires performance and payment bonds only “in the forms and amounts satisfactory to the division.”

ASA recommended that the DOH follow the tenets of the state’s Little Miller Act, which requires a 100 percent payment bond and does not permit alternatives to the bond.

OSHA Rule on Electric Power Generation, Transmission and Distribution Work Takes Effect An Occupational Safety and Health Administration rule governing workplace safety and health for workers performing electric power generation, transmission and distribution work took effect on July 10. The new standard, the first in 40 years, makes the construction standard for electric power line work more consistent with the corresponding general industry standard. It also includes new or revised provisions for host and contract employers to share safetyrelated information with each other and with employees, as well as for improved fall protection for

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employees working from aerial lifts and on overhead line structures.

In addition, the new rule includes revised approach-distance requirements to better ensure that unprotected workers do not get dangerously close to energized lines and equipment. The rule also adds new requirements to protect workers from electric arcs. General industry and construction standards for electrical protective equipment also are revised under the rule.

The new standard for electrical protective equipment applies to all construction work and replaces the existing construction standard with a set of performance-oriented requirements. In addition, the new standard addresses the safe use and care of electrical protective equipment, including new requirements that equipment made of materials other than rubber provide adequate protection from electrical hazards.

More information is available at http://www.osha.gov/dsg/power_ generation/.

DOL Proposes to Extend Family and Medical Leave Act to Same-Sex Marriages The U.S. Department of Labor issued a proposed rule that would extend the protections of the Family and Medical Leave Act to all eligible employees in legal samesex marriages regardless of where they live. The Department proposed the rule in light of the U.S. Supreme Court’s 2013 decision in United States v. Windsor, in which the court struck down the Defense of Marriage Act provision that interpreted “marriage”

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and “spouse” to be limited to opposite-sex marriage for the purposes of federal law.

The proposed rule would change the FMLA regulatory definition of “spouse” so that an eligible employee in a legal same-sex marriage will be able to take FMLA leave for his or her spouse or family member regardless of the state in which the employee resides. Currently, the regulatory definition of “spouse” only applies to same-sex spouses who reside in a state that recognizes same-sex marriage.

Under the proposed rule, eligibility for FMLA protections would be based on the law of the place where the marriage was entered into, allowing all legally married couples, whether opposite-sex or same-sex, to have consistent federal family leave rights regardless whether the state in which they currently reside recognizes such marriages.

ConsensusDocs Offers New Subscription Package for Design Professionals and Owners The ConsensusDocs coalition unveiled a new subscription package of contract documents especially for design professionals and owners who want to use fair and balanced contracts. Under the package, design professionals and owners receive a comprehensive set of standard contract documents on the ConsensusDocs Microsoft Wordcompatible technology platform that allows either online or office usage.

The package costs less than an AIA contract documents subscription.

“ConsensusDocs contracts are fair to

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architects and engineers, insurable, and do not raise the standard of care,” said Brian Perlberg, executive director and counsel of ConsensusDocs.

“ConsensusDocs offers design professionals and owners alike a real choice in fair standard contract documents. Self-serving and overly protective contract terms, simply lead to a distrust of gamesmanship, communication silos, and eventually inflated construction costs and contingencies.”

The new design professional/owner package provides unlimited use of design professional and select other contracts for one year, including 200.2, 220, 221, 222, 240, 245, 250, 270, 271, 280, 281, 291, 292, 296, 300, 301, 310, 420, 421, 422, 491, 492, 498, 499, 721 and 803, for $349/ ASA members and non-members, plus $209 per additional user (up to nine user licenses). Contact ConsensusDocs at (866) 925-3627 for volume pricing for 10 or more user licenses.

ConsensusDocs are the only standard contracts written and endorsed by 40-plus leading design and construction industry associations. ASA is a founding member of the ConsensusDocs coalition, which publishes a library of 100-plus contracts and documents. ASA members can use the promotional code ASA100 to receive a special member discount off ConsensusDocs subscriptions. View the new ConsensusDocs catalog of contract documents.

OSHA Introduces Training Tool on Workplace Hazards The Occupational Safety and Health Administration released a

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new interactive training tool to help small businesses, particularly in the construction industry, effectively identify hazards in the workplace.

Employers and workers can virtually explore how to identify common workplace hazards and learn about hazard abatement and control.

“Hazard identification is a critical part of creating an injury and illness prevention program that will keep workers safe and healthy on the job,” said Dr. David Michaels, assistant secretary of labor for occupational safety and health. “This new tool not only educates employers about how to take control of their workplaces and protect workers, it also demonstrates that following well-established safety practices is also good for the bottom line.”

Through the hazard identification tool, users can play from the perspective of either a business owner or an employee as they learn to identify realistic, common hazards and address them with practical and effective solutions. The tool explains the key components of the hazard identification process, which include information collection, observation of the workplace, investigation of incidents, employee participation and prioritizing hazards.

The hazard identification training tool can be found on OSHA’s Web site at www.osha.gov/hazfinder.

AAA Publishes New Rules for Fixed Time and Cost Construction Arbitration The American Arbitration Association has inaugurated a new set of supplementary rules that enable parties to predict the time and cost of their construction arbitration.

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These Supplementary Rules for Fixed Time and Cost Construction Arbitration were designed in response to increasing concerns among users that they are unable to foresee the ultimate fees and completion time of construction arbitrations.

With the use of these new supplementary rules, parties can calculate: • The maximum time to complete the arbitration.

• The number of hearing days the arbitration will run.

• The arbitrator costs.

• The AAA administration fees.

For example, for cases in the $250,000 to $500,000 range, the rules prescribe a maximum of 180 days from filing to award, with no more than three hearing days. Arbitrator compensation for hearing days and study time (limited to 12 hours) is capped at $275 an hour. Administrative fees to the AAA are fixed at $5,000. The supplementary rules also encourage client participation by requiring that each party representative provide contact information for a “designated employee,” such as in-house counsel or senior level executive, and require that the AAA and/or arbitrator include such designated employees on all communications related to the arbitration.

The construction experts on the AAA’s National Construction Dispute Resolution Committee, of which ASA is a member, worked in tandem with the AAA to create these innovative rules, which provide for more time and cost certainty in construction arbitrations.

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Construction in the Courts Edited by R. Russell O’Rourke, Esq., partner and chair of the Construction Law Group, Meyers, Roman, Friedberg & Lewis, Cleveland, Ohio.

A brief review of recent cases that affect your business Missouri. The Missouri Supreme Court holds that a mechanic’s lien recorded prior to a purchase money mortgage may have priority over the mortgage in the right circumstances.

The Missouri Supreme Court held in the case Bob DeGeorge Associates, Inc. v. Hawthorn Bank that mechanic’s liens which attached to property prior to the recording of purchase money deeds of trust were prior and superior to the purchase money mortgage interests held by the lender.

The Court of Appeals in Jimmy Jones Excavation, Inc. v. Lawrence Bank a mortgage lender which loaned money to buyers of five residential lots and simultaneously recorded purchase money deeds of trust upon making of the loans argued that its purchase money deeds of trust were prior and superior to mechanic’s liens under an exception discussed in the Bob DeGeorge case. Under that exception, purchase money mortgage interests are considered prior and superior to mechanic’s liens where construction work is performed under contract with a person who has agreed to buy but has not yet taken title to the property and such work is performed without the knowledge or acquiescence of the current owner of the property who subsequently takes a purchase money mortgage upon conveyance of the property.

Because the buyer takes title charged with the purchase money mortgage interest, the mechanic’s lien does not take precedence over the mortgage interest. In Jimmy Jones, the appeals court held that the mortgage lender did not show why the exception applied. The mechanic’s liens attached when construction commenced two years prior to the recording of the purchase money deeds of trust and the liens were not for labor or

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material ordered without the current owner’s knowledge or acquiescence or even by the eventual lot buyers.

Lee B. Brumitt is a construction law and litigation partner at the Kansas City, Mo., law firm Dysart Taylor Cotter McMonigle & Montemore, P.C. He may be reached at (816) 714-3027 or via email.

Texas. Good news for contractors in Texas regarding insurance coverage and the “Contractual Liability Exclusion.”

The Texas Supreme Court ruled in the case Ewing Construction Co. v. Amerisure Ins. Co. that the “Contractual Liability Exclusion” does not apply when the insured contractor could be liable for those same damages outside of the contract, i.e. for alleged negligence.

Ewing Construction contracted to install tennis courts for a school district. The school district later complained that the courts were not performing as promised. The district sued Ewing for negligence and for breach of contract, specifically the breach of contract for allegedly not “performing in a good and workmanlike manner.” Ewing’s insurance carrier denied coverage under the “Contractual Liability Exclusion” in the policy because the insurer claimed the damages came from a breach of contract.

