The Contractor's Compass November 2015

THE

ASA’s

THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION

WWW.ASAONLINE.COM

TM

Building an Enduring

NOVEMBER 2015

Business Development

Organization for Today and Tomorrow

Sales — It’s a People Thing How To Bring Value: BD Ideas BD is a Loaded Gun — Which Direction to Point It? What Are You Really Selling & Negotiating?

Building Your Brand Identity by Improving Your Online Identity Becoming a Trusted Advisor Legally Speaking: Public-Private Partnerships: Business Development Opportunities

Register Online!

March 3-5, 2016 Miami, FL • See page 28

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THE

ASA’s

November 2015

Features TM

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.

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).

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

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

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

The Strategy and Tactics of Best-in-Class Firms — Building an Enduring Organization for Today and Tomorrow ............................................................... 11

by Gregg M. Schoppman

Sales — It’s a People Thing............................................................ 14

by Tom Woodcock

How to Bring Value: BD Ideas....................................................... 17

by Larry Silver

BD Is a Loaded Gun — Which Direction to Point It?............... 19

by Larry Silver

What Are You Really Selling & Negotiating?............................ 20

by Monroe Porter

Building Your Brand by Improving Your Online Identity....... 22

by George Minardos

Becoming a Trusted Advisor......................................................... 26

by David Pugh & Mike Medrzycki

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

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.

CONSTRUCTION IN THE COURTS.................................................... 9 LEGALLY SPEAKING.......................................................................... 29 Public-Private Partnerships: Business Development Opportunities

by Matthew Meaker

Quick Reference

LAYOUT Angela M Roe angelamroe@gmail.com

ASA/FASA CALENDAR..................................................................... 32 COMING UP....................................................................................... 32

© 2015 Foundation of the American Subcontractors Association, Inc.

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Contractor Community Congress Approves ASA-Backed Minimum Standards for Individual Surety Bonds Both the U.S. House and Senate have approved legislation to establish minimum standards for individual surety bonds necessary to assure that the bonds protect the payment of subcontractors and suppliers on federal construction.

Section 874 of H.R. 1735, the National Defense Authorization Act for Fiscal Year 2016, prescribes the type of assets that are acceptable and requires the individual surety to deposit those assets with the federal government.

“ASA is not out to eliminate individual sureties,” said E. Colette Nelson, ASA chief advocacy officer.

“However, the Association strongly believes that subcontractors and suppliers should be confident that the assets backing up the payment bond are there, liquid, and accessible to a legitimate claimant.”

The federal Miller Act requires a prime contractor on federal construction to provide performance and payment bonds on contracts over $150,000. Most such bonds are provided by corporate sureties, which are required to submit detailed financial information to the U.S. Department of Treasury, which verifies that information and monitors the performance of the sureties. However, the Federal Acquisition Regulation also allows the use of individual sureties, which are not as heavily regulated.

An individual surety is simply an individual or group that pledges to make good on the contract if the prime contractor fails to perform or fails to pay its subcontractors or suppliers. ASA has repeatedly testified to Congress about the need to further regulate individual sureties, citing

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numerous examples of subcontractors that have gone unpaid when the prime contractor and individual surety subsequently defaulted.

“Some individual sureties have undermined the protection offered by the payment bond by overstating the value of assets, listing assets which they do not own, not fully disclosing liabilities and not fully disclosing other bond obligations,” Nelson said.

Most recently, the U.S. District Court in Fresno (Calif.) handed down a five-year prison term to a California man for fraud involving individual sureties. “These new requirements, when enacted and implemented, will improve payment assurances for subcontractors and suppliers on federal construction,” Nelson added.

President Obama is expected to veto H.R. 1735 over a dispute with Congress concerning provisions unrelated to the individual surety bond provision; thus, when the dispute is finally resolved, the individual surety bond provision will remain in the legislation.

Congress Approves ASASupported VA Construction Reform After months of wrangling, Congress passed S. 2082, an ASAbacked reform package that will put the U.S. Army Corps of Engineers in charge of any construction project by the U.S. Department of Veterans Affairs estimated to cost $100 million or more. ASA has repeatedly asked Congress to take action after severe construction management problems, including changing designs and delays in decision-making, arose on several major VA projects.

In June 2015, the ASA Board of Directors called on Congress to “enact legislation to transition the U.S. Department of Veteran Affairs’ major construction program to the U.S. Army Corps of Engineers.”

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ASA Chief Advocacy Officer E. Colette Nelson said, “ASA will continue to work with Congress to assure that the VA fully cooperates with the Army Corps at each stage of design and construction and that both agencies have incentives to make timely decisions. This bill is only the first step toward needed construction reform, both in the VA and other federal construction programs.”

Nelson also reported that key legislators have pledged to require federal construction agencies to collect data on the number of, time for approval, and payment of change orders, as the first step to developing a federal solution. The VA operates the nation’s largest integrated health care system with over 1,700 sites of care.

SBA Proposes New Affiliation Rules for Surety Bond and Loan Programs In a rule proposed on Oct. 2, the U.S. Small Business Administration offered to simplify guidelines for determining affiliation for eligibility based on size for five of its programs, including the Surety Bond Guarantee Program and four loan programs — the 7(a) Loan Program, the Business Disaster Loan Programs, the Microloan Program and the 504 Loan Program. SBA proposes that for all five programs, it will determine control exists on ownership when: • A person owns or has the power to control more than 50 percent of the voting equity of a concern; or • If no one person owns or has the power to control more than 50 percent of the voting equity of the concern, SBA would deem the small business to be controlled by either the president, the chair of the board, or the chief executive officer of the concern (or other officers, managing members, partners or directors who control the management of the concern.

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SBA is soliciting comments on the proposed amendment as well on the following: • What impact will this rule have on Small Business Loan and SBG applicants?

• Are there alternatives to the proposed rule relating to control, negative control, common ownership, identity of interest, common management and franchise agreements?

• Would the elimination of the newly-organized concern and joint venture affiliation rules from the Business Loan and SBG Programs affect these programs and if so, how?

Interested parties may submit comments and additional materials electronically at http:// www.regulations.gov, the Federal eRulemaking Portal, until Dec. 1, 2015.

ASA Says Subcontractors ‘Cannot Be Strictly Liable’ for Installing Material Complying with Specifications A California court case will determine whether a subcontractor can be held “strictly liable” for installing material on a project that complied with specifications which the subcontractor did not write, and which was approved by the architect.

ASA, the Association of the Wall and Ceiling Industry, and the Roofing Contractors Association of California, in an amicus curiae brief filed on Sept. 25, 2015, in the case of Joel Hernandezcueva vs. E.F. Brady Company, Inc., argue that a subcontractor cannot be strictly liable for installing material that complied with specifications.

“To impose a burden of strict liability on a subcontractor for installing material that complied with specifications because years later

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it is identified to have a dangerous component would impose liability on a party who did not specify or approve the material installed,” the organizations wrote. “Further, strict liability on subcontractors would place liability on a party who does not control the risk. It would also broaden liability in construction thereby raising insurance rates to contractors throughout California, which in turn would unnecessarily raise construction costs in a still struggling economic environment. This would place undue burden on the Construction Industry that is unnecessary to protect the public.”

The underlying dispute involved litigation by an individual dying of cancer allegedly caused by asbestos in products that E.F. Brady Company, Inc., installed in a commercial building project as a drywall subcontractor to C.L. Peck Contractor in the 1970s.

E.F. Brady purchased the products at issue (drywall, drywall compound, and fireproofing products) to complete its subcontract work on the building.

Decades later, from 1992 to 1995, Joel Hernandezcueva was a janitor at the Fluor Daniels Building in Long Beach, Calif. Hernandezcueva’s job duties included cleaning up after improvement work and cleaning areas that contained the asbestos drywall and joint compound the subcontractor had installed in the 1970s.

Several years after leaving his job, Hernandezcueva was diagnosed with life-threatening mesothelioma.

In 2013, Hernandezcueva and his wife sued numerous defendants, including the subcontractor. The plaintiffs claimed that Hernandezcueva contracted mesothelioma because of his exposure to asbestos in the Flour Daniels Building in the 1990s. They asserted several theories of recovery and sought to impose strict liability on the subcontractor.

The subcontractor moved for Judgment of Partial Nonsuit, asking the court to dismiss the plaintiff’s C O M P A S S

strict liability claims against it.

The subcontractor argued that strict liability does not apply to subcontractors. The subcontractor noted that the fire-proofing material was not its own product, it was not a manufacturer of the product, and it was not in the business of selling drywall, fireproofing or other construction products — it had merely purchased and installed the construction materials to complete its subcontract work. The trial court agreed. It held that the subcontractor could not be strictly liable for installing the allegedly defective products at issue. The trial court allowed claims against the subcontractor to proceed only on the question of whether it was negligent when it installed the asbestos-related products. After a 17-day trial, the jury returned a verdict finding that Hernandezcueva suffered exposure to asbestos from products the subcontractor installed in the 1970s, but the subcontractor was not negligent. Shortly after this decision, Hernandezcueva died. Plaintiffs have appealed the decision to the California Court of Appeal, Second Appellate District, Division Four.

ASA and the other organizations urged the California Court of Appeal to affirm the trial court ruling holding that E.F. Brady could not be strictly liable for installing material approved by the owner’s architect and required by its contract to comply with specifications that it did not write.

“The decision of the trial court is in accord with established case law recognizing a clear distinction between a subcontractor, a manufacturer, and those who place a product into distribution,” the organizations wrote. “The equities courts have established through developing the doctrine of strict liability do not favor extending liability to one who installs materials that is (a) required by specifications

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prepared by others, (b) purchased from others, and (c) merely installed as required by Contract.”

ASA and the others warned that if the appeals court reverses the trial court, “it will change long-standing California law and unfairly impose liability on California subcontractors for risks they do not control. This would be a severe inequity not only for E.F. Brady but for other future similarly situated subcontractors who call California home and help build this state.”

E. Scott Holbrook Jr., an attorney with ASA-member firm Crawford & Bangs, LLP, Covina, Calif., wrote and filed the brief on behalf of ASA and the other organizations. ASA’s Subcontractors Legal Defense Fund financed the brief. Contributions may be made to the SLDF via the ASA Web site.

FASA Publishes ‘AntiForum Selection Clauses in the 50 States’ Manual, a No-cost Member Benefit Out-of-state general contractors commonly require their subcontractors to sign forumselection clauses, arguing that it’s more convenient and less expensive for them to resolve disputes in a jurisdiction of their choice. For example, a general contractor headquartered in Alaska may place a forum-selection clause in a contract on a project in Texas stating that “Regardless of the site of the project, the laws of the State of Alaska shall govern in the interpretation of any contract-related issues, and any hearings or dispute resolution meetings shall be held in the State of Alaska.”

Such clauses may create an undue hardship for the subcontractor on such a project. The subcontractor may have to comply with laws

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and regulations with which it is not familiar and be held accountable for failure to comply; the subcontractor may have to bear the expense of travel and litigation in a distant location. Further, the subcontractor may not be able to access witnesses or provide other evidence to support its position in a dispute. Ultimately, the additional burdens of a distant forum can often be prohibitive and effectively deprive a subcontractor of its day in court and/or leverage it to heavily discount, if not abandon, even the most worthy of claims. Many states view forum-selection clauses as against public policy and make them “void and unenforceable.”