The court held that the exclusion did not apply, the finding that the exception to the exclusion — which is that if Ewing is liable for damages that it would be responsible for outside of a contract, then the contractual liability exclusion does not apply, even if it is also a breach of the contract. In this circumstance, Ewing had a duty to perform in a

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good and workmanlike manner even if the contract with the district did not exist — so Ewing’s contractual promise to do so did not “enlarge” its obligations to the district. The court distinguished the Ewing case from the facts in its 2010 decision, Gilbert Texas Construction v. Underwriters at Lloyd’s of London, where the Court found the Contractual Liability Exclusion did apply. The Gilbert facts were “unusual” because the only liability against Gilbert was under a contract claim — not under any other duty existing in Texas law.

Jane Haas is a commercial and construction law litigator at the Houston, Texas, office of LeClairRyan.

She may be reached at (713) 752-8357 or via email.

Florida. Settling a Case? Be Careful what you (or your kids) say if there is a Confidentiality Clause. A Florida Court of Appeals Court held in the case Gulliver Schools v. Snay that a well-drafted confidentiality provision saved a Florida employer $90,000 in its settlement with an age discrimination plaintiff.

Gulliver Schools agreed to pay the former headmaster of one of its schools $150,000 to settle his age discrimination complaint, consisting of $90,000 for Snay and $60,000 for the former headmaster’s attorneys.

The agreement included what the court described as a “detailed confidentiality provision”: 13. Confidentiality … [T]he plaintiff shall not either directly or indirectly disclose, discuss or communicate to any entity or person, except his attorneys or other professional advisors or spouse any information whatsoever regarding the existence or terms of this Agreement. … A breach … will result in disgorgement

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of the Plaintiff’s portion of the settlement Payments. Four days later, on Nov. 7, Gulliver notified Snay that he had breached the agreement based on a Facebook posting by his collegeage daughter to her 1,200 Facebook friends: “Mama and Papa Snay won the case against Gulliver, Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.” On Nov. 15, Gulliver tendered the $60,000 check for attorney fees, but withheld the payments to Snay. Snay moved for a ruling that his disclosure to his daughter and her Facebook comment did not constitute a breach of the settlement agreement. The trial court agreed with Snay, but the appeals court reversed. Under the unambiguous terms of the confidentiality provision, the appeals court found that Snay had “directly or indirectly disclose[d] … the existence or terms of this Agreement.”

Brian Cubbage is the contraction administration counsel for Heico Construction Group in Alexandria, Va. He may be reached at (816) 332-4854 or via email.

Ohio. The Ohio Supreme Court strictly read the payment provision of a contract to be a Pay-if-Paid clause in the case Transtar Electric, Inc. v.

A.E.M. Electric Services Corp. The Court reversed a Lucas County Court of Appeals decision that determined that, although the contract contained the language, “RECEIPT OF PAYMENT

BY CONTRACTOR FROM THE OWNER FOR WORK PERFORMED BY SUBCONTRACTOR IS A CONDITION PRECEDENT TO PAYMENT BY CONTRACTOR TO SUBCONTRACTOR FOR THAT WORK.” The Court of Appeals noted that Pay-if-Paid clauses are disfavored by courts and that some states have either limited or voided such clauses by statute and some others have judicially declared such clauses to be against public policy as abrogating the states’ lien laws. The appeals court held that to shift the risk of non-payment to the subcontractor the clause, “must be made plain in plain language … while the words ‘condition precedent’ may be helpful, the term is not sufficiently defined to impart that both parties understand that the provision alters a fundamental custom (paying the T H E

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sub for its work) between a GC and a sub.” The Supreme Court determined that that language, “clearly and unequivocally shows the intent of those parties to transfer the risk of the project owner’s nonpayment from the GC to the sub.”

The Supreme Court had a very clear answer: words in a contract mean what they say, even if the meaning is not obvious to the lay reader. If you don’t understand it, call your lawyer.

ASA’s SLDF filed an amicus brief in support of the subcontractor’s argument, adding that such clauses should be void and unenforceable as against public policy. Many ASA lawyers offer low cost or flat fee contract reviews to protect you against this happening to you. Be sure that you take advantage of this benefit of membership.

Russell O’Rourke is chair of the Construction Law Group of the Cleveland, Ohio, firm Meyers, Roman, Friedberg & Lewis. He may be reached at (216) 831-0042 or via email.

Indiana. The U.S. Court of Appeals for the Seventh District (Indiana) held in Orton-Bell v. State of Indiana that an employment law/sexual harassment case must establish that “(1) she is a member of a protected class, (2) her job performance met [her employer’s] legitimate expectations, (3) she suffered an adverse employment action, and (4) another similarly situated individual who was not in the protected class was treated more favorably than the plaintiff.” This case involves a claim of sexual harassment made by a substance-abuse counsel at an Indiana maximum security prison against her co-workers and superiors. The allegations fall into two categories: 1) Other employees and correctional officers at PCF were having sex on Orton-Bell’s desk. When she complained, a supervisor told her he didn’t care as long as offenders were not involved. Another co-worker suggested she clean her desk every morning; and 2) Orton-Bell’s coworkers engaged in sexually charged banter with her, and subjected her to differing treatment such as more invasive pat-downs searches in the shakedown area.

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The court concluded that the “sex-on-desk” allegations could not support a claim for sexual harassment because she could not prove the conduct, while egregious and offensive, was because of her sex: “If there were evidence that the night-shift staff were using her office because she was a woman, and her supervisors were indifferent, that would be enough. If there was evidence that night-shift staff similarly used a man’s office, and her supervisors intervened in that circumstance but not in her circumstance, that would be enough.

There is neither.” The remaining allegations, however, painted a different story: “The constant barrage of sexually charged comments, however, was clearly pervasive, offensive, and based on Orton-Bell’s sex.”

This case illustrates: 1. The requirement of “Because of sex” in the law of a sexual harassment case has real teeth to it. No doubt, the desk-sex is gross and offensive. Yet, Orton-Bell could not offer any evidence that the use of her desk was for any reason other than the fact that it was located in a private office. Absent evidence that the use of her desk was sex-based, that allegation could not support a harassment claim.

2. If your workplace is sexually charged, it will eventually catch up with you. It is almost impossible to fathom the difficulties of managing employee behavior in a maximum security prison. Nevertheless, Title VII does not stop at the door just because the workplace is inherently hostile.

Jon Hyman is a partner in the Employment Law Group of the Cleveland, Ohio, firm Meyers, Roman, Friedberg & Lewis. He may be reached at (216) 831-0042 or via email.

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Feature Innovation — The World of Construction 2.0: Driving Sustainable Innovation Throughout a Construction Organization

by Gregg Schoppman

The world is witnessing a new Renaissance. Just as Michelangelo, Raphael, Dante, Galileo, Titian and Botticelli defined a generation of classical painting, sculpting, mathematics and literature, a new revolution surges in the world of business. For the last three or four decades, innovative business leaders have dramatically altered the landscape with truly groundbreaking ideas that have forever changed how the world lives. Sparked by the ingenuity of brilliant minds such as Jobs, Zuckerberg, Page, Brin and Gates, countless scientists, programmers, inventors and entrepreneurs toil tirelessly to invent the next “big thing.” Facebook, Google, Instagram, iPhone, and Zygna dominate the headlines and inspire start-ups and savvy business people to create. “Create” may be an oversimplification — obviously there are many innovative ideas that sprung from the desire to make things easier for users and customers.

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Others — like the iPhone and Facebook — moved simple conveniences such as a phone and networking to the world of necessities. What sounds frivolous and petty, has managed to reshape the business world that we see today.

One person’s passion fueled a world’s populace to take a rather mundane idea (i.e. the phone) and catapult it to a device that few can live without — which brings us full circle to the construction industry.

On the continuum of innovation, there are few construction firms that would be confused for the likes of Apple or Google. Obviously, it is unfair to compare the likes of a civil or electrical contractor to that of Google.

Whether it is the industry or just the people that comprise it, comparing a construction firm to Apple is well, apples and oranges.

The flawed thinking, however, is not comparing Apple and XYZ Construction Inc., but rather failing to recognize the fact that regardless of

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the industry, every contractor can take a page out of the “Google Handbook.”

Consider the following questions: • Is your firm still using the processes and tools that were created at the firm’s inception?

• To what extent does your firm leverage technology to communicate internally?

Externally? Are you still fumbling to manage a serviceable Web page? Is Facebook simply for “those young people” in your firm?