The Foundation of ASA has published a comprehensive manual, “2015 Anti-Forum Selection Clauses in the 50 States (2015),” to help subcontractors understand how forum-selection clauses are treated in the 50 states and the District of Columbia.

The ASA-member law firm and ASA general counsel, Kegler, Brown, Hill and Ritter, Columbus, Ohio, prepared the manual, which is available under the “Contracts & Project Management” section in the members-only area of the ASA Web site at no cost to ASA members.

ASA Publishes White Paper on the Legal Basis for Subcontract Adjustment In order to obtain full adjustment for the impact of changes and changed conditions, a subcontractor must clear four separate obstacles: substantive entitlement, procedural compliance, causation, and quantification of impact. ASA’s new white paper addresses the “Contract Changes and Claims: Contractual and Legal Basis of Entitlement to Subcontract Adjustment.”

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The white paper is available in the members-only section of the ASA Web site under “Contract Changes and Claims.”

Building Subcontractor Involvement in the Legislative Process from the Grass Roots Up He used to think that you “had to know someone” to get old laws changed or new laws put into place.

He could see how businesses felt powerless in the face of seemingly endless government regulation. The company he works for was resigned to spending countless hours each month trying to negotiate “unfair” clauses out of contracts. Then he saw how “the system” could work.

Phil Nevlud, drywall sales manager of Marek Brothers Systems, Inc., Houston, Texas, saw first-hand how subcontractors can make a difference in the state legislative arena. He was there when ASA of Texas, working in coalition with the Texas Construction Association, pushed through subcontractor legislation.

As the chair of the ASA Task Force on Government Advocacy, Nevlud wants all subcontractors to believe that they don’t have to be lobbyists to make a difference in local, state, or federal governments.

“It’s critical that subs get involved at the local level,” Nevlud said. “Some of the changes subcontractors need to bring fairness to the industry aren’t going to come from the federal level.”

Nevlud wants to build on the achievements of subcontractor advocacy programs already in place.

“Subcontractors across the country are scoring new victories every legislative session,” Nevlud said.

“And success breeds success. When subcontractors in one state are able to help pass a law that protects subs’ rights, it makes it easier to promote similar legislation in another state.”

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Getting involved takes time, he acknowledged. “But I’ve got a lot of years left in this business and I want to make it better.”

The ASA Task Force on Government Advocacy’s next meeting will be held on Friday, Oct. 16, in Austin, Texas. For more information about the meeting, see the ASA Web site.

ASA Comments on Fair Pay/Safe Workplace Rules In comments submitted to the Department of Labor and the Federal Acquisition Regulatory Council on Aug. 26, ASA recommended that DOL, not prime contractors, should review subcontractors’ legal compliance certifications required under the proposed rule.

ASA’s comments were submitted in response to DOL and FAR Council proposed guidance and proposed rule, respectively, published on May 28, intended to implement President Obama’s 2014 Executive Order on Fair Pay and Safe Work Places. The Executive Order requires prospective federal contractors to disclose labor law violations and gives agencies more guidance on how to consider labor violations when awarding federal contracts.

ASA suggested that a DOL review will help assure consistent application of the Department’s standards at all contracting tiers. “Contractors and subcontractors simply are not equipped to assess another company’s compliance with the breadth of policies envisioned under the proposed guidance and rule,” ASA wrote.

The Association also suggested that the review of such compliance certifications should occur after the bidding/proposal phase but before award of the contract in order to, in the first instance, assure impartiality in the selection process

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and, in the second instance, to deter disruption of the project.

ASA’s comments also addressed other elements of the proposed guidance and rule, including the definition of “administrative merits determinations” and paycheck transparency.

DOL’s proposed guidance and the FAR Council’s proposed regulation are intended to make sure that agencies have the information they need to determine which contractors are providing their workers with protections to which they are legally entitled.

For more information on the DOL proposed guidance and the FAR Council’s proposed rule, see ASA’s Frequently Asked Questions.

Associations Call on FHWA to Include Surety Bond Requirements for P3s ASA joined The Surety & Fidelity Association of America and the National Association of Surety Bond Producers in calling on the Federal Highway Administration to include in its proposed rule related to the construction manager/general contractor method of contracting that surety bonds be provided on projects financed through public-private partnership agreements.

The three associations recommended that “FHWA should follow the bonding requirements that have been a longtime feature of the U.S. Department of Transportation’s regulations on federal grants for state highway construction projects.”

DOT’s rules currently provide that “[t]he federal agency awarding a grant may accept the state bonding policy applicable to the person or entity receiving the grant if the federal agency determines that policy adequately protects the federal agency’s interest.”

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The associations emphasized that “[t]he payment bond guarantees that covered subcontractors, suppliers and laborers on the job will get paid.

Many subcontractors and suppliers on public works projects are small contractors that have fewer resources to absorb an event of non-payment.”

Register Online Now for SUBExcel 2016 — Miami Online registration is now available for SUBExcel 2016, which will take place March 3-5, 2016, in Miami, Fla. Registrants are invited to attend the President’s Welcome Reception from 5:00 p.m. to 7:00 p.m. on Wednesday, March 2, and the annual convention will kick off the following morning.

Make your hotel reservations online to stay in the ASA room block at the Hyatt Regency Miami. ASA has negotiated the special room rate of $199 single/double or $244 triple/ quad, and the cutoff date for the room block is on or before 5:00 p.m. Eastern time on Wednesday, Jan. 26.

ASA will celebrate its 50th anniversary during the Reception, Banquet & Awards Gala from 7:00 p.m. to 10:00 p.m. on Saturday, March 5.

For more information, visit SUBExcel 2016 online or enter through the portal at www.SUBExcel. com.

ASA/FASA Education Catalog Contains Resources to Help Subcontractors Succeed ASA and the Foundation of ASA provide construction subcontractors, specialty trade contractors, and suppliers with strategies and ideas to better manage their businesses.

The 2015-16 edition of the ASA/ FASA Construction Subcontractor’s Education Catalog showcases the

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newest education products and programs that ASA and FASA offer to help subcontractors meet the demands of working in today’s construction industry, including these videos-on-demand: • “The Value of Technology and Data Management for Construction” (Item #8073) • “Common Practices and Effectiveness of Incentive Compensation” (Item #8074) • “Negotiating Retainage” (Item #8076) • “Mechanic’s Liens: Protect and Collect” (Item #8077) • “Non-Negotiators’ Strategies for Negotiating Outstanding Results” (Item #8078) • “Managing the Life Blood of Contracting—Cash Flow” (Item #8079)

• “How to Properly Manage and

Terminate Employees Without Breaking the Law” (Item #8080) The catalog also highlights the ASA/ FASA education webinars series for 2015-16. These webinars will take place from 12:00 p.m. to 1:30 p.m.

Eastern time on the second Tuesday of the month. The registration fee for each webinar is $99 for ASA members and $179 for nonmembers: • Nov. 10, 2015 — “Implementing Technology for the Jobsite: Turning Refusers into Adopters” presented

by Doug Chambers, FieldLens, New York, N.Y. • Dec. 8, 2015 — “Employment Law Changes and How They Affect Screening and Hiring Practices” presented by Jamie Hasty, SESCO Management Consultants, Richmond, Va. • Jan. 12, 2016 — “The War for Talent Drives Construction Pay Higher:

Pay Trends in the Construction Industry” presented by Mike Rose, FMI, Phoenix, Ariz.

• Feb. 9, 2016 — “Negotiating Retainage” presented by Eric Travers, Esq., Kegler, Brown, Hill & Ritter, Columbus, Ohio.

• April 12, 2016 — “The Payment Dance in the Construction Industry” presented by Scott Wolfe Jr., zlien, New Orleans, La. • May 10, 2016 — “Websites, Email, Social Media and Your Domain Name” presented by George Minardos, .BUILD, Santa Monica, Calif.

• June 14, 2016 — “Damages for Lost Labor Productivity” presented

by James Yand, Miller Nash Graham & Dunn, Seattle, Wash.

Learn more about ASA webinars under “Register for an Event” on the ASA Web site.

New On-demand Video from FASA TM

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

Your order includes access to the on‑demand video any time, and as many times as you’d like! This is just one of the on-demand videos available through the FASA Contractors’ Knowledge Depot to meet your business management training needs.

Contractors’ Knowledge Network

“Cash Management for Subcontractors” (Item #8082) Estimating new work. Managing costs. Hiring new talent. All are critical to running a successful construction company. Here’s one more: strategically managing your business’s liquid capital.

Careful cash management isn’t just a competitive advantage. It’s a necessity. The FASA video-on-demand, “Cash Management for Subcontractors,” examines the internal treasury function, or management of surplus funds, for subcontractors. This on-demand video explores best practices for handling liquid capital on your balance sheet while meeting your current cash flow needs. $65 Members; $95 Nonmembers

Order online at www.contractorsknowledgedepot.com or call ( 703 ) 684-3450, Ext. 1321 8

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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 Arizona. For years Arizona has protected the prompt payment rights of contractors, subcontractors, and suppliers on private construction projects. Design professionals, however, had not been so lucky until this year.

The Arizona legislature passed HB 2336 known as the Arizona Design Professional Prompt Pay Act, which creates a standard payment billing cycle for all private Arizona contracts. To enact these provisions, the Act amends A.R.S. §28-411, A.R.S. §34-221, A.R.S. §34-227, A.R.S. §41-2571, A.R.S. §412577, and A.R.S. §41-2583.

The statute applies to “design professionals” performing work on construction projects including architect services, engineer services, land surveying services, geologist services and landscape architect services.

Applying the five-step prompt pay process: 1. For applicable construction contracts, the general contractor submits payment applications to the owner every 30 days.

2. Once the general contractor submits an invoice to the owner, the owner has 14 days to issue a written statement detailing those specific items that are not approved and certified. If the owner fails to issue a written objection within 14 days, the invoice is automatically certified and approved.

3. Once the invoice is certified and approved, the owner must pay the general contractor within seven days.

4. The general contractor must pay the subcontractors (which include design professionals and material suppliers) within seven days after payment is received from the owner.

5. The owner must provide final payment within seven days after the general contractor completes the work and the owner certifies and approves the work.

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technicalities. To be safe, every owner, general contractor, design professional, subcontractor, materialman, and supplier, must be familiar with these provisions.

This is one of those cases where you may want to contact your construction attorney first before you violate the law just by mistake and be liable for damages.

Rick Erickson is a partner and Nicole Sornsin is an associate in the Construction and Commercial Litigation practice areas of the Phoenix, Ariz., office of Snell & Wilmer. Erickson can be reached at (602) 382-6540 or rerickson@ swlaw.com and Sornsin can be reached at (602) 382-6392 or nsornsin@swlaw. com.

Pacific failed to notify the CSLB and the licenses of both companies were suspended.

Pacific argued that it was in substantial compliance, however the court did not agree. Pacific could not maintain its collection action and ended up with a judgment against it for disgorgement (having to return the money already paid to it under the construction contract) of $206,437.91.

Several lessons can be learned: 1. Comply with the Contractor’s License Law at all times, even a short lapse between the time you bid and the time you receive your final payment.

2. If you are working in another state, before you even consider bidding, find a local attorney to make sure that California. As subcontractors, you you aren’t violating local laws. should know that if you do not maintain 3. If an RMO licenses multiple entities in proper licensure throughout the course California, they are deemed related. of performing work you cannot enforce The violations of one company apply rights to payment. In California you may to both! be required to repay everything you 4. Make all required fringe benefit have already been paid, even if you paid payments.

They never go away that money to your subcontractors and and failure to pay may even create suppliers. The penalty seems extremely personal liability for you. cruel, but true.

Bradley Bosomworth and Joseph California courts do not have sympathy Sweeney are shareholders in the for a contractor that engages in practice areas of construction and real construction activities without a proper estate law with the Los Gatos, Calif., license, Pacific Caisson & Shoring, Inc. v. law firm of Sweeney, Mason, Wilson & Bernards Bros. Inc. (2015).

Bosomworth. They can be reached (408) Pacific Caisson & Shoring, Inc., was 356-3000 or bbosomworth@smwb.com an excavation subcontractor to Bernards and jsweeney@smwb.com.

Bros. Inc. It sued Bernards for its unpaid contract balance. Unfortunately, during Missouri. The American Rule the course of the work Pacific’s license governing attorney fees denies a had been suspended for two months party’s right to recover attorney fees by the Contractor’s State License Board unless the contract or a statute allows because it didn’t notify CSLB that a attorney fees to be awarded. Recently, related company had not satisfied a the Missouri Court of Appeals decided stipulated judgment.

The owner and Responsible Managing the case City of Chesterfield v. Frederich Construction, Inc., ruling that while Officer of Pacific was also the owner the contract did not contain an explicit and RMO of another company, Gold attorney fees provision, the contract Coast Drilling, Inc. Gold Coast did not did provide for an award of attorney pay all required pension benefits. Gold fees because the contract adopted the Coast and the Trust signed an agreed settlement, but Gold Coast did not make AAA rules and each party had requested an award of attorney fees in their the payments resulting in the judgment, arbitration demand.

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The city contracted with Frederich Construction on two separate projects.

The contracts did not include an attorney fees provision. However, the contracts did contain clauses designating AAA arbitration in the event of a dispute. The case went to arbitration and the arbitrators ruled in favor of FCI in both arbitrations and granted FCI attorney fees in addition to the principal amount.

The city filed a motion with the trial court to vacate the grant of $279,000 in fees in the second arbitration. The city argued that the arbitration panel had no power to award attorney fees because the contract did not include an attorney fees provision. The trial court denied the motion to vacate and confirmed the arbitration award.

On appeal by the city, the Court of Appeals reviewed the AAA Construction Industry Rules. Specifically, Rule R-45 allows an arbitrator to award attorney fees “if all parties have requested such an award.” Both the city and FCI requested such an award in their pleadings despite the lack of any expressed attorney fees clause in the contract.

Lee B. Brumitt is a shareholder with the Kansas City, Mo., law firm Dysart Taylor Cotter McMonigle & Montemore, P.C., focusing his practice in the areas of construction and litigation. Brumitt can be reached at (816) 714-3027 or lbrumitt@dysarttaylor.com.

Ohio. In the still pending case Siewertsen v. The Worthington Steel Company, Nicholas Siewertsen, deaf since birth, sued Worthington, claiming that it discriminated against him when it banned him from performing any job requiring him to operate forklifts or cranes.

From the time of his hiring in 2001 until the ban in 2011, Siewertsen operated forklifts, overhead cranes, and other motorized equipment without incident. He communicated with his co-workers using a variety of techniques and tools, including written messages on notepads, computer programs and text messages, hand gestures, and limited speech. In 2011, however, the human resources manager learned that Worthington had a corporatewide policy against deaf employees driving forklifts. Without considering

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Siewertsen’s on-the-job performance, Worthington disqualified him and transferred him, without a demotion in pay, to one of four menial jobs in the plant.

Siewertsen sued, claiming that Worthington violated the ADA by applying the no-forklifts-for-deafemployees policy. The district court denied the employer’s motion for summary judgment, concluding that a jury should decide whether Worthington satisfied its obligation to engage in an “individualized inquiry” as to whether Siewertsen could perform his job despite his disability.

The ADA mandates an individualized inquiry in determining whether an employee’s disability or other condition disqualifies him from a particular position. A proper evaluation involves consideration of the applicant’s personal characteristics, his actual medical condition, and the effect, if any, the condition may have on his ability to perform the job in question. At bottom, the individualized inquiry requires the employer to consider whether the employee, despite his disability, is capable of performing the essential functions of the job.

So, what is an employer to do when faced with an employee whose disability could prevent them from performing a job?

1. Do not apply a blanket exclusion policies. The ADA mandates an individualized inquiry, and one who excludes a disabled employee pursuant to such a policy has violated this obligation under the ADA. 2. Inquire as to an employee’s past experiences and successes working, despite the limitations imposed by the disability.

3. Consider reasonable accommodations that will enable the employee to perform the essential functions of the job.

Jonathan Hyman is a partner in the Labor & Employment practice at the Cleveland, Ohio, law firm of Meyers, Roman, Friedberg & Lewis. Hyman can be reached at (216)831-0042 or jhyman@meyersroman.com.

Washington. The Washington legislature in 1992 added a provision to the lien law to address unfair business practices concerning lien waivers.

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RCW 60.04.035 declares that “acts of coercion or attempted coercion” in the construction lien setting constitute unfair or deceptive acts or practices in trade or commerce for the purpose of applying the consumer protection act, RCW Chapter 19.86. The statute does not define “coercive acts” but does provide some examples such as a contractor’s or developer’s threats to withhold future contracts, made to discourage a contractor, subcontractor, or material or equipment supplier from giving an owner the notice of right to claim a lien required by the construction lien statute. Does this mean that any requested lien waiver prior to payment for labor or materials arising on a construction project constitutes an automatic violation of the statute? It appears at least one federal court has reached this conclusion but there are no reported state cases yet to confirm this important rule of law.

In 20 years the statute has only been addressed on one decision, the unreported case Uribe Inc. v. Northwest Pipeline Corp., 232 F.3d 899 (9th Cir. 2000). Although the statute was not discussed by the Ninth Circuit, it did affirm the federal district court’s determination that a lien waiver provision in a contract was illegal and that it violated Washington’s CPA. Northwest Pipe unsuccessfully argued that its lien waiver provision was not a facial violation of RCW 60.04.035, and applying existing Washington law, there was no evidence that Northwest Pipe coerced Uribe into waiving its lien rights.

What makes this important now is the new use of construction payment management systems, which require electronic lien waivers from subcontractors prior to actually receiving payment. These practices would seem to be a prohibited act under a broad reading of the statute.

Both Alaska in AS 34.35.117. Waiver of Lien Rights and California in California Cal. Civ. Code Section 8122 also have similar restrictions on lien releases as a matter of public policy.

James T. Yand is a litigation partner and member of the Construction Practice Group in the Seattle law firm of Miller, Nash, Graham & Dunn. Yand can be reached at (206) 777-7404 or James.

Yand@MillerNash.com.

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Feature The Strategy and Tactics of Best-in-class Firms — Building an Enduring Organization for Today and Tomorrow

by Gregg M. Schoppman

Strategy enters every aspect of our lives. From the chalkboards of our favorite sports teams to the war rooms of our favorite politicians, strategy serves to provide direction, purpose, and even a target for an individual, team, company, or country.

Why do we consume ourselves with strategy? Some experts believe that there are no predictive indices — trends, patterns, cycles — making strategy no more than a hunch or hopefully a scientific guess. The randomness of the world serves merely as a wave carrying most of the world’s firms, through crests and troughs. The misconception is that the best strategic plan will overcome all economic conditions, good and bad. The reality is no one has a

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crystal ball or seer on the mountain.

In fact, good, fact-based strategy is an interpretation of numbers and data just like a general or sports coach examines the field for some competitive angle.

The most important thing to consider is that building an enduring organization requires patience and hard work and most importantly, bestof-class firms create a strategic plan that builds the right infrastructure, executes flawlessly, develops their associates proactively, and spends the requisite amount of time on innovating their tactical playbook.

While no one has the “cheat sheet to the industry,” best-of-class firms focus

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on building the right organization with the right people and catalyze the right thinking, internally and externally.

Traits of Enduring Organizations One of the most enduring qualities of an enduring organization is its culture. Taken another way, many successful businesses almost have a “cult-like following.” While cult-like may scare a few people, think of organizations like Apple, Disney, or Google. Whether you are a programmer or working in a retail store, there is a mysticism or allure associated with being a part of these firms. Many firms today are trying “bounty programs” geared

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to find new associates through the relationships of their current associates. If people fail to take advantage of this bounty, the kneejerk reaction would be to assume there are no talented people in the area. A contrarian view might be one that existing associates do not want to recommend the firm for any number of reasons, but simply the culture is not right.

The characteristics of best-of-class firms include: • Flawless Execution — Regardless of the customer, market, or conditions, the firm executes flawlessly and takes a serious introspective examination when they fail to meet expectations.

• Customers and the Customers’ Customers — They know their customer’s business as much as they know their own business and most importantly, they know what drives decision making at all levels.

• Data Driven — In a world full of data, best-of-class firms find the right “tea leaves” and use this to assist in the decision making.

Furthermore, they are emphatic about measuring things connected to their business to provide benchmarking.

• Employee Focus — Construction is and always will be a people business — best-of-class firms constantly ask their employees, “How are we doing,” and take a proactive stance in developing talent at all levels.

• Ever-evolving Succession — Succession planning is not limited to the CEO or CFO. The firm is always developing new talent with the aim of succession as all levels.

• Research and Development — While most construction organizations do not carry a line item for R&D, best-of-class firms innovate and find better ways to build every year.

The most important item to realize is the fact that best-of-class firms do not view the aforementioned items

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as a destination, but rather a constant journey, always reflecting on the area of their business that is holding them back rather than the one area propelling them forward.

Vision, Mission and Values — The Problem Is Action Vision and mission statements usually adorn the conference and board rooms of most construction firms. However, short of providing inexpensive wall accoutrements, how much passion exists in the firm for these visions? Here are two short tests to determine the efficacy of your mission and vision: 1. Ask anyone in the firm — receptionist, operator, installer,

All jokes aside about the ink, there is often a huge disconnect for most people when it comes to the vision of a firm and how the associates see themselves influencing or even being part of how the firm “gets there.” If it fails to evoke any passion, it may also be that the firm is not following the trajectory it originally set out to achieve. For instance, did the firm create a vision, mission, and core values but do nothing else to change the firm? Put another way, it has a vision, mission, and core values, but it is actually living contrary to those pivotal words.

The problem often lies in the subsequent action planning, or lack thereof. For instance, a firm will go

Figure 1 Hygiene and Innovation

manager, etc. — to recite the vision?

How consistent is the vision across the firm? Could you even recite it?