• Do you train your associates?

If yes, is it once a year, predominantly focused only on safety, requiring everyone to be in the same place at the same time?

• If someone had a new idea, how would he or she implement it?

How would that idea become a new “best practice” in your firm?

The last question should be the most thought-provoking. Every day, there are great ideas that come to life through the ingenuity of mastermind managers and supervisors. However, because of the fragmented nature of the business, these great ideas often become singular moments in a firm’s life with no chance of replication.

There is often a victim mentality in the construction industry. “We’re not Google — we are builders.”

“We’re only an $X million firm — we couldn’t possibly do something that grand.” The pervasive belief that because a drywaller or plumber is not

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creating the next iPhone, innovation cannot exist. Meanwhile, carpenters, technicians and pipelayers constantly “engineer” the methods and means to drive innovative thinking on the jobsite every day without so much as a second thought. Figure 1, on preceding page, illustrates the concept of sustaining innovation and disruptive innovation.

As a whole, everyone would like to create the next iPhone or device that moves not only an industry but reshapes the world. It is sexy to think that an individual or firm was responsible for redefining a market, niche or even how people live today.

However, most of the ideas that will help an organization will occur at the ground level. Whether it is processing payroll more efficiently or tracking a plumber’s inventory or some new formwork technique that saves 10 percent in labor expenditures, sustaining innovation not only has a higher probability to occur but when shared across a firm, it will probably have a greater impact long-term.

As mentioned previously, ideas are constantly percolating at the field level through amazing practitioners.

Business leaders must reflect on the internal machinations of their firm to ensure “game changing” ideas languish on the isolated islands that are their projects.

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For so many people, innovation involves the latest gimmickry and gadgetry. Innovation for a construction firm is more of a groundswell toward an evolution in thinking. “How can we do this better?” is more of a rallying cry to inspire everyone and ultimately avoid the stagnation of complacency.

Complacent firms are comfortable and satisfied with their current destination — leading firms are ones that evolve their thinking to recognize that there is no destination but improving the trajectory of the journey is most important.

the home office with few linkages to the hub. Human behavior is another reason innovation fails to occur. In the same vein of complacency, there is always a reluctance to embrace a new idea or concept, especially one that may not have been fully vetted. Lastly, there remains a lack of strategic thinking across many firms — complicating this matter is the integration of new

Innovation Inhibitors Complacency is one aspect of a business that inhibits forward-thinking. “Why bother to change the company — we are making money now.”

Additionally, there may be drastic disconnects within the firm that serve as barriers to creative thinking.

Isolationism in the construction industry is not uncommon — superintendents and foremen on site, miles from

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IN THIS ARTICLE . . . �

�

�

You don’t have to be Google to be an innovator, but take a page out of its handbook.

Complacency is one aspect of a business that inhibits forward-thinking.

For years firms have rewarded safety and tenure — why not innovation?

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ideas while building the business on the heels of the “Great Recession.”

Table 1, below, examines the “root thinking” of many leaders relative to innovative thinking and its connection to the industry tumultuous economic cycles.

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multitude of resources (i.e. media, consultants, etc.) the most powerful changes occur by the practitioners and with their consent. Change — proactive and constructive change — will not occur through osmosis.

While the majority of the discussion

Recession

Growth

The reason we are not Reluctance: Too worried to innovating in the way we change because work is do business is because ... scarce.

Fear: Too busy to try something new in light of properity.

Our focus right now is not We are just trying to make on innovating because ... payroll and keep our r esources busy.

We are trying to not burn out our people; they are slammed as it is.

Our people don’t think innovatively because ...

We have enough money in the bid to cover any inefficiencies; when we get un-busy, we can work on improving and motivating.

It is all hard bid and there is no reason to change when we are a commodity.

Change does not occur in Innovation costs money and our firm because ... we are very cost-conscious right now.

There is no time to learn a new technology now.

Table 1: Innovative Thinking Inhibitors and the Economic Cycles

By the rationale posted, there would never be a good time to change or innovate. There is also a compulsion to “subcontract” thought leadership in that while there may be limited time and resources in the firm now, we can rely on others to do the thinking for us. Put another way, the people that do the work will focus on that while other “change agents” will work complementary to them to enact new concepts. While idea generation often comes from the outside via any

has been around operations, it is important to examine every aspect of the firm relative to innovative thinking.

For instance, does the firm still rely on traditional training and education or has it evolved to include traditional and sometimes stale delivery? Does the business planning concept appear to have lost its luster and has it become more of a perfunctory exercise of “number manipulation?”

Figure 2, below, is an illustration to guide a firm’s leadership to objectively

evaluate the capabilities and level of forward-thinking that is present or absent.

It is also important to ask several fundamental questions when grading the level of innovation in the firm: • What “sacred cows” are we not willing to change? Why? • Is there a definable ROI for making change? If not, is there some other metric that can be considered to provide a measure of success?

• Can we enact innovative change in the firm while running the business?

• Who will be the “Chief Innovative Officer?”

• Do we discount how long “true” change will take? Is this a simple azimuth adjustment or is this change moving the entire organization in a different direction?

As the industry pushes out of its malaise, firms will begin hiring more staff. Another litmus test for innovation might rest in this category. Will the hiring process simply be gauged by if an individual can fog a mirror or might the firm take a chapter from the Google Playbook. Why not implement some sort of testing to evaluate talent and capabilities? While this doesn’t imply instituting a complex and arduous IQ exam, a firm’s hiring process might benefit from a simple innovation in thinking.

Figure 2 — Grading Innovation Across the Firm

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Inspirations to Innovation So many firms have captured the spirit of innovation in their firm’s vision, mission or core values, yet they would hardly be categorized as innovative firms. The concept is attractive and appeals to the progressive mind. Few people want to be part of the firm that adopts a mantra of “We’re stuck in our ways, don’t be bringing that change around these parts.” However, true innovation requires action. Talk is cheap and innovation will not survive on lip service. Inspiring innovation has to come from all levels within the firm and most importantly it must be encouraged. Below are some “inspiring” ideas to sow the seeds of innovation: • Think BIGGER! Don’t be limited by borders or industry conventions — be willing to look outside of the construction industry and even outside of our country. Consider the Lean Movement — it was born from a manufacturing concept.

What are peer organizations doing in China? Europe? What lessons can we learn from Southwest Airlines? McDonalds?

• Challenge Conventional Thinking. As firms look to tablets, GPS, 3D modeling, augmented reality and robotics, challenge the normal conventions but saying, “How can we incorporate this model here?” Start small, but start with something.

• Reward Innovation. For years firms have rewarded safety and tenure — why not innovation? Let the associates of the firm know it rewards great new ideas. Become a think tank that supports new ideas not a vacuum of despair!

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• The Power of Metrics. Metrics

of all kinds provide tangible results in sometimes intangible circumstances. Measuring success provides even the greatest cynic evidence of innovative genius.

• Make it Fun! A little competition never hurt anyone. Make it a sport and harness the internal horsepower to create! Instead of a stodgy Standard Operating Procedures, make it the “Team Playbook.”

Innovation is an action, whereas complacency is an attitude. Best of class firms — regardless of the industry — emphasize this concept through every aspect of their business.

Even the most granular idea is examined and reflected upon. Whether a firm is leveraging the latest tablet is secondary to how its people think on a daily basis. Yes, Google and Apple and Facebook are on the forefront of the gadgetry universe. However, their success lies in how their people think about problems differently. Their product manifests itself as a phone or Web site, but the true evolution of their business lies more in how one or two individuals solved a problem.

Each of these innovative businesses has strong competition and in some cases, they evolved far past their peers. How do you solve problems?

How do you innovate to be a better business tomorrow? Ask yourself — do I want to be the Google or Apple of the construction industry or some dinosaur?

practice. Schoppman presented six education modules at ASA’s annual convention, SUBExcel 2014, in March in New Orleans, La. 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 multi-family 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.

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

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Feature Using Technology as a System of Engagement

by Brian Chickowski

One of the most difficult issues that plagues contractors of all sizes and trades these days is the lack of a tool to monitor the labor production of a project while it’s being constructed.

On a typical construction project, labor contains the most risk of any cost type and is typically 30 percent to 40 percent of the total construction budget. Yet, most contractors do not have any tools in place to monitor the labor being expended on their projects.