2. Assuming someone could recite the vision, how much passion was there toward this grounding principle of the firm? Put another way, would anyone — including you — “get the tattoo” because you feel that strongly about the vision and mission?

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to great lengths to capture a vision, mission, and values and then stop.

In reality, the work just began. The rubber meets the road in creating all of the action items necessary to fulfill the vision. To be a “Best-ofClass Contractor in the Midwest” requires a great deal of effort and work, very rarely occurring because of happenstance. The greatest

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vision and missions almost seem unachievable, but evoke enough passion within the firm that everyone consciously works on the business while still working in the business. If you see your vision for a wonderfully enduring organization failing to come to fruition, you may have bought the membership to the fitness center but you failed to start working out.

Hygiene and Innovation As strategy takes shape, the fervor and excitement for innovation is often hard to stifle. That new office in Atlanta, the new market in Arizona, the new electrical business unit.

Often called the “bright shiny object,”

Hygiene by itself hardly gets anyone excited. Some might even define these action items as remedial. However, failing to achieve success at the hygienic level makes implementing new practices, idea, concepts, etc., very difficult. For instance, pre-construction planning might be considered hygienic.

Failing to plan, as basic as it sounds, must be mastered before a firm can successfully enter a new market, niche, etc.

That being said, to move any firm forward, there must be a balance of actions that focus on the hygiene and the innovative aspects of the business. If a firm only works on the

Innovation

“Same Market / New Execution”

“New Market / New Execution”

Today “Same Market / Same Execution”

“New Market / Same Execution”

Hygiene

Figure 2 Execution and Marketplace Matrix

the strategy of firms can be waylaid by initiatives and concepts that are outwardly focused but fail to capture the appropriate level of hygienic activities. For instance, this firm may likely underperform in its current marketspace — what would make anyone believe it could succeed in a new office/niche/market? For example, the illustration in Figure 1 provides a summary of how a firm might view “Hygiene” and “Innovation.”

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basics, it is never able to look ahead and move into becoming a market leader. Another way to look at the marketplace and a firm’s strategic foothold would be to examine the matrix in Figure 2.

A firm can simply operate within its existing sphere and execute the projects the same way (with a focus on ever-improving practices).

The corollary would be examining a new market with all new rules of engagement. Both are effective

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strategies, assuming the market conditions and data support this hypothesis. The overarching strategic direction of the firm will require some semblance of focus on these concepts of hygiene and innovation. As it continually revisits its action plan for the future, it should constantly weigh the activities in either category to ensure it is achieving the right results.

Building an enduring organization takes time. The greatest construction entities had their fair share of hiccups and challenges. The one item that separates the best-of-class firms from those that are muddling their way through life, is the time the best firms took to work on their business. In today’s construction world, there are no shortage of emergencies and fivealarm fires. The “urgent” will often supersede the “important” every day.

Leaders of today find this balance as well — dedicating the requisite time to build a great business while dealing with the day-to-day activities that come up. Ultimately, someone has to be at the helm of the ship, guiding it through the rough waters.

If everyone — including the captain — is down in the mechanical room, wrenching on the engines, who is steering the ship? Better yet, who will make sure you miss the iceberg?

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

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Feature Sales — ­ It’s a People Thing

by Tom Woodcock Selling can be a simple process or very complex one. In the construction industry it’s often made more complicated than it really is. The format of competitive bidding can be frustrating, but if you don’t let the pricing mechanism dictate your actions, you can see through the fog. I help some very intelligent contractors who have to work not to buy into the conventional wisdom on bidding. It’s extremely easy to get sucked into the “It’s all about low bid” crowd. The pressure to focus on pricing can be intense. It takes discipline and effort to realize there are other factors in the construction buying decision. Failing to recognize those factors can lead to a lack of understanding of why you’re not winning projects. Getting on bid lists is a small accomplishment, but getting inside information on the bid process, needs or results is significant.

This is not achievable through a great Facebook page or social media activity. Achieving it requires customer engagement and relationship. Being connected to your customer base is old school but necessary. The impact of social media is beginning to level off which brings us back to good ol’ fashioned customer contact.

I still thoroughly enjoy helping a client get connected to the customer base and first watch bid volume increase then customer penetration.

They develop strong relationships that even turn into friendships. They not just entertain their clients but connect socially. It isn’t a matter of throwing money at them but treating them as people. Learning their preferences and likes. Then, in the end, taking advantage of that position and securing quality opportunities.

The investment of time and treasure produces significant returns if you stay with it. The easy thing to do is write the necessary customer contact off as time wasting and expensive. To

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be honest the majority of contractors tend to lean in that direction. Those that persevere get the desired results.

The process of connecting with a wide swath of customers is simple in nature if you don’t complicate it.

Getting in front of them and doing so consistently will pretty much meet the requirement. Talking about life in general will incorporate business conversation nine times out of 10.

Forcing conversation or pressuring a customer usually backfires. You’ll experience a lot of one appointment and done results. Relax as much as you can and ask reasonable, personal questions. Be genuinely interested in your customers’ opinions and lives.

They’ll appreciate it and want to know about you. Stepping out in this fashion will grease the path to success. Just stick with it.

Personal contact is very difficult for some people. It’s a struggle to meet new people and feel comfortable. It can sometimes seem amazing that some people can connect at the drop of a hat. If you have one of these unique individuals don’t saddle them behind a desk or computer. Top notch people skills can be very difficult to find. Though often these talented team members need structure and support.

For those who dread connecting with people or working a room, putting yourself in the position to do so is half the battle. Pushing yourself to introduce yourself to a new business contact breaks the seal. Most people feel exactly as you do, so that little step can begin the relationship process. If there’s no other choice but you having to connect with the customer base, you have to learn how to make a first move. It’s easy to hide behind LinkedIn or Twitter, send an email or post on a wall. Problem is it simply relegates you to virtual invisibility. White noise per se. Gaining the separation from competitors

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everyone is now saying is necessary requires personal contact. The more you try to structure your approach, the more complex it becomes. Tensecond elevator speeches and cute ice breakers are easily spotted. Trying to get out what you do in the first 90 seconds is amateurish and flat out cheesy. The construction consumer is much more astute than in generations past. The ability to secure information and project knowledge is at our fingertips. The more you’re simply yourself, the more impacting on the customer. Let’s face it, being yourself should be easier. As I train dozens of construction personnel on selling, I find the greatest impediment being the willingness to get around people as much as possible. It’s much easier to make excuses why you can’t get around potential customers than raise the priority of such behavior in your schedule. Paperwork, project visits and financials are actions with immediate results. Sales is the definition of delayed gratification. Accepting this premise and persevering anyway will separate you from a high percentage of the competition. It’s not enough to think it’s a good idea to connect with customers, you have to put feet to it.

Yes, selling can be complex, if you make it so.

I’m continually amazed at what I see going on in the world of construction sales. Companies are chewing up and spitting out sales personnel like sunflower seeds or the reps themselves are bouncing from company to company trying to boost their income. Why does this happen so often in our industry? Well, honestly, the construction industry is still a little naïve on what a “sales” individual should do. Many times the person is hired to only get new business or process existing business.

Truth be told, you need a little of both to get the maximum out of the

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ENHANCE YOUR BUSINESS DEVELOPMENT SKILLS WITH FASA VIDEOS-ON-DEMAND Each of these on-demand videos, available from the Foundation of ASA. Play them with a free media player like Windows Media Player and use them for group training by projecting them onto a screen or wall in a conference room. candidate. Rarely when someone is hired to strictly get new business or accounts do they survive. It’s difficult to walk in and survive only on new transactions or accounts unless the demand is excessive. In a situation of high demand, the rep is needed just to keep up. If you’re looking to expand a customer base, reasonable expectations should apply. You can test candidates till you’re blue in the face but you’ll still burn through them because your expectations are pie in the sky. So what are the realities?

First, be honest where your sales production is before you secure sales help. What revenue totals, profitability and market penetration do you currently have? What’s the end goal?

How patient are you willing to be to get there? Are you willing to train a young, home-grown rep or prefer to over pay for experienced help? Really, those are the only viable options. The first option, you’ll end up investing in training and will need patience. The second, you’ll spend big time dollars but should expect immediate results.

Simple right? Not so fast. Construction is a people business and those skills are critical. The sales dynamic can vary significantly. Even between different customers.

What do you look for in a business development person? I have an idea: • Energy — Is the individual upbeat and hungry? If so they’ll make the sales calls. If not, get used to them being around the office.

• Guts — Will the individual make the tough calls, meet new people and handle customer issues fearlessly.

Not that they won’t be nervous, but will they embrace the work?

• Goal-Oriented — Will they do what it takes? Will they do the little sales extras that tip the scales? Strive to hit targets placed before them?

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$65 ASA members

$95 nonmembers

‘Sales Training Bundle: Networking, Why Buyers Buy and Staying Motivated’ (Item #5007)

“Sales Training Bundle: Networking, Why Buyers Buy and Staying Motivated” (Item #5007) is a three-part series presented by Tom Woodcock, Manchester, Mo., that provides tips on figuring out customer hot buttons and buying motives. Learn how to network to generate revenue, and techniques for motivating and reaching your sales goals.

‘How to Get Results from a Networking Event’ (Item #8056)

Are the networking events that your company participates in yielding solid sales leads? Are those events generating brand awareness and helping your company gain market presence? Poor results — or less than ideal results — may not have as much to do with the event itself, as with the execution of your sales team’s networking approach. Learn how your sales team can improve results with “How to Get Results from a Networking Event” (Item #8056). Presenter Tom Woodcock, Seal the Deal, Manchester, Mo., provides tips on how to approach and engage customers, as well as maximize the results your company gets from networking at industry events. Participants will also learn how to generate market presence and brand awareness for their companies.

‘Putting Your Best Foot Forward: How to Impress Prospective Clients and Get the Job’ (Item #8040) “Putting Your Best Foot Forward: How to Impress Prospective Clients and Get the Job” (Item #8040) teaches you how to position your firm to get the job, including how to get and use information about the prime contractor, its business practices, and its pre-qualification processes. Presenters Dennis Bausman, PhD, FAIC, CPC, Clemson University, Clemson, S.C., and Kevin Burnett, CPA, CCIFP, The Sundt Companies, Phoenix, Ariz., explain how pre-qualification works and provide tips for handling the process.

‘How to Choose the Right Customers (and Get Them to Select Your Bid’ (Item #8071)

Today’s subcontractors are turning the table and are choosing the best customers and projects on which to bid. Learn how with “How to Choose the Right Customers (and Get Them to Select Your Bid)” (Item #8071). Presenter Tim Moriarty, Textura Corp., Chicago, Ill., explains the challenges general contractors have obtaining bid coverage on their projects and how subcontractors can make their firms a preferred partner by making the GC’s jobs easier.

‘Playing It Cool: How to Effectively Pursue Claims While Keeping Your Customer Happy’ (Item #8062)

“Playing It Cool: How to Effectively Pursue Claims While Keeping Your Customer Happy,” provides subcontractors with strategies for effectively resolving disputes and obtaining payment of claims, while preserving relationships with customers.

Presenter Ben Wheatley, Munsch, Hardt, Kopf & Harr P.C., Austin, Texas, provides tips and information on how to use liquidation agreements and pass-through claims to resolve disputes without having to sue.

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What do you look for in a construction industry company you’re going to sell for? I have an idea here as well: • Are there existing accounts that will be given to the rep?

• Are the growth targets reasonable based on current data?

• Is there a training format in place?

• Are there clear performance expectations?

You may be beginning to see why there’s a bit of a gap between the company’s and individual’s expectations. So many business development people are simply thrown into the fire with no help or support. Many high priced reps make significant promises and never realize them in reality. I see this all of the time. Business development people are sent out on a wing and a prayer.

Companies are continually let down by a lack of production. The roller coaster ride keeps on moving as rep turnover

increases. What’s the most costeffective way to get the most bang out of your business development buck?

Well, speaking from experience, the best scenario is to take a candidate with strong people skills and a willingness to work at their trade. Ex collegiate or high school athletes, student government and community action personality types come to mind.

You then need an internal structure that allows these people to learn your corporate culture. Then, a training format on your products or services.

The next step is to educate them on your customer types and base. This is a great start. On the compensation end, I’ll simplify. Having designed dozens of sales compensation packages, I do not believe in straight commission nor high-base salaries in most cases. You need a mix. Fair base with bonus potential based on performance. That is actually paid out by the way. The customer list should be a mix of existing customers needing

maintenance or expansion plus a good list of targets. A good candidate, with structure and fair opportunity will excel in most cases. Compromise in any of these areas and you lessen the chance for success. Looking for a sales homerun hitter isn’t too different from professional baseball. There aren’t too many and they ain’t cheap. Good hitters can be developed to produce consistently.

If sales is the most important aspect of your business, and it is, then having a plan in selecting and developing your sales team is crucial. Throwing money at it rarely produces the desired results. No investing in it may be even worse!

Tom Woodcock, president, Seal The Deal, St. Louis, Mo., is a speaker, trainer, and author of the book You’re Not Sellin’, They’re Buyin’! He can be reached at (314) 775-9217 or www. tomwoodcocksealthedeal.com.

ASA EXCELLENCE IN ETHICS AWARDS 2015 ASA will honor selected firms that demonstrate the highest standards of internal and external integrity during an awards ceremony at the ASA who ‘knowingly … destroys … any The burden of regulatory attempting to navigate the regulatory annual convention, SUBExcel 2016, March 3-5, 2016, in Miami, Florida. record, document, or tangible object

compliance is growing at a staggering field. And it is only getting worse. rate. In 1960 the Code of Federal On top of this avalanche of Regulations (CFR),LINKS which contains HELPFUL regulation, another wrinkle in the all federal rules and regulations compliance field is the unsettled law.

• Watch the Excellence in Ethics (collectively: administrative laws), AwardsAVideo. comedic (and perhaps horrific) consisted of 22,877 pages published example the case Yates v. United • Download the 2015 Excellence in Ethics AwardsisBrochure. in 68 volumes; by 1981 that number States (13-7451 - Slip Opinion – • Download theto2015 ASA Excellence in 02/25/2015), Ethics Awards Application. had ballooned 107,109 pages in which detailed how 180 volumes; and as of 2012 the CFR invoked provisions • ASA provides useful model documents federal to helpprosecutors with your submission and your consisted of 174,545 pages in 235 of the infamous Sarbanes-Oxley law ethics program. View the 2015 Excellence in Ethics Awards Resource Guide. volumes, according to The George to indict a commercial fisherman.

• Download University, the 2015 ASA Excellence in The Ethics Awardswas Timeline.

Washington Washington, defendant accused of D.C. The latest year of data readily disposing undersized fish that • ASA’s Excellence in Ethics Awards Program Q&AofLinkedIn Group — available from the Federal Register, were found during an inspection a forum for getting answers to your questions about the award and 2014, has the current page count at ofcurrent his boat.

This was, according application process.

This forum includes award recipients whotohave 175,268 laws. These numbers may be federal prosecutors, in violation of been through thelawyers, application process and are willing to help guide new welcome news for federal the Sarbanes-Oxley provision that applicants administrative through their application prosecutors, agencies, process. “imposes criminal liability on anyone and compliance professionals, but • Recipients of the 2014 ASA Excellence in Ethics Awards may re-apply for are disheartening for businessmen

2015 using the Re-Certification Form.

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with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States …’”

Historically, this dictate had been traditionally associated with document destruction following the likes of the infamous cases such as Enron and Arthur Andersen. However, in Yates, it was being invoked in regards to a red

APPLICATION DEADLINE:

DECEMBER 11, 2015

grouper, a similarly ‘tangible object’, according to federal prosecutors. It T H E

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Feature How to Bring Value: BD Ideas

by Larry Silver

Solve Their Challenge

I have been hearing Ted Garrison’s mantra for many years now that bringing value is the key to doing business. Garrison is a construction consultant and contributing columnist to the ezine, Business Development.

I have to agree with that premise one thousand times over. People want value for their dollar, for their investment. If something is of value, people are willing to pay for it.

Granted, some of it is perceived value, but nonetheless, it is value to them.

Being a consultant and recruiter myself, I have a partial handle on this concept. In the past, many contractors would call me and discuss how I could possibly help them in their firms. I used to quote really large sums of money and often times, I blew the prospect out of the water.

Why do you think? The reason that I blew them out of the water was that I had not first established the value that I was bringing to the table. So, really any amount of money seems high if you do not establish some value on the front end.

For example, let’s say that you are attracted to hiring a certain business

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developer who you think highly of in your marketplace. You interview them confidentially and when asked what salary they want, they share $200,000 as a base. Most AEC firms would balk at that figure and it would end the fantasy about the hire, right?

But, let’s say instead that the business developer laid out a simple and clear annual plan of how to bring $2 million in gross profits to your bottom line on top of what you are already doing. Would it be so arrogant to request 10 percent of that profit as a base salary and as a reward for the growth earned? It would not be arrogant. Now the $200,000 base looks fair and reasonable. After all, you will be a millionaire and your business will have some breathing room. It is a matter of perceived value and its impact on you.

It is the same with your clients. It is necessary and very important to establish value on the front end of every relationship, every transaction, and every communication. This cannot be overstated.

So, how can you bring that value through ideas that have been tried and true in our industry?

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Regardless of what your product or service is, your client has a need for it and there has been challenges in their past with the fulfillment of it. Therefore, it behooves you to uncover what their true needs are, their business goals, and to apply your product or service to meeting that challenge in part or in whole. If you can save them time or money, these are at the top of the list. If you can minimize their liability, their hassle, their pain and discomfort, your contribution is golden. You will win a loyal client, a customer who will also let others know what you did to serve their needs.

Design Is Important Having worked in various roles and capacities in the AEC industry, I have learned that one of the most important ways to bring value is through the design of a product or service or project. It is on the front end, when the preliminary concepts and needs are being discussed, where the strides and the gains can be made. Many use the term VE or Value Engineering. That term is important, but if you are not locked into a specific design, you may find that you can influence the overall design or subsets of it to bring tremendous value to your client.

One realm where this is obvious (not as obvious 10 years ago) is the area of sustainability. Construction has a lifecycle, and the initial costs turn out to be about 10 percent of the costs over the life of the project.

This is huge. Therefore, roll-up your sleeves and figure out how to save your client time and money over the life of a project. You will be thinking beyond the normal scope of the initial

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work and even one piece of your counsel could save them the cost of the entire project.

One of my careers was with an E/A firm where we designed and promoted tilt-up concrete construction. Because of some aggressive engineering and understanding how to use the shell of the building as sheer walls, we could eliminate the structural columns surrounding the internal wall perimeter. The savings were astronomical and, if there were initial plans drawn up that did not consider the “sheer” wall concept, they could not compete with our design.

Communication in Relationships

admit fault when it is there and eat humble pie even when it is not? Do you have a formal or informal system in place to communicate thoroughly with your contacts? Is your attitude positive and upbeat? This is a differentiator these days when we are all being bombarded with the same or very similar messages. Recently, I had to decide between four vendors to aid in selling an important asset.

One stood out as positive, assertive, and confident. The others were not as confident, as positive, and were more hopeful and wishful rather than demonstrative. I went with the positive one. That is what I need to sell my asset.

Differentiate

Business Development is all about relationships. If you desire to bring value in relationships, then you must learn to be an above average communicator. We are not looking for perfection here. But, are you responsive to your contacts? Do you keep your word consistently? Do you

It is crucial to differentiate your firm from the pack. Be clear and focused with your value proposition.

Make sure that your whole staff, your team, is trained in how to deliver and communicate that differentiation. It also comes out through your written proposals and presentations. Make

sure that they are salted with strong BD ideas that demonstrate that you are paying attention and ready to consult with your clients. It makes a difference in the results of your sales, your people, and your growth.

In summary, we have shared how to bring value through implementing BD ideas such as solving your client’s challenges, using design to save time and money, being an excellent communicator in your relationships, and by differentiating your firm from the pack with a clear value proposition.

Larry Silver is president of Contractor Marketing Inc., a consulting/recruiting firm in the AEC Industry. Silver performs strategic planning, marketing/business development audits and training, and is currently the publisher/editorin-chief of Business Development, an ezine that is distributed to more than 100,000 firms. Silver can be reached at (937) 776-7170 or larry@ contractormarketing.com.

THE

Win. Win. Sell your products and services.

Advertising reaches industry leaders and decision-makers who spend $11+ billion annually on products and services.

Support ASA.

Advertising supports ASA, the industry voice of trade contractors.

That’s a win-win situation.

To advertise in The Contractor’s Compass, contact Tony Kozak at (716) 844-8174 or advertising@asa-hq.com

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Feature BD Is a Loaded Gun — Which Direction to Point It?

by Larry Silver Business Development is a misunderstood secret weapon for many AEC firms. It is powerful, explosive and can change the direction and future of your firms, if you learn to use it properly and to point it strategically in the right direction.

I remember a young president of a GC firm who shared the story of an older business developer who had the area where they were located in his hip pocket. He was close friends with the key decision-makers and the good

take on. Actually this is not really an unusual story, because BD has that effect on many firms, whether they realize it or not, whether they take it for granted or not.

Obviously a loaded gun is a metaphor that represents the damage that BD can do, damage in a positive light and promoting growth and expansion. Every relationship your firm enters into, every opportunity you pursue, BD is part of that process and hopefully working to assure long-term

ol’ boy club, the circle of influence there in that region. Late in his 60s, he had a heart attack and at that time their GC firm was 100 percent private negotiated type work.

Within two years of the business developer’s absence, the firm defaulted to 100 percent hard bid work. The gentleman decided to come back to work again after his recovery and within 18 months, the GC was back to 100 percent negotiated work.

This story really impacted me at the time and seemed like a unique testimony of the power of BD. The power to impact who you do business with and what type of work you

success with selected clients.

To not have a direction to put such a powerful weapon is a shame and a waste. To just start firing a powerful weapon randomly into the air or in random directions is dangerous and unadvised. BD is the same way. It is crucial to be clear, targeted, and strategic about how BD is positioned and enacted from the top down in any AEC firm.

If BD is used properly and consistently, the results can be astounding and bring massive returns, not unlike our story above.