All too often, the field staff is provided with a set of construction drawings and a “Go Build It” directive and then criticized by upper management when the project finishes over labor-budget. In reality, the project staff was not provided with any tools to monitor the labor

being consumed on the project and had no way to ensure that the project is kept on budget. The tool that is lacking needs to put a spotlight on any labor deficiencies so that they can be identified and corrected as the tasks are being performed on a weekly basis and not when the job has run over budgeted hours. Bestin-Class contractors develop, train to, and have the discipline to require the use of a Production Tracking System by their project teams and review the feedback it provides regularly to assure project success and accurate labor forecasting.

A successful Production Tracking System contains three distinct work steps, but the foundation is a construction budget that is broken down into standard repetitive task

codes and then organized by phase and geographic work areas that allow for easier time and quantity tracking at the field level. An example being a budgeted cost code identified as A1-1234.

This cost code tells the employee where and what task is being performed on the project. In the example of A1-1234, the cost code is broken down into a phase, “A” with a description of “Building A”, a work area “1” with a description of “1st Floor” being the first floor of a multistory building and lastly the repetitive task code “1234” with a description of “Install 4” PVC Conduit.” There most likely will be multiple phases and there certainly will be multiple work areas, however, the work tasks will always be the same no matter what

Figure 1 — Production Tracking System

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the project that is being constructed may be. Best-in-Class contractors establish their construction budgets so that no single phase/area/task code contains any more than 5 percent of the total labor budget.

If a construction budget has 5,000 labor hours, no single phase/area/ task should have more than 250 labor hours.

A Production Tracking System (see Figure 1) can take on many forms.

It could be sophisticated Internetbased software that is linked directly to the accounting/ERP software of the organization that handles all three work steps and returns the time card and quantity data weekly to the accounting/ERP software for automatic processing. Or it can be a manual process of completing spreadsheets for all three work steps that make up the Production Tracking System, which are manually entered into the accounting/ERP system for processing. Either way, feedback is necessary to assist the project staff with keeping the project within or beating budget.

The first step of a Production Tracking System is a Short Interval Plan, or as most in the construction industry are familiar with, a threeweek look ahead. It allows the field

staff to plan their work for the next three weeks and puts visibility on manpower needs of the project as well as the availability of materials and equipment required by the field work force to perform the planned tasks. The goal of the plan is to minimize recoverable lost time and to ensure that there are no obstacles, such as an RFI that requires an answer, which may be preventing the field from completing the planned tasks. Project Managers should review the Short Interval Plan with the field staff on a weekly basis and address any hindrances to the field staff in accomplishing their plan.

The other key component to the Short Interval Plan is its ability to provide the field work force with quantifiable production targets to achieve on a weekly basis. These production targets are based on budgeted units of production and the man hours the field staff intend on expending during the week on the planned tasks. This budgetary production target is produced by multiplying the total hours planned on a cost code by the budgeted production rate. As an example, if the production rate for wire terminations is 5 per hour and the field is planning on having two employees work on

terminations for four hours each during the week, the production target is 40 terminations (5 per hour x 2 employees x 4 hours worked each).

The second step of a Production Tracking System is nothing new and occurs with every contractor performing work today. It is capturing the labor hours actually worked on the project on some form of a time card on a daily basis as the work is performed by the field staff (see Figure 2). While an ideal time card self populates with the cost codes that were included in the Short Interval Plan, it also needs to have the flexibility to allow for time to be charged against tasks that were not included on the planned work activities. These cost codes need to be identified in some way to provide feedback to the project team that the work that was actually performed by the field staff differed from the planned work activities. Depending on the cause of the variance in work performed in relation to the work planned, the project team must determine if there is justification to produce a request for equitable adjustment to the client if the cause was influenced by others such as out of sequence work.

Figure 2 — Capturing Labor Hours

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The final step of a Production Tracking System is to capture project progress by tracking installed quantities either daily or weekly (see Figure 3). This is achieved by either physical count of materials installed or reporting in increments of percent complete, but must be tracked in the same unit of measurement definition that is included in the construction budget. For example, if the construction budget identifies 5,000 linear feet of conduit to be installed, the field staff must track total linear feet installed and may not report on a percent complete basis. This ensures that job to date quantities are accurate and earned hours are calculated properly. The actual installed quantities need to be compared to the production targets set forth in the Short Interval Plan of the same week and when production targets are not met, the cause needs be identified and subsequently corrected if possible.

After all three steps of the Production Tracking System are complete, the project team then provides approvals of both the time and quantities reported by the field staff. The resulting feedback provides the number of hours earned as it compares to the actual hours incurred. Earned hours are defined as the number of hours that are in the construction budget to complete the same progress that is reported by the field staff. The field staff are most familiar with hours and interpret a simple bar graph to display the status of the project from an earned labor hour calculation. And with the breakdown of phase/area/task, the data can be rolled up by phase, by phase and area, or by task depending on what information is desired.

These earned hour reports and percent complete calculations become the first step in assisting the project team in accurately forecasting labor costs in dollars to complete on a cost code-by-cost code basis.

Once operational within an organization, a Production Tracking System assists the field staff in planning their work and provides budgetary production targets, which

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Figure 3 — Tracking Installed Quantities

Figure 4 — Earned Hours Report

are monitored as production occurs during the course of a project. Weekly, the project team is informed of what work tasks are planned and if any information or item prevents the accomplishment of the planned work activities. Labor hours are captured via time cards and actual installed quantities are recorded and measured against the planned production.

Earned hours are calculated and the feedback is provided back to the field staff for their use in keeping up with the budget and the project team uses the same information to accurately forecast job costs as completion (see Figure 4).

Best-in-Class contractors are embracing Production Tracking Systems to engage both field and office staff in the progress of their construction projects. In addition to comparing actual field production rates to budget production rates, Production Tracking Systems also provide valuable feedback to their estimating departments. The actual production rates that their organization can achieve are loaded

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into the estimating software for bidding purposes. Simply put, these firms understand not only their material, equipment and overhead costs, but also have measured their own field labor production rates and use those results to help them win more work.

Brian Chickowski is an associate director at Maxim Consulting Group, responsible for evaluation and the implementation processes with clients. He has worked with construction firms of various sizes to evaluate business practices and assist with the business process changes.

Having worked in the industry for over 15 years, Chickowski brings practical experience, an enthusiasm for success and leadership to help his clients improve and succeed.

Areas of specialization include organizational assessments, project execution, productivity improvement, and automation of processes. He can be reached at brian.chickowski@ maximconsulting.com.

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Feature Developments in Technology Streamline Prequalification Process

by Steven Yapdiangco

As risk management becomes increasingly ingrained in construction projects, the practice of prequalification is becoming more prevalent, which is creating both challenges and opportunities for subcontractors. In seeking more proactive ways to mitigate financial exposures and other risks, a growing number of general contractors are embracing qualification management and are requiring much more information from their subcontractors prior to awarding work — or even soliciting bids.

To maximize the benefits of prequalification, construction companies increasingly are looking to technology to simplify and standardize the complex

IN THIS ARTICLE . . . �

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Increased use of prequalification is creating opportunities for subcontractors.

GCs need to determine whether subs have the requisite resources and experience to do a job.

Developments in technology have streamlined prequalification communications.

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information-exchange and assessment processes that a robust prequalification program entails.

Absent technology to support these processes, prequalification can become disorganized and burdensome for both the general contractors gathering information and the subcontractors called upon — over and over — to provide financials and other qualification materials. But the right tools can greatly streamline and improve the prequalification process, with “connected” online technology in particular being well suited to facilitating an efficient and effective approach.

And while the growing use of prequalification has meant new disclosure and administrative burdens for subcontractors, the practice — supported by technology — also brings competitive advantages, including new ways to market their capabilities and strengthen relationships with their general contractor partners.

Prequalification — Here to Stay General contractors’ risk awareness has grown over the past decade, driven by legislative changes, pressure from owners/developers, high-profile project failures, and other factors. As a result, general contractors increasingly regard themselves not just as builders and project managers but also

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as risk managers, responsible for ensuring owner/developer confidence that projects will be completed on time and on budget.

As part of that growing role, general contractors need to determine whether subcontractors have the requisite resources and experience to complete work on a project. In large, multi-party projects, the risk of default by unqualified or unknown subcontractors is amplifi¬ed. By equipping general contractors with the information they need to better assess subcontractor strength and experience, qualification management has become a critical practice for general contractors seeking to understand and minimize default risk and other exposures. Accompanying the growing risk perception is an increasing flight to quality, seen in a shift from “lowest bid wins” to “lowest qualified price wins.”

As a result of these forces, prequalification and related practices are becoming entrenched in the construction industry, with more general contractors requiring subcontractors to open their books as a condition of being considered for or awarded project work.

Today, it is not uncommon for general contractors to require prospective subcontractors to provide a host of information, including: • Financials • Bond information • Insurance coverage, including providers and limits for various exposures • Certifications and licenses • Equipment • Project history • Leadership/ownership

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• Safety and other compliance

reports • References • MBE/WBE status Legal/pending litigation information This list is by no means comprehensive, and some general contractors require many additional types of information as part of prequalification. Needless to say, manually gathering and distributing such a broad range of information requires considerable time and energy on the part of subcontractors, especially when the process entails a prolonged paper chase.

Subcontractors typically must manually complete general contractors’ prequalification forms.

More often than not, that same subcontractor will be required to submit the same prequalification forms to the same general contractor for every project they are on — or for every regional office they work with. Very few subcontractors have a centralized database of information, so every prequalification means assembling the data and manually completing the forms.

And once prequalification information has been submitted, there may still be a back and forth if the general contractor needs further clarification or documentation, with that process taking place via fax, phone, email, or even standard mail.

If the process is not transparent to subcontractors, they may not know whether they are in compliance with the general contractor’s request, necessitating further phone calls, emails, etc., just to know where they stand.

All of those factors add up to a great deal of time spent locating, sharing and revising information — all just to be considered for a job. And ignoring prequalification requests is not an option, with general contractors in rare cases even willing to end longtime relationships when repeated requests for information go unanswered.

How Technology Helps Although prequalification is an involved process, it need not be a

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burdensome one for subcontractors or general contractors. Developments in technology have dramatically streamlined prequalification communications and information exchange. These tools enable subcontractors and general contractors alike to significantly reduce the amount of effort involved, while also giving general contractors the information they need in a way that supports consistent assessment and comparison. This is welcomed by both parties, as subcontractors benefit from a rigorous, consistent process that ensures they will not be competing with weak or ineffective peers for business — or end up on a challenging project due to another subcontractor’s failure to perform.

So how does technology help?

Robust prequalification systems eliminate manual processes with automation and workflows, and they minimize wasted effort and errors from redundant data entry. In addition, such systems standardize forms and requests, and they greatly improve communication and visibility into compliance status.

For example, online/Cloudbased technologies can facilitate a collaborative approach to prequalification. Such an approach gives all parties secure, real-time access to information in a centralized location. When all of a subcontractor’s information is stored centrally, any general contractor approved by the subcontractor can obtain that information — immediately and at any time. No longer do subcontractors seeking to prequalify need to fill out the same forms and gather the same materials over and over. This change alone has the potential to save subcontractors significant time and resources, enabling both to be better spent on more important activities.

The centralization of prequalification information and documentation also simplifies data management, as changes can be made once, in one place, and then communicated to all relevant parties automatically through system notifications. In addition, by enabling everyone to work from the same

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information, such systems make compliance status much easier to determine at a glance. In addition, centralization can ease tracking and reporting of historical information stored on the system.

New Work = New Opportunities To be sure, prequalification has added to the work subcontractors must do to compete for business.

At the same time, it has created competitive advantages for the companies that embrace the practice.

For one, qualified subcontractors know that in qualification-based assessments, their bids won’t be seen as equivalent to those of weak or irresponsible firms. In addition, with the help of technology, the practice can also help subcontractors market themselves and identify new potential partners.

Storing qualification information in a centralized database not only simplifies processes and saves time, it also can yield opportunities.

Subcontractors can showcase their qualifications to all general contractors on the system, aiding those that are looking for subcontractors with particular expertise or operating in certain regions. By positioning themselves as a quality partner, subcontractors can leverage the prequalification process to gain a competitive advantage over less-qualified or unknown peers.

Prequalification is now firmly established in the construction industry, and all subcontractors would do well to consider ways they can use the practice — and supporting technology — to their benefit. Failing to do so puts companies at risk of being left behind.

Steven Yapdiangco is a senior consultant and business development manager for Textura Corporation’s Textura®-Pre-Qualification Management (PQM™) solution. He can be reached at (847) 457-6510 or steven.yapdiangco@texturacorp.com.

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Equitable Subrogation: Court Ruling Falls Short of a ‘Bright Line’ Rule

by Matthew B. Meaker In the fall of 2013, the Arizona Court of Appeals ruled, in Weitz v. Heth, that Arizona’s mechanic’s lien statutes (A.R.S. § 33-992[A], et seq.) prevented a lender from utilizing the doctrine of equitable subrogation to leap ahead of a valid mechanic’s lien, resulting in the potential creation of a “bright line” rule on the topic. The Arizona Supreme Court granted review of this decision, and, on Aug. 26, 2014, issued its ruling.

In its ruling, the Arizona Supreme Court rejected the “bright line” rule for which many contractors and subcontractors had hoped, and instead held that Arizona’s mechanic’s lien statutes do not preclude “assignment by equitable subrogation of a lien that attached before construction began on the project at issue.” In so finding, the court stated that “permitting equitable subrogation of a lien that is superior to a mechanic’s lien is consistent with

“In Weitz v. Heth, the Arizona Supreme Court decides that Arizona’s mechanics’ liens statute does not preclude assignment by equitable subrogation of a lien that attached before construction began.” the legislature’s treatment of junior lienholders’ interests in foreclosure actions.”

The possibility of a bright line rule (such as exists in Alabama, Indiana, Minnesota, Nevada, Oregon and Utah) was a key factor for ASA and the American Subcontractors Association of Arizona in deciding to file an amicus brief with the Arizona Supreme Court. In spite of the ruling, it is important to be vigilant in attempting to protect the payment rights of contractors and subcontractors.

As always, contractors and subcontractors need to mindful of the doctrine of “equitable subrogation” and that, depending on the circumstances, a third party

may attempt to utilize the doctrine to trump their mechanic’s lien rights.

Additionally, those who are involved in construction of multiple parcels or units within a single project should make extra note of this case.

The court held that “when a single mortgage is recorded against multiple parcels, a third party is not precluded from attaining equitable subrogation rights when it pays the pro rata amount of the superior obligation and obtains a full release of the parcel at issue from the mortgage lien.”

Matthew B. Meaker is an attorney with Sacks Tierney, P.A., Scottsdale, Ariz. He can be reached at (480) 425-2627 or matthew.meaker@ sackstierney.com.

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These awards, to be presented during ASA’s annual convention, SUBExcel 2015, in Seattle, Wash., March 26-29, 2015, recognize an extraordinary level of commitment to industry best practices. Your application will be evaluated for: (1) use of a standard subcontract whose provisions substantially reflect the best practices incorporated into the ASA-endorsed ConsensusDocs 750, 751 model subcontract agreements; and (2) highly favorable evaluations from three specialty trade contractors, based on 20 project management factors.

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Feature Safety in Numbers: Enlisting Subcontractors to Help Manage Workplace Safety Using Predictive Analytics

by John Watras

Retailers use predictive analytics to assess consumer demographics and avoid unsold merchandise.

Municipalities use it to manage garbage cart thefts and losses. Colleges rely on sophisticated predictive modeling tools to determine dropout rates for their incoming freshmen students.

As the use of predictive analytics has increased throughout the world of business, government and education, it was only a matter of time before the same tool would be applied at construction sites where multimillions are at stake if workers are seriously injured or even killed.

“Whether in pursuit of improved financial results, or the ability to ensure that every employee goes home safe every day, predictive analytics is becoming a key component of a world-class safety program for general contractors and their subs,” said Griffin Schultz of Predictive Solutions, a software and consulting firm focused on predicting workplace injury.

GCs and Subs Unite Predictive analytics is a softwaredriven analysis of data and statistics to predict future behaviors and events.

In the construction industry, such information is used to find patterns around accidents and injuries with the hope of targeting problem areas and developing solutions to mitigate those risks.

“Building a culture of safety at construction sites requires a proactive approach, and predictive analytics makes being proactive that much easier,” said Eric Lambert of Zurich North America’s construction group.

Zurich works with large general contractors in developing risk management solutions to help create a zero injury culture in the construction industry.

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Data around historic work site statistics and documentation of whether workplace safety programs are implemented are “fed” into a predictive model. Users can then run various prebuilt or ad-hoc reports and analyses that will help them “manually” predict their future risk levels through dashboards, configurable reports, charts, graphs, alerts, etc.

The software can also run automated reports based on data input around projects and then send that information to the general contractor — alerting contractors to any risks and reasons why a certain project might be at risk.

Predictive Solutions runs a Red Flag Predictive Model on the first of the month for its clients. This model flags any project, location or team that is at high risk of having increased incidents over the next 30 days and then emails that information to clients.