One of the largest and most successful GC/CM (unnamed for

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privacy) firms in our industry has a BD culture that is clear and dominant.

An executive can only rise so far in the firm until they prove themselves from a BD standpoint. When they are successful in their BD efforts, they can continue on in their career aspirations.

This same company, when they interview their subs for a project, begins their interview by asking what role BD plays in the sub’s business. BD is primary to their culture, so they are direct and forthcoming, because they want team players who get the BD paradigm that they swear by.

In another GC firm where I placed their first business developer, they were performing about 70 percent of their work for one major retailer.

The idea was to diversify and to not place all their eggs in one basket. It was too risky to continue that way.

The business developer invested eight years there; they tripled in size (to over $200 million) and got into many other new segments including large government projects, which they had no former experience.

The business developer can bring new types of work, bring larger projects than the current history, network with new industries and new C-level execs, and partner with significant players who would have never been considered before.

BD is a loaded gun and handled wisely can make all the difference in profitable growth for years to come.

Larry Silver is president of Contractor Marketing Inc., a consulting/recruiting firm in the AEC Industry. Silver performs strategic planning, marketing/business development audits and training, and is currently the publisher/editorin-chief of Business Development, an ezine that is distributed to more than 100,000 firms. Silver can be reached at (937) 776-7170 or larry@ contractormarketing.com.

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Feature What Are You Really Selling & Negotiating?

by Monroe Porter Selling means different things to different people. Some folks think of the tin man, aluminum siding kind of salesperson. Others think of pushy fast talkers who talk potential customers into something they do not want or may not need. Many people are prejudiced against selling because they do not fully understand what selling really involves.

Good sales and negotiation practices focus on sound communication skills. A sales definition I communicate with contractors goes something like this: “Selling is your ability to communicate your craft or trade to solve customer problems and fulfill customer needs.” Nowhere in this definition do you see the words coerce, pressure or push. Good selling is nothing more than good communication. But what are you really communicating?

Business sales, unlike consumer sales, focuses more on the buying process and less on the actual product being sold. For many subcontractors, this is a difficult concept to fully grasp and practice.

Many confuse technical expertise and socializing with their ability to fit within the customers buying practices and close the deal.

Ask most people what makes a good salesperson, and they describe a talker and social extrovert. Their personality of choice tends to be a person who has the gift of gab who is a shoot-the-bull kind of guy.

Unfortunately, this type of person can fail miserably at all sales but results can be particularly bad with businessto-business sales. While business sales are built on relationships and communication, success involves detective work and an ability to

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fit within the customer’s buying process. Business-to-business sales are built on three specific types of relationships. Unfortunately, business/ career relationships do not naturally develop and are frequently build on the wrong foundation.

Social Social interaction revolves around likability, common personal interests, perceived friendship, social outings, etc. It is important for people to like you but few people are willing to risk their job in order to maintain a social relationship. Social relationships also tend to naturally happen as people are chit-chatting and being nice to one another. At times, social relationships may actually hurt salespeople when negotiating work because they can lose objectivity. Some large companies even prohibit socializing with vendors.

Operational/Service Operational relationships are built around job and product activities such as schedule, craft quality, specifications, etc. Such conversations naturally happen and are needed to calculate an estimate and project manage a job. Frequently, subcontractors fall into the trap of believing that just because they are better at a technical process, they will win the job. Rarely is this the case.

In fact, when dealing with today’s construction managers, many have a college degree in construction management but little or no actual craft experience. Another complexity is that in many cases, the person who is “buying” the job may have little to do with actually constructing the job.

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Business/Career Business relationships are built on your ability to help customers with long-term career and business issues.

These relationships are built on your ability to understand the customer’s buying methods and forging a strategy to fit within those processes.

The relationship goes beyond one job or order and is more in tune to what is trending within the customer’s business. Are they outsourcing more? Are they in a growth cycle?

What are the internal politics within the organization? What are your contact’s career goals and how can you help that person achieve success?

Few subcontractors ask the right questions or appreciate the value of understanding this information.

Such conversations also do not naturally happen. You have to ask the appropriate questions and make the conversation happen. Having your contact complain about how his or her job has changed and then asking how you can help them with that issue can build a much stronger relationship then merely sharing a beer together.

The larger the company, the more complicated the buying practices.

Two kinds of people dance with elephants, quick and dead. It is all a matter of trying to figure out where the elephant is headed and tag along rather than conflict with procedures and get squished.

It is also important to leverage the estimating process. Customers need your number. Evaluate your bid process and also track the winning and losing bids by type of work, customers, estimator and other pertinent facts. Estimates are free to the customer but they are not free

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to subcontractor. Use your customer list to separate the prospects from the suspects. If people keep using your numbers and you never get a job, you must be willing to have a tough conversation about the reality of the situation. If they are unwilling to throw you a bone or figure out a way to get the job, it is a waste of time to keep bidding them. Treat each estimator and customer as a profit center.

Much is said about closing a sale and what to say and do. In order to close the sales process, you have to talk about commitment. Too many sales people are reluctant to do this.

Some are afraid of the rejection.

Others want to hold on to that faint hope that they still might get the job.

Some don’t want to appear pushy.

Others are afraid their price will be questioned. The best close is to simply say, “Would you like for me to pencil you into our schedule?”

Such a question should never seem pushy and if you feel that way, the problem is in your head as the seller.

When you go into a restaurant and the server asks would you like to order food, you don’t see that as pushy. When the hotel desk clerk asks if you want a room it is a natural and expected question. Asking can you do the job is just a logical progression of the estimating process and frankly, is expected.

Let’s move forward to negotiations.

Negotiations are part of the buying process. Even if you are not good at negotiations or don’t enjoy it, you must be able to recognize the process and know when tactics are being used against you. Negotiations also are much easier when you have gathered information upfront and tried to fit within the customer’s buying process. Simply asking for the price and asking for the order makes negotiations much harder as you have

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no information to counter with and no way of knowing real value is to the customer.

Take a moment and reflect on the following statement. Is it true or false?

“When negotiating it is better to concede a little and give some small points in order to win in larger areas down the road.”

False. Concede denotes giving in. What if you are dealing with a ruthless negotiator or nibbler? They will just take your money and run.

Negotiations are about trading, not giving in. It should not be a win-lose situation.

Negotiation is a skills-based discussion and decision-making process where two or more parties complete a transaction or agreement.

There are standard ploys that many negotiating parties use as part of the process. These processes have been around for years and I am going to cover a few. You may or may not use them but at least understand when they are being used against you.

First, don’t get hung up with the price flinch or initial price rejection. It is the customer’s job to flinch and say your price is too high. If you bid a job and the customer replied that your price was perfect, it would worry you to death. You would be lying in bed tonight wondering what you left out of your quote.

Good guy/bad guy is a common negotiation ploy. This is where one person appears to be on your side and the other is the bad guy. Car salespeople practice this ploy when they say they are trying to get you the best price on your trade in but the used car manager will only do so much. You’d love to trade your car at a lower price but your wife won’t let you. How do you deal with this? Play good guy/bad guy back. For business, use things like you’d love to do it but the owner won’t let you, the bank

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says you must retain this amount of margin, etc. Play the game until a situation develops where both of you can win.

Use Mother Hubbard, there is nothing in the cupboard. Simply insist there is no more money to give. It is just not there and you would love to do better but can’t.

What would you do if you were me? Insist that you would rather be upfront and be straight with them.

“What would you do if you were me, agree to that price and then nail you on change orders later? We don’t do business that way and I would rather be upfront with you now.”

Agree and offer an alternative. If you walk into a Chevrolet dealership to buy a Corvette and tell them the price is too high, they’ll simply show you a Camaro. Don’t make it your problem that the customer is cheap or does not have enough money. Start by saying, “I can understand why you might think this is a lot” and then offer an alternative. “I can understand why you might think this is a lot, we could use a sub crew or cut back on the materials but would you be happy with that?”

Yes, I know this all is easier to say and many construction projects are price-driven. OK, but what do construction managers really build?

Most do not employ craftspeople, but rather they make a living negotiating on the owner’s behalf, buying out the job and coordinating the job. They are professional negotiators. Understand this and play the game. Don’t take a knife to a gun fight and wonder why you lost.

Monroe Porter is president of a PROOF Management Consultants. For consulting or a seminar, call (804) 2671688 or email monroe@proofman. com.

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Feature Building Your Brand by Improving Your Online Identity

by George Minardos our company identity is your brand.

It is a combination of your name, logo, tag line, culture, competencies, people, and your portfolio. It is what makes your business unique. By defining your identity you define your value to those that buy your services.

Your company’s identity is a function of how you perform and how you are perceived. It impacts everything in your business, from the projects you are considered for to the employees you attract and retain.

Your online identity is the extension of these unique characteristics onto the Internet and the virtual world that it enables.

Because builders create physical structures, they tend to think of their brand or unique value proposition

in terms of the services they provide or the portfolio of their work. To that extent most construction companies’ online marketing efforts focus on a Web site, which is little more than a digital version of their paper marketing materials.

The number of people online has recently surpassed 3 billion with an 800 percent growth rate this past year.

The magnitude and impact of this connectivity is hard to comprehend and predict, but it does have a clear effect on your business. These days, an old Web site that provides little value to your audience reduces your competitiveness and your image. Your brand online is now as important as it is in the real world. There are parallels between how you brand and market

in the real world and online. There are also new challenges that technology creates that were not necessarily at issue in the past. Your identity and reputation have evolved to mean something more and different in the online world.

Search This is perhaps the largest and most recognized area that people are familiar with on the Internet. In the construction industry, the original source to get found was based on paper books like the yellow pages or The Blue Book. Many companies used to start with “AAA” just to show up on top in an alphabetical listing. But online it is more complex. Google, Bing, or Yelp, and other digital directories, use multiple variables to display your name. Your name, your services, your geography, and your paid advertising all affect the search algorithm. The stakes are high. “If you don’t show up on Page 1, you don’t exist,” is the mantra of many SEO experts. But the opportunity is greater than ever. Now anyone from anywhere can find your company as long as they are connected and you show up in the results.

Internet Branding Internet branding has now become its own discipline, whereby your company takes control of how it is perceived online. This can take the form of Google and other online ads, blogs, customer testimonials, commentary, ratings, and more. When someone searches your company, you want it to appear in its best light.

Try it out for yourself. Perform a search on your company, a keyword, and some of your competitors and look at how much there is to learn.

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Online Presence Your online presence is slightly different. It is how you show up on the Web. This could be in search results, but it extends to your Web site, reviews, blogs, news articles, and wherever your business is displayed.

Social Communities Social communities exist in the real world and online, both are how you build trust. Your real world community in which your business functions, parallels your relationships to your online communities. Your digital community is how you interact with customers on your blog or informational sites. Your employees’ posts (personal and business) can also impact you. All of these interactions affect the way your community views you and can either increase or reduce the quality and trust of your brand.

Digital Footprint Your digital footprint is the interaction of all of the above. It extends beyond the static elements of Web pages and social media sites.

It refers to how your company is interacting online. This is both visible and behind-the-scenes reporting.