“Project owners want to apply the same advanced management rigor to their construction projects as they do in other areas of their business,” Schultz said. “To win new business today, general contractors are expected to show how they are proactively managing for safety, and predictive analytics helps them do that.”

Schultz estimates that up to 80 percent of the general contractors on the ENR Top 400 are using some form of analytics to manage workplace safety.

And while general contractors usually are more likely than subcontractors to invest in such technology, subcontractors are not immune from this data-driven safety movement.

Some subcontractors have licensed their own predictive analytics software in order to manage their safety records and provide that information to general contractors as part of their bid process, according to Lambert.

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More commonly, though, Schultz said subcontractors play a vital role in collecting such data to assist general contractors. Beyond offering that help, he also encourages subcontractors to ask general contractors for feedback on any predictive analytics results and any programs being instituted for safety improvements.

“My recommendation to subcontractors is to be open and responsive to all safety inspections and audits,” Schultz said. “There’s generally no reason to be defensive about these requests. While some time investment might be required, it will be a benefit to everyone on the project to embrace the process and become a change agent for this new paradigm of safety.”

Changing the Safety Paradigm This new paradigm of safety is a real shift from the construction industry’s more traditional view of safety, which focuses on failures like regulatory citations, litigation and loss ratios.

“The problem with these traditional metrics is that they are lagging — it’s too late to prevent an incident,” Lambert said.

Lambert suggested a more effective approach may be using leading indicators — the unsafe behaviors, conditions and near-miss incidents that can influence future construction safety performance.

“Lagging indicators reveal there is a problem, while leading indicators help identify the source of the problem and guide how to create effective solutions,” Lambert said. “Leading indicators are meant to be active metrics, something that prompts a proactive response to the process it measures.”

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Gilbane, a global general contractor, can attest to the value of relying on leading indicators to improve safety.

Upon collecting pertinent work site safety data and then using predictive analytics to scrutinize the data, quantify project risk and spur safety programs focused on those risks, Gilbane noticed big results, according to Tony O’Dea, vice president and director of corporate safety for Gilbane.

Over a period of four years, Gilbane reduced its workplace injury rate by nearly 50 percent, O’Dea said. In addition, more than 80 percent of its projects experienced no recordable incidents, and more than 90 percent experienced no lost time incidents during the period. More importantly, an increasing number of projects have achieved zero injuries, he said.

“The ability to identify the leading indicators of safety in our organization, and then implement a strategic action plan to mitigate injuries on our job sites, has been a game-changer for us,” O’Dea said. “We now can go confidently into new business presentations with the data to prove we are not only serious about workplace safety, but have the processes in place to markedly reduce incidents.”

Data is the “fuel” of any predictive model for worker safety. Typically, data collection for a predictive model concentrates on leading indicators such as: • Near miss reporting.

• Project management team safety process involvement.

• Worker observation process.

• Stop work authority.

• Auditing program.

• Pre-task planning.

• Housekeeping program.

• Owner’s project manager (pm) participates in worker orientation.

• Foreman feedback meetings with owner’s pm.

• Owner performs safety walk through.

• Pre-task planning for vendor activities.

• Vendor design for safety.

The models used by Predictive

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Solutions, for example, include a dataset of more than 100 million observations from more than 15,000 work sites and were developed in collaboration with algorithm experts from Carnegie Mellon University.

Predictions Inform Strategic Safety Decisions Once a general contractor has received the safety predictions based on the leading indicator modeling, a strategic action plan is developed to address work site areas most vulnerable to injuries and accidents.

“Predictive analytics are an effective tool, but it’s important to note that it is not meant to replace existing worker safety personnel or programs,” Lambert said. “Once the data is collected and risk is quantified, there must be follow up.”

He said action plans should be created to help minimize those risks that materialized as problem areas during reporting, and general contractors and subcontractors should then work together to make sure those plans and safety measures are enforced. Only then, might companies see results like Gilbane.

Schultz said the return on investment for implementing a predictive analytics solution for general contractors can include a reduced incident rate, reduction in workers’ compensation insurance payments, OSHA fine avoidance, a more engaged work force and improved sales and marketing differentiation.

Large general contractors often work closely with their insurance providers in incorporating predictive analytics into a more robust safety management program.

Both Predictive Solutions and Zurich North America worked with Gilbane on workplace safety audits, reviewing and implementing the findings from the predictive analysis of the inspection data, and tracking corrective and preventative actions.

Based on the safety improvement records experienced by general contractors like Gilbane, predictive analytics will continue to be used as

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an important tool to help improve workplace safety, and also as a due diligence check for picking subcontractors.

Lambert said: “Predictive analytics in the construction industry ultimately can serve everyone better — the owner, the investors, the general contractor, the subs, the insurance providers and most importantly, the workers themselves.”

John Watras, vice president of Zurich’s construction industry segment, is responsible for the middle market commercial contractor’s space. He develops national strategies around product, sales and service for this market, and he works closely with the field underwriting teams to further Zurich’s relationships with agents, brokers and customers. He holds both CPCU and AIM professional designations. Watras can be reached at (952) 229-3692 or john.watras@ 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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Feature Thriving Online by Understanding the Future of the Internet

by George Minardos

As the building industry emerges from one of the most challenging times in its history, it is time to look forward and shift from the survival mentality that most of the industry has employed over the past five-plus years to one of innovation and expansion. Most in the industry have done this and are operating in the new business paradigm, which requires everyone to do more with less.

Construction is a cyclical industry, but boom times are not the solution.

The industry needs innovation and improvements to return to sustainability and achieve the desired profits. With waste upwards of 45 percent on typical projects, there is a huge amount that can be done to improve the situation.

Technology, specifically, improvements in the connected and wired world, can answer much of the industry’s pain point. The building industry has been one of the slowest to

adopt and innovate online. Now is the time to shift thinking and embrace the Internet to help businesses thrive. If you don’t, your competitors will, and competition will come from unlikely places.

A Brief History of the Internet

To better understand the future of the Internet, it is worthwhile to consider the meteoric rise of the Internet. The early architects who dreamed up the World Wide Web could not have imagined or predicted the impact that it would have on society and the world. It’s hard to believe how far the world has come from a few Web sites and instant messaging of the early ’90s. Today, Internet adoption is soon to reach 3 billion users globally, ecommerce represents over $1 trillion per year, and even governments are subject to its forces through the likes of social platforms such as Facebook and Twitter.

Three major online developments have occurred on the Internet in its brief history that have transformed it from simply Web sites and email to the “electricity” that powers new types of manufacturing. Firstly, broadband access has both sped up what The World Wide Web is is possible and also expanded what is doable. The world has undergoing a profound just scratched the surface expansion. in the use of these “bigger pipes” with online plans, You will be able to clearly Web cams and video conferencing. Secondly, state the business you are in mobile computing and and be found more effectively. smartphones have put computing power Stake your claim in the new directly into the field Internet real estate of .BUILD. where things happen.

This is allowing data to come from the field

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in cost-effective and accurate ways that has been an unfulfilled promise for years by software services. Thirdly, social platforms have connected people in ways that were never before possible at such scale. Every employee has a resume for competitors to view openly on LinkedIn. What is being constructed online is a virtual overlay of the physical world and a fourth dimension of data on top of it.

You may be wondering, “What does all this future-tech stuff have to do with my very real world brick-andmortar business, which is based on relationships and can’t be shipped to China.” In part, you may be right, and in large part you would be dead wrong.

Certainly Barnes and Noble thought nothing of a young upstart in 1995 called Amazon and the entire music industry was asleep at the CD player while Naptser and eventually Apple eviscerated it.

Today, China is literally printing buildings with giant 3D concrete printers. Disruption is coming to our industry at every level, and not necessarily from your known competitors. Google has quietly been testing a new technology called Flux.

Their aim: streamline the construction process and eliminate waste with the ambitious aim of taking billions out of the costs for owners. Guess where that savings is going to come from? It’s time to admit and embrace that every business is an online business, whether it exists in the Cloud or on the land.

But disruption doesn’t need to be bad news. With the right knowledge, companies can seize the opportunities that change brings with it. The construction industry sits on the verge of finally being able to fulfill what technology has promised to do for our

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industry for decades — simplify data entry and analysis so that builders can do what they do best: BUILD!

The New Internet In looking several decades into the future, some things about the Internet are predictable. The World Wide Web is growing and this expansion will have a profound effect on the technologies that are possible and a direct impact on people and businesses.

In the coming years the Internet will reach a state of ubiquity. This means Internet access everywhere for everyone and everything combined with unlimited computing processing. Like electricity, the Internet will be less visible, but more prevalent and important. Over the past 25 years we have seen 36 percent adoption of the Internet globally. The new expansion will bring the Internet to the rest of the world and 100 percent access.