Think of it like a credit report. You don’t necessarily see all the traffic that creates it, but you certainly know that it can impact your financial options. Similarly, your online activity is being tracked and compiled as part of many big data services. This can make your online experience more relevant and tailored.

Security Security of your identity, as more things like bids and electronic payments happen online, is quickly becoming a top priority for CTOs. More and more project information is and will continue to move online to the cloud. As that happens, verification of your online identity will become critical to conducting business. Just like you wouldn’t want someone to be able to log into

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your bank account, you would want assurance that a competitor cannot see your bid online before they post theirs.

Next Steps to Meet Your Objectives The construction industry is by its nature firmly rooted in physical production. The notion of online identity or online presence may seem like marketing fluff to many builders.

However, as more of our daily business happens online, it becomes more critical for proper online brand and identity management.

Developing, protecting, and expanding your online identity can be a cost-effective way to improve your bottom line. A better online identity can help improve your prospect list, your hiring success, and even help with fraud protection.

Start with your strategy and audit what your company is doing and/or what it needs to do. Determine what is important to measure, what you would like to improve or start doing, and why.

Once you know what you want to undertake and measure, you can then determine a platform to use.

For example, if you wanted to simply update your online identity and presence you might sign up with a service like Yext.com. Their power listing system goes out to all the major listing services and updates your profiles on them so that you can have consistency and monitoring on over 60 different directory and business sites. It works on every service except Google, which you would need to update directly through https://www.google.com/ business/.

Once your online presence is cleaned up and optimized, you will want to find out who is viewing your company information and from where. There are multiple systems to track traffic to your site and social platforms. The standard way to track your site’s metrics is through Google Analytics.

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With well over half of Internet users now accessing the Web via mobile, you’ll also want to show your best face on these devices as well. The simplest way to do so is to make sure your site is mobile responsive. The standards now are basically automatic. If you have a new Web site, the browser is able to detect the device and adjust the format of your site accordingly. If you have an older site it may be a more mechanical process for your Web site programmer.

Determining which social media platforms make sense for your company is almost as unique as your own identity. The big three are LinkedIn, Twitter, and Facebook.

There are literally dozens of others.

One way to determine which of these social platforms makes sense for your company depends on your audience and your goals. Start small, explore, learn, and have fun.

Your Domain Name At the core of your identity is your name. The name you choose for your Web site, email, and other microsites is fundamental to your online identity.

It is what is on your business cards, job signs, and what shows up in search.

Many builders settled for what was available in the crowded world of .com. Now businesses have an almost unlimited number of choices to get the best name that most closely represents their online brand.

Last year ICANN, the organization that controls the naming system of the Internet, launched the largest expansion of the Web since its inception. You can now get www.

YourCompany.build at places like GoDaddy and Network Solutions and chances are the exact name you want is available. More and more businesses are using specially branded unique names for many uses. The days of grabbing your one name and putting everything on it are a thing of the past. Registering a .BUILD name for your company,

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1100 Via Callejon, Suite A, San Clemente, CA 92673

surety@southcoastsurety.com www.southcoastsurety.com (949) 361-1692 Fax (949) 361-9926

The Bond Only Agency

(800) 361-1720 DOI Lic# 0B57612

MAY 10, 2016, ASA WEBINAR FOCUSES ON ESTABLISHING YOUR FIRM’S ONLINE IDENTITY Most construction businesses have not taken their online identity to the next level.“What is your online identity?” asked George Minardos, .build. “It’s more than simply your Web site and your email address. It’s how you are found on search engines, your company and employees’ LinkedIn profiles, your Facebook page, Twitter account, and it’s what others say about you on ratings sites like Yelp!”

Minardos will present the May 10, 2016, ASA webinar, “Websites, Email, Social Media and Your Domain Name.” In this webinar, Minardos will explain the Top 5 secrets about how to seize control of your online identity and provide tips on how to get started quickly and easily today.

This live, 90-minute webinar will begin at 12:00 p.m. Eastern time / 9:00 a.m.

Pacific time. The registration fee is $99 for members and $179 for nonmembers and allows access with one Internet connection. Project the webinar onto a screen or wall and listen to it on a speakerphone for a group training event.

After the program, registrants will receive a link to a recording of the webinar, and an ASA Certificate of Completion that can be downloaded and printed for each person who watched. Register online.

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.

Think of your online identity as an overall part of your company’s reputation. More and more of our business will be discovered and conducted online. 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.

George Minardos is the founder and chief executive officer of .BUILD. Mindardos has a passion for technology and building. For more information on .BUILD, contact Minardos at george@bmail.build.

ASA NATIONAL CONSTRUCTION BEST PRACTICES AWARDS 2015 ASA offers national recognition to prime contractors that are committed to superior business practices like prompt payment. ASA’s annual National Construction Best Practices Awards, developed by the Task Force on Ethics in the Construction Industry, recognize elite prime contractors that uphold best practices and refuse to do business according to the “lowest common denominator.”

The deadline for prime contractors to submit applications is Nov. 13, 2015. The application fee is $495. Each prime-contractor applicant must supply three sealed business-practices recommendations from specialty trade contractors that have worked for it in the past year, along with a copy of its standard subcontract, with its application.

ASA will honor recipients during an awards ceremony at the ASA annual convention, SUBExcel 2016, March 3-5, 2016, in Miami, Florida.

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HELPFUL LINKS Watch the National Construction Best Practices Award Video Prime contractors: Download the 2015 National Construction Best Practices Award Application Form Specialty trade contractors: Download the 2015 National Construction Best Practices Award Form for Evaluating the Applicant’s Business Practices ASA Chapters: Download the ASA Chapter Guideline for Processing the 2015 National Construction Best Practices Award and other materials under “Industry Relations” in the ASA

Chapter Toolbox.

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APPLICATION DEADLINE:

NOVEMBER 13, 2015

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Feature Becoming a Trusted Advisor

by David Pugh & Mike Medrzycki To be sure, the marketplace is making it tougher and tougher to consistently win more work. It’s still a buyer’s market. Fees and earnings have hit bedrock levels and are only slowly coming back to anything reflecting the “good old days,” which weren’t always that good anyway.

Then we look at our bid numbers, and they aren’t low. Now it’s an even tougher battle, so maybe it’s time to face a potential truth: We’re not just losing; we’re failing to win. There’s a difference.

No one doubts our firm’s technical capabilities. What prospective clients don’t fully understand and/or appreciate is that while our capability to build things is unquestioned, that capability is readily available elsewhere in our industry, and it’s available at a lower cost to the owner than what we’re citing. In short, our project prowess, however impressive, is not adequately differentiating us to the point that we can sell ourselves in spite of those higher numbers.

Golden Rule: Positive differentiation does not simply occur. It must be created. Negative differentiation doesn’t need to be created. It just happens.

We need to create the differentiation that empowers us not just to sell our services per se, but to sell our numbers as well. From an owner’s perspective, dollars are tight, and any misspent dollars ensure serious immediate consequences and well into the future. Conversely, dollars saved or spent wisely means real value and provides clients with a compelling reason to choose the contractor that provides that value.

In other words, they look at us, they look at our numbers, and they say in

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so many words, “They may cost a bit more, but they’re worth every penny.”

How sweet it is for them and for us.

The operative word here is “value.”

Unfortunately, it has been used and abused for so long in our business

things as people, safety, value, quality, leadership, and so on — all commoditized claims made by our competitors, as well, and all just so much sales noise. So, based on the original premise that we’re falling short of winning the volume

— typically because it isn’t assigned any real meaning and isn’t, therefore, taken any more seriously than a letter signed “Affectionately yours, Duke” — that we now try to punch it up by claiming to provide not just value but “value added.” Big whoop. So What?

Key Issue: We have ample evidence that while we’re consistently producing superior, highly competitive proposals and presentations, we’re not winning because of these deliverables.

Golden Rule: In most cases, proposals don’t win contracts but can lose them in a heartbeat.

Let’s be honest. We have postured, brochured, and preached about our unflinching commitment to such

of work and earnings we require not just to survive but to prosper, here’s a Statement of Need: Create substantive differentiation by leveraging our behavioral advantage and deploying our best doers as doer-sellers way in front of an RFP and doing so in ways that clients will value and be willing to pay for.

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Lead the Need What Do We Need To Achieve (i.e., our Goal)?

A tactical, practical knowledgeand skills-based learning program to improve our development of client relationships that matter, i.e., relationships that deliver a powerful, positive impact on winning,

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relationships that ensure we enter the proposal phase already perceived by the owner as their preferred provider.

That being done, our proposal and presentation capabilities can confirm their belief that they want to work with us rather than trying to convince them with last-minute pitching.

In doing so, we gain a powerful advantage in the market place if — with quality face-time not just with phone calls and emails — we become Trusted Advisors for our current and future clients. Then, when a current or potential owner has a question or problem or challenge, they dial 911 and our phone rings. When they turn to us for answers, direction, and leadership, we have our metric of goal achievement.

This learning program is not just about knowledge and skills related to building trust with clients and prospects — although it is certainly focused on that — because it will also be designed to take the first critical steps in cultivating a Trusted Advisor culture, a way of working with clients that is part of our professional DNA. It’s what we do, it’s what we do internally, as well as externally, and it’s what we do better than any company in our industry. In other words, it differentiates us with real value.

To that end, we align the BD principles, concepts, tools, and models — embodied in and standardized throughout our learning program — with the technical knowledge of our finest operations colleagues. By synchronizing these two engines of BD differentiation, the learning program would include such topics as: • The Five Trust Skills: Listen, Partner, Risk, Improvise, and Know Yourself • The Dynamics of Influence • Trust-Based Marketing and Business Development • Trust-Based Networking • Delivering the Message

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• Handling Objections • Talking Price • Selling to the C-Suite • Reviving Stalled Relationships • Shifting from Tactics to Strategy Bottom Line: Building trust is a teachable and learnable skill.

Becoming valuable Trusted Advisors to our clients, current and potential, over time creates powerful, positive differentiation we can use to win clients first — i.e., pre-RFP — and then their projects.

Golden Rule: Work to win clients before trying to win their wallets.

If we wait until they’re reaching for those wallets to try to build relationships, it’s painfully and embarrassingly clear what’s really going on. At that point, developing trust-based relationships is a shallow, salesy exercise in futility.

Who? Business Development: While our BD professionals should be steeped in building trust-based relationships with current and potential clients, the fact of the matter is that with few exceptions, BD needs to sharpen current skills and add new ones, especially in the realm of behavior that builds deep trust. Moreover, BD needs to define and build collaborative, behavioral alignment with our much more technically astute doer-sellers.

Operations-based Doer-sellers: We’re talking about a fairly rare breed of builder here, and they are as potentially valuable to the firm as they are rare. We know who some of them are. We need to find the others. We need to grow all of them. These are our Ops colleagues who not only can answer the tough questions owners ask, they actually enjoy the experience and the process of contributing to wins long before grinding out sections of a proposal or rehearsing an interview presentation.

These are the pros who can and must build deep trust with current and

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prospective clients, not just show up at a short-list presentation and start by saying “Hi, my name is Bob, and I’d like to be your project manager.”