In order to keep up with this growth, the domain namespace (the URL or the name you type into your Web browser) is being expanded by 1,000 times in every language. For the first time in Internet history, a user can type in Chinese, Arabic or Hindu. Also, new and meaningful extensions will help you move beyond .com, .net and .org to extensions that actually mean something. More than 1,000 new domain extensions will become available — brands (.IBM, .NIKE), geographies (.NYC, .LONDON), and focused keywords (.BUILD, .GREEN, .MOVIE). Now you will be able to clearly state the business you are in and be found in a more effective way.

So what will a day in the life of a building contractor look like in five, 10 or 15 years from now? You will be estimating your projects right out of the 3D model, and your take-offs will be automatic. As you price your options it will integrate with scheduling tools and real-time inventory and product availability systems. When you are awarded the job, your vendors will automatically be notified of their selection as well as informed of schedule start dates and other job requirements. Your Artificial Intelligence system will tie in with your Big Data analysis tools to find out your best

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planning and purchasing options, factoring things you never thought of like global currency exchanges and all the commodities data and projections.

The smart jobsite will track your labor hours without time cards and will know if a worker is performing planned or extra work. He or she will be using augmented reality glasses to see where the pipe goes and at what depth.

The delivery of your materials will be coordinated not by the superintendent but by the actual field productivity overlaid with the critical path schedule.

The robotic assistant bricklayer will mortar and set the CMU without layout or survey requirements since that data is programmed from the BIM model right into the unit. You will 3-D print a faulty replacement part straight from the factory. And by the way, you’ll have to take a crypto currency like Bitcoin since that is how the owner decided to finance the project.

Does this sound scary to you or exciting? Your reaction is a matter of perspective. Those who know how to play in this new Augmented Reality world will beat their ill equipped competition.

How to Get Started on the New Internet You can stake your claim on the new Internet by improving your online identity and acknowledging you are an online business. This small but major shift in thinking will guide you through the shifting tides of change. Stake your claim in the new Internet real estate of .BUILD. Remember your online identity is more than just your Web site and email.

Your new online identity is everything you do online: • Web site • Email • Business Applications • Social Media/Global Reach • Mobile • Targeted and more effective search allowing you to be found • Prequalification for projects and vendors Think of your online identity as

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your reputation. More and more of your business will be discovered and conducted online. Yes, relationships will always be key to our way of doing business but your new clients will be finding you and working with you or your competitor for more than just your brick and mortar reputation as they grow to rely more and more on your online identity.

Registering a .BUILD name for your company, product or idea is simply the beginning. A domain name is only useful if it is used effectively and the tools available now and in the future are what will enable your growth. A Web site and email are the two most logical places to start, but with .BUILD, you have the ability to easily and quickly create “building industry”focused Web sites that highlight your projects in a manner that allow you to showcase your areas of expertise and get attention. .BUILD is working with Internet and construction industry partners to enable the kinds of business tools that will allow you to be more productive and expand your reach, whether your focus is residential or commercial. .BUILD recently enabled Google Apps via www. domain.build and also provides an easy way to click on and engage the various social media aspects tied to your Web site and email, which will expand your audience.

The best thing about the future is that it hasn’t happened yet and that you can be a leader, not a follower. The way to take advantage of opportunity is with innovation, efficiency and the ability to connect with your customers. .BUILD is an online identity designed now and for the future with the specifics of the building and construction industry in mind.

George Minardos is the founder and chief executive officer of Minardos Group, a full-service general contractor in California with a focus on unique, challenging and creative projects. He has a passion for technology and building.

For more information on .BUILD and the new gTLD program, contact Minardos at George@minardosgroup.com. For more information on how to “build better,” please visit www.about.build.

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Legally Speaking Using Technology to Monitor Receivables in a Way that Helps Your Legal Position

by Scott Wolfe

Big and small companies both appreciate the immense importance of accounts receivables. In fact, in a 2012 survey of CFOs by CFO.com, accounts receivables were ranked the most important way to influence working capital. In a world where cash is king, influencing working capital access is important.

But how? How does a company influence its working capital?

New digital technologies are available to enable companies to improve their accounts receivables performance. And, in fact, the opportunity to leverage these technologies for competitive advantage is huge. Nevertheless, the financial world of receivables performance constantly intersects with legal rights, and it is important to leverage those technologies that will help your legal position, and not hurt it.

Technology Is Everywhere — Except in Construction There are few aspects of today’s society that have not been optimized by technology in some way. If something needs to happen, it has either already been automated or somebody is trying to figure out how to develop that automation.

In the financial space, software platforms have been developed that enable contractors to manage projects, secure extensions of credit, track deadlines, manage relationships/ customer contact, and monitor and manage receivables and payment.

This tech revolution is a welcome change from the days of hand-written ledgers and Excel spreadsheets, but the use of these tools in the highly

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specialized construction industry lags far behind the use of technology in other industries.

This is frustrating to those who understand the value added by technology, but it is also dangerous.

The Construction Financial Management Association’s July/ August 2014 issue of Building Profits, published an article, “The Gifted Technology Driven Contractor,” in which the authors explain that “technology is not a necessary evil, but rather a competitive differentiator.”

They are not making things up, nor are they out of line. This is a Business 101 concept, discussed in great detail by Geoffrey Moore in the 1991 business technology classic: Crossing the Chasm.

The advantage of being at the frontend of technological changes is one end of the spectrum, with the other end being at the back-end of those changes.

The failure to adopt new technology like this when available can have dramatic consequences. Companies that put off implementing new technological advances available to their industry run the risk of falling behind competitors with respect to the tools used, and falling behind those competitors’ subsequent efficiency gains. In an industry with thin margins and a history of payment problems, losing the efficiency battle can quickly lead to problems competing in the marketplace.

Standing out from the crowd can sometimes be a good thing, but that is not the case when it comes to failing to adopt a game-changing technology.

What happened to companies that didn’t adopt the Internet back in the 1990s? Having some Web presence

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is compulsory, and the companies that chose not to embrace that new development quickly learned that was a mistake.

Unfortunately for the construction industry, staying ahead of — or even on pace with — technology trends is not typical.

Despite the very real hazards of failure to adopt technology, the construction industry still lags far behind other industries in this regard.

In fact, construction companies only spend 25 percent of what companies in other industries spend on technology. This is not optimal, and provides evidence that change is needed in the construction sector, but it also defines an opportunity — nobody in the construction industry has missed the boat completely.

According to a recent survey by JBKnowledge, most construction companies use some sort of accounting software, but the vast majority of those are using software that doesn’t communicate with their other programs. In fact, one-third of the 85 percent of construction companies using an “accounting software” are only using Microsoft Excel.

Client Relationship Management technology use is similarly proportioned. While only 21 percent of the construction companies surveyed uses CRM technology, one-third of those that did used only Microsoft Excel.

This over-reliance on Excel continues to plague the receivables game with the same problems. The problems are actually exasperated because receivables monitoring, follow up, and management is so key to a company’s top and bottom line.

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While Excel is a useful product, it’s the wrong tool for subcontractors — especially as it’s being forced into a de facto platform for which it is not designed. Among other issues, it’s too general, it’s not collaborative, and using Excel results in multiple spreadsheets with no ability to tie that data together. In some cases, there is just too much data to reliably and consistently track with a spreadsheet.

Receivables Monitoring Technology To really provide clear and tangible benefits, a receivables monitoring solution for the construction industry should be able to perform several key functions. It should 1) provide good access to your information; 2) be able to store and intelligently display your data; 3) be able to communicate with other software applications; and, potentially most importantly, 4) monitor and track security rights and the steps needed to remain in a secured position. Monitoring receivables is all about getting paid, and nothing prompts payment more efficiently than remaining secured in all extensions of credit.

Cloud-based Solutions The technological revolution in construction receivables management is happening, and it’s happening in the Cloud. The benefits to Cloud-based technology are real, and they line up neatly with the requirements of a thorough construction receivables monitoring solution outlined above.

Cloud-based solutions are agile, communicative, clear, attractive, and powerful.

With Cloud-based solutions, a company can connect products through APIs, and with products that talk to one another, the financial manager can do away with double data entry for good. What’s more, Cloud-based solutions are formulated specifically to provide easy access to all of your information from wherever you are. If you have an Internet connection, you should have access

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to all of your data — and if you don’t, something is wrong. Finally, Cloudbased solutions are powerful as well as pretty. Ugly applications can be functional, but when your important information is presented in a clear, attractive, and thoughtful manner, it’s easier to make sense of it, and get paid.

Legal Issues to Keep in Mind Managing accounts receivables is a financial task. No wait, it’s an administrative task. No wait, it’s a legal task.

The truth is that it can be all of these things. It is unavoidable. However, legal rights and obligations will weave in and out of everything a company does to manage its receivables. Here are a few important things to keep in mind with relation to technological tools.

Consumer Collection Rules When Working on Residential Projects: Those working on a residential construction project may be dealing with a consumer collection matter if work goes unpaid. The consumer collection rules are complicated and toxic. In part, there are a lot of technology products out there that understand standard consumer collection rules. Make certain that the product you choose does so.

Don’t Blow Through Your Rights: The construction industry has a large number of very unique legal rights, which can vary from stateto-state and project-toproject. Consider the prompt payment statutes available nationwide, or the security, lien, and bond claim rights available to subcontractors. While these rights are terrific for subcontractors and very powerful, they are also easy to lose. When working with technology

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products not familiar enough with the construction industry, or even with these nuanced legal rights, it’s likely that the actions aided by the technology will not protect these rights for a company. Be very, very careful about this, as it can make a huge difference in the collectability of a receivable. Seek out accounts receivable technology that has construction competencies.

Scott Wolfe is CEO of zlien in New Orleans, La., a platform that reduces credit risk and default receivables for contractors and suppliers by giving them control over mechanic’s lien and bond claim compliance. Wolfe is a licensed attorney in six states with extensive experience in corporate credit management and collections law, including the use of mechanic’s liens, UCC filings and other security instruments to protect and manage receivables. He can be reached at (866) 720-5436, Ext. 700, scott@zlien.com, or @scottwolfejr on Twitter.

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Put off implementing new technology and risk falling behind your competitors.

An over-reliance on Excel continues to plague the receivables game.

To really provide clear and tangible benefits, look for a receivables monitoring solution.

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JUNE 5TH , 11:0 8 A .M .

A STAGGERING STATISTIC INSPIRES A LIFE-SAVING RULE IN AN INS TANT,

C A LV IN B ERGER SAW THE VA LU E O F IN - C A B B EH AV I O R TR A ININ G FRO M CN A

When a recent safety webinar revealed that 280,000 drivers are involved in serious accidents every year, Calvin Berger of Calberg Contracting took CNA’s recommendation to heart, and posted placards restricting cell phone use in each of his company’s vehicles. Now Calberg Contracting is filing fewer claims, and Calvin’s enjoying a handsome bonus for worker safety and performance.

When you’re looking for risk control programs that keep workers dialed in to relevant industry trends … ® we can show you more.

To learn more about CNA’s coverages and programs for building contractors, contact your independent agent or visit www.cna.com/construction.

The examples provided in this material are for illustrative purposes only and any similarity to actual individuals, entities or places is coincidental. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice. CNA is a registered trademark of CNA Financial Corporation. Copyright © 2014 CNA. All rights reserved.

Contract Corner Negotiate Better Contract Terms For a year, ASA released “Subcontractor’s Negotiating Tip Sheets” designed to help subcontractors navigate harmful contract language and provide information they need to negotiate a particular subcontract clause, including ASA-recommended language, samples of what a subcontractor may see in a client’s proprietary subcontract, and an explanation of the impact of poor language on a subcontractor.

Legal Action Against the Owner by the Contractor on Behalf of the Subcontractor General contractors sometimes include a provision in their proprietary subcontracts that they argue is beneficial to subcontractors: “If the Owner or its designated agent does not issue a certificate for Final Payment or the Contractor does not receive such payment for any cause that is not the fault of the Subcontractor, the Contractor shall promptly inform the Subcontractor in writing. The Contractor shall also diligently pursue, with the assistance of the Subcontractor, the prompt release by the Owner of the final payment due for the Subcontractor’s Work. At the Subcontractor’s request and expense, to the extent agreed upon in writing, the Contractor shall institute reasonable legal remedies to mitigate the damages and pursue payment of the Subcontractor’s final payment including interest thereon.”

ASA recommends that subcontractors strike such a provision from the subcontract. The subcontractor may have to fund any legal or claim actions by the general contractor, on the subcontractor’s behalf, even if the owner’s decision to not make a payment is for a reason that is not the fault of the subcontractor.

Furthermore, the subcontractor may

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find that the provision’s protections are illusory if the owner is insolvent or if the owner has large enough claims against the general contractor to effectively shield the owner from any subcontractor demands.

Legal Action by Subcontractor Against Owner Another common provision found in general contractors’ proprietary subcontracts allow “Legal Action

by Subcontractor Against Owner:” “In the event that the Owner fails to pay the amount certified as due the Subcontractor, the General Contractor does hereby appoint the Subcontractor as the General Contractor’s authorized agent, to take action against the Owner appropriate to procuring payment, including any costs and claims connected thereto following a period of sixty (60) days after the work for which payment is delinquent has been performed.”

ASA recommends striking such a provision. The subcontractor may have to fund any legal or claim actions even if the owner’s decision to not make payment is for a reason that is not the fault of the subcontractor.

The subcontractor may also find that the provision’s protections are illusory if the owner is insolvent. The subcontractor may find that some jurisdictions will not even allow direct action by a subcontractor unless there is explicit consent by the owner in the general contract — which is unlikely.

Concealed or Unknown Conditions If subcontractors aren’t careful, they could find themselves assuming the risk for unknown concealed or subsurface conditions, thanks to a particular clause usually located in general contract documents and incorporated by reference into the subcontract. ASA recommends that

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subcontractors include a provision stating: “Subcontractor’s obligation to examine documents, the project site, and materials and work furnished by others is limited to notification of Customer of any defects or deficiencies that a person in the trade of Subcontractor would discover by reasonable visual inspection.

No testing beyond reasonable visual inspection shall be required.

Subcontractor is entitled to rely on the accuracy and completeness of plans, specifications, and reports of site conditions provided to Subcontractor.”

Subrogation of Workers’ Compensation General contractors sometimes include a provision in their subcontracts requiring subcontractors to waive subrogation for workers’ compensation: “The Subcontractor’s Workers’ Compensation policy shall contain a waiver of subrogation in favor of the Owner and the Contractor.” The subcontractor could find that its insurance carrier is precluded from asserting a claim against the named parties, i.e., the owner or general contractor, to recover money paid by the subcontractor’s insurance carrier.

Furthermore, the subcontractor’s insurance modifier may be negatively impacted, affecting its ability to obtain work, the subcontractor’s insurance premiums could increase, or the subcontractor’s insurance policy could be canceled. ASA recommends: “Subcontractor is not required to name additional insureds to its general liability insurance policy, nor to waive subrogation for claims covered by workers’ compensation or commercial general liability insurance.”

The ASA tip sheets are available in the members-only section of the ASA Web site.

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ASA/FASA Calendar January 2015

9 - Webinar: How to Bid More Competitively on Government Construction

13 - Webinar: Negotiating Retainage

9 -10 ASA Executive Committee and ASAC Board of Directors Meeting in Los Angeles, CA

February 2015

October 2014 14 - Webinar: The Value of Technology and Data Management for Construction 22-25 - ASA Executive Committee, Board of Directors, Legal & Advocacy Meetings in Denver, CO November 2014 18 - Webinar: Common Practices and Effectiveness of Incentive Compensation 21 - Deadline for Application Submissions to Chapters for 2014 National Construction Best Practices Award December 2014 9 - Webinar: Where Are We Now? 2014 Election Results and Outlook for 2015 Legislative Sessions

Coming Up . . . in the October 2014 Issue of ASA’s

10 - Webinar: Mechanic’s Liens: Protect and Collect March 2015

THE

September 2014

Theme: Selling Your Construction Services

26-29 - SUBExcel 2015 in Seattle, WA. April 2015 14 - Webinar: Non-Negotiators’ Strategies for Negotiating Outstanding Results May 2015 12 - Webinar: Managing the Life Blood of Contracting - Cash Flow

• Efficiency in Construction

Industry Selling

• The Customer Centric

Lighthouse in a Sea of Poor Service

• Business Development:

A Misunderstood Profession

• Generate More

June 2015

Customers

9 - Webinar: Bidding from the Other Side: How GCs Use GradeBeam to Find Subcontractors

• Legally Speaking: Getting

Paid for Change Orders

Look for your issue in October.

12 - Deadline for Applications for 2014 Excellence in Ethics Awards

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

19 - Deadline for Chapters to Submit Applications to ASA Headquarters for 2014 National Construction Best Practices Award

Contact information for all ASA and FASA events/programs: www.asaonline.com education@asa-hq.com

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