C-level Executives: The vast majority of our top executives have come from the operations side of the business, and they are now the face and voice of the company. These leaders need to learn about the power of Trusted Advisors and acquire the skills to become Trusted Advisors. In very real terms, our C-level executives can and must “lead the need.”

Why? We need to win more work with excellent fees and earnings, and the clock on this goal is ticking loudly. The old ways aren’t necessarily obsolete, but they aren’t enough. Moreover, to win negotiated work we must win before the proposals, not with them, and the fact of that matter is that we aren’t succeeding. Too often we trot out our proposed project team for the short-list presentation, and the owner is looking at a cluster of strangers: no chemistry on the team, no chemistry between our team and the owner’s team, no deep trust that these project professionals will win the day for everyone. To win consistently and without boiling our numbers down to a subsistence level, all this can and needs to change sooner rather than later. The marketplace waits for no one.

Syzygy Professional Marketing Services is a firm specializing in professional development, marketing and consulting services related to maximizing business results through people in the AEC Industry. Syzygy helps clients differentiate themselves and grow their business through the development of people and the processes and tools they use to do their work. For information on how Syzygy can assist your organization achieve its goals, call (253) 224-5252 or visit its Web site www.Syzygy. consulting.

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March 3-5, 2016 Hyatt Regency Miami, Florida

www.SUBExcel.com

Legally Speaking

Public-Private Partnerships: Business Development Opportunities

by Matthew Meaker In the September edition of The Contractor’s Compass, E. Colette Nelson and Lenora Marema discussed the concept of publicprivate partnerships from the perspective of subcontractors needing to be aware of concerns regarding payment security when taking on these projects. This is a real concern that warrants subcontractor caution when considering a P3 contract.

Evidence suggests that use of P3s in the United States is likely to increase. According to the World Economic Forum’s 2012-13 Global Competitiveness Report, U.S. infrastructure — quality and availability of roads, railroads, ports, air transport, electricity, and telephones — is lagging behind that of most developed countries and even some emerging ones.

(The report ranks the United States 25th, behind nations such as Bahrain, Oman, and Barbados. The American Society of Civil Engineers “2005 Report Card for America’s Infrastructure” gave a grade of “D” to the overall condition of our country’s infrastructure and called for an investment of $1.6 trillion over the next five years.

Contractors and the construction industry as a whole play a critical role in the development of a successful P3, and a subcontractor looking to grow and succeed should be knowledgeable about the

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opportunities that P3s offer to both the public and private sectors.

Definition of Public-Private Partnership There appears to be no generally accepted definition of a “publicprivate partnership,” as no two P3s’ purpose, appearance, structure, and operation are alike. However, for the sake of discussion, let’s use the definition provided by the National Council for Public-Private Partnerships. According to the NCPPP, a P3 is: “a contractual agreement between a public agency (federal, state, or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.”

Examples of P3s in the United States In order to better understand the various scopes, structures, and financing mechanisms of P3s, it is worthwhile to briefly examine five examples of P3 projects that reached financial close in 2014: • Florida: I-4 Ultimate Project ($2.3 billion) — Florida has been a leader in the use of P3s,

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with some of the nation’s most significant P3 transactions to date. This project, which reached financial close in September 2014, spanned approximately 21 miles and included adding four tolled express lanes; reconstructing 15 interchanges; and replacing, reconstructing, or widening 140 bridges. The winning consortium of contractors was awarded a 40-year Design-Build-Finance-OperateMaintain contract. This project was financed in part through two TIFIA loans and a construction loan. The TIFIA loans, at approximately $950 million, were the largest ever TIFIA loans for a P3.

• Indiana: I-69 Project ($370 million) — This project reached financial close in July 2014. The project included the improvement of 21 miles of State Road 37, in addition to new interchanges and overpasses. The winning consortium of contractors was awarded a 35-year Design-BuildFinance-Operate contract. The financing for this project included $243,845 of tax-exempt private activity bonds.

• Texas: SH 183 Managed Lane Project ($847.6 million) — This project reached commercial close in November 2014. The project included a 14-mile stretch of State Highway 183, the addition of 2.1 miles on State Highway 114, and a number of additional items. The

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winning consortium of contractors was awarded a 25-year DesignBuild-Finance-Operate-Maintain contract. The financing for this project has an unusual structure, including variable-scope shortterm private financing and the bundling of long-term construction and lifecycle risks. The consortium will be paid $600 million before substantial completion and the remainder over a period of five years.

• Texas: Texas A&M University Student Accommodation Project ($104 million) — This project reached financial close in June 2014. This project entails 1,274 beds in apartment configurations and other amenities. The winning consortium of contractors was awarded the contract as a DesignBuild-Finance contract.

• Colorado: US 36 Project ($120 million) — Colorado’s first P3 project, which reached financial close in February 2014, included approximately 24 miles of managed lanes on US 36 between Boulder and Denver. The winning consortium of contractors was awarded a 50-year Design-BuildFinance-Operate-Maintain contract.

The project was financed in part by tax-exempt private activity bonds, TIFIA loans, a subordinate loan, and private sponsor equity.

Why Have P3s Emerged?

In addition to the reports listed above regarding the state of America’s infrastructure, governments are turning to P3s because, in many instances, their infrastructure needs far exceed the funding available in the budgets raised through taxes or that can be accessed with revenue bonds or borrowing. Typically, the public entity will authorize the private entity to design, build and, frequently, operate and maintain the resulting public work.

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The private sector, especially companies involved in investment opportunities, are also propelling and advocating the use of P3s. They create an additional mechanism for investment in a marketplace, as referenced above, that clearly desires new and different funding and financing models. These monies may come from investment funds, private equity firms, pension funds, businesses that would directly benefit from the potential P3 project, and contractors seeking to perform the work. In particular, private investors are looking for clear “cash flowing” projects that create a secure, long-term investment with a clear payout structure. Being able to identify the public sector needs and present private sector solutions through the use of P3s can create real opportunities for entrepreneurial general contractors and subcontractors.

Spectrum of Public-Private Partnerships As the structure of a P3 may vary greatly from project to project, depending on the needs and decisions of the public and private partners, one should picture P3s on a spectrum, with the structure varying based on a number of factors that include the functions being assigned to the private sector partner, the level of operational control the public sector partner intends to retain, and the terms of any applicable P3 enabling act.

Following is a breakdown of a number of the most common P3 structures. As we go down the list, greater and greater risk transfer from the public sector to the private sector is accomplished. It is worth noting that the concept of Design-Build tends to be a common theme in many P3s, as it allocates the least amount of risks and responsibilities to the private sector partner. In a DesignBuild, the private sector partner

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designs and constructs the project for a fixed fee payable by the public sector partner.

• Design-Build-Operate: Similar to a Design-Build, except that the private sector partner is also responsible for operating the project. This model is one in which the public sector partner shifts the risk and responsibility of operation to the private sector for some period of time.

• Design-Build-Maintain: Similar to a Design-Build, except that the private sector partner is also responsible for maintaining the project. This model is one in which the public sector partner shifts the risk and responsibility of maintenance to the private sector for some period of time. There is an argument that, knowing that it will be responsible for maintenance, the private sector partner will build a higher quality project for the public sector partner.

• Design-Build-Operate-Maintain: Similar to a Design-Build, except that the private sector partner is also responsible for operating and maintaining the project. In addition to the benefits above, this can create real cost savings and certainty to a public sector partner that is unsure about the ongoing availability of funds to maintain and operate a project.

• Design-Build-Finance-Operate: Similar to a Design-Build-Operate, except that the private sector partner is also responsible for financing the project. Title to the project remains with the public sector partner.

• Design-Build-Finance-OperateMaintain: Similar to a DesignBuild-Finance-Operate, except that the private sector partner is also responsible for maintaining the project.

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• Design-Build-Finance-Operate-

Maintain-Transfer: Similar to a Design-Build-Finance-OperateMaintain, except that the private sector partner also owns the project for a period of time defined in the P3 contract. At the conclusion of that period, ownership and all other responsibilities for the project transfer to the public partner.

• Build-Operate-Transfer: Under this structure, the public sector partner authorizes the private sector partner to build the project based on an agreed-upon design and then operate the project for some specified period of time. Under this model, the private sector partner at no point owns the project. An advantage to this model for the private sector partner is typically reduced responsibility for design issues.

• Build-Own-Operate-Transfer: Very similar to the Build-Own-Operate structure; however, the private sector partner owns the project during a specified time within the P3 contract.

• Build-Own-Operate: Under this structure, the private sector partner builds a project (according to the specifications of the public sector partner), owns the project, and operates it. In return, the private sector partner is paid by the public sector partner for some period of time, and may have a right to purchase the project at the end of that period.

• Lease-Develop-Operate: This structure is used typically in existing or brownfield projects.

The private sector partner leases an existing project from the public sector partner, invests in it to improve the project, and then operates it for some period of time.

• Concession Agreements: In many instances, this looks like an O&M agreement. In exchange

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for operating and maintaining a project, the private sector partner receives payment from the end users of the project.

Financing Mechanisms There are a number of ways in which a P3 may be financed. Payment arrangements to the private sector partner may include generally one of these structures, or a combination thereof.

• Fixed fee payments by the public sector partner: Under this structure, the public sector partner pays the private sector partner when the project becomes available for use. This structure relies on public funding.

• Variable fee payments by the public sector partner: This structure is seen many times on transportation projects, as the payment is not a flat fee but is based on use by the end user.

This may be utilized on a road, for example, when tolls are not an available option.

• User fees: Under this structure, it is the end user that pays for the use of the project. Toll roads and parking garages are examples of projects in which money is easily collected directly from the end user.

On the financing side, in the event the private sector is looked at to finance the project, a number of options exist including: • Equity: The members of the consortium contribute to the project company.

• Balance Sheet Financing: The lender relies on the consortium members’ financial statements to make credit decisions.

• Private Activity Bonds: Also known as “Industrial Development Bonds,” this type of bond provides a number of benefits, including lower maturities, lower interest rates than generally achievable in the private sector, and exemption from federal income tax.

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• Project Financing: In this method,

lenders rely on revenues generated by the project for repayment of the debt. When possible, it tends to be a preferable method for both the public sector partner and the private sector partner.

Opportunity The late Steve Jobs is quoted as saying, “You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”

While there is no doubt that it is important to listen to your customers and clients, you must also attempt to anticipate customer needs and how to meet them. Knowing the state of infrastructure and other public construction needs in your community, and knowing the state of funds available to address these needs, what can you do to assist? Is a P3 an option that you could present in order to address those needs? If so, understanding your options, and having confidence in knowing how each option would apply, will help maximize the value you bring to the ultimate partnership.

Matthew Meaker is an attorney who, for over 12 years, has represented companies involved in construction in Arizona, the Southwest and across the United States. He is actively involved with clients exploring P3 opportunities and works with state and local governments in the growth of P3s in Arizona and beyond. Meaker served as legal counsel to the American Subcontractors Association of Arizona from 2013 to 2015, is a member of the Board of Directors of the Valley of the Sun Chapter of the Construction Financial Management Association, and is Chair-Elect of the Construction Section of the State Bar of Arizona.

He can be reached at meaker@ sackstierney.com.

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