The Contractor's Compass October 2015

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ASA’s

THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION

WWW.ASAONLINE.COM

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OCTOBER 2015

Ethics

In Compliance with What?

The Unforgiving Regulatory Landscape Why You Can’t Trust Your Bookkeeper The Most Common Subcontractor Ethical Concerns in 2015: The New and the Old that Remain Out of Sight, Out of Mind: Ethical Considerations for Field Leaders The Moral Obligation: An Examination of Ethics and Integrity in the World of Construction How’s Our Ethics — Dial 1-888-I-N-T-E-G-R-I-T-Y Mitigating Risks from the Increasing Threats of ‘Joint Employment’ Legally Speaking: The Why, When, and How: Preserving Construction Documents and Other Evidence

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March 3-5, 2016 Miami, FL • See page 6

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THE

ASA’s

October 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.

In Compliance With What?

The Unforgiving Regulatory Landscape ..................................... 8

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

by Todd Kimball

by Brendan M. Keating and Dr. Nitish Singh

Why You Can’t Trust Your Bookkeeper....................................... 12 The Most Common Subcontractor Ethical Concerns in 2015: The New and the Old That Remain............................. 14

EDITORIAL STAFF Editor-in-Chief, Marc Ramsey

by Bruce R. Demeter

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.

Out of Sight, Out of Mind: Ethical Considerations for Field Leaders............................................................................... 16

by Christine Rahlf

The Moral Obligation: An Examination of Ethics and Integrity in the World of Construction................................ 19

by Gregg Schoppman

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

How’s Our Ethics — Dial 1-888-I-N-T-E-G-R-I-T-Y....................... 20

by Gregg Schoppman

Mitigating Risks from the Increasing Threats of ‘Joint Employment’....................................................... 21

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

by Terrence M. O’Connor

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

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.

Departments CONTRACTOR COMMUNITY............................................................ 4 LEGALLY SPEAKING.......................................................................... 24

The Why, When and How: Preserving Construction Documents and Other Evidence

by Jason R. Kennedy

Quick Reference

LAYOUT Angela M Roe angelamroe@gmail.com © 2015 Foundation of the American Subcontractors Association, Inc.

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ASA/FASA CALENDAR..................................................................... 26 COMING UP....................................................................................... 26

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Contractor Community ASA Opens Online Registration for SUBExcel 2016 — Miami Online registration is now open 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. During this special event, ASA will distribute a commemorative anniversary keepsake book documenting the many accomplishments that ASA has achieved over the past 50 years.

Supported by full-page, half-page, and “Friend of ASA” advertising, the book will also be distributed to each ASA member company. Please see the advertising flier and insertion order for details. In addition, ASA is offering several event sponsorship opportunities that may interest your firm.

For more information, visit SUBExcel 2016 online or enter through the portal at www.SUBExcel.com. For questions or assistance, please contact ASA Director of Communications Marc Ramsey at mramsey@asa-hq. com or ASA Director of Finance & Administration Beth Horan at bhoran@ asa-hq.com.

ASA Introduces New FAQ on Contingent Payment

subcontract provisions they face is a clause that legally prevents them from collecting payment if the owner fails to pay the prime contractor even though the reason for nonpayment has nothing to do with the subcontractor’s work. These objectionable contract clauses are referred to by a number of names, including “contingent payment,” “pay-when-paid,” “pay-ifpaid,” and “pay-when-and-if-paid.”

Whatever the name, their purpose is the same — to shift the risk of nonpayment by the owner from the prime contractor to the subcontractor.

To help subcontractors deal with such clauses, ASA has introduced a new Frequently Asked Questions that reviews the type of contingent payment clauses a subcontractor is likely to encounter and provides general guidelines on how to deal with them.

ASA has a broad range of other educational materials to help subcontractors learn about contingent payment clauses. These include the following documents that are available to ASA members at www.asaonline. com: • ASA Negotiating Tip Sheet: Pay-ifPaid Clause (2013).

• Contingent Payment Clauses in the 50 States (2014).

• Protecting Against Payment Default (2009).

ASA also has a robust advocacy effort to make pay-if-paid clauses against public policy and thus unenforceable. This includes both legislative initiatives and judicial action when appropriate. To find out what you can do to help with ASA’s advocacy efforts, contact your ASA local chapter, review ASA’s legislative work kit Eliminating Pay-if-Paid Clauses in Your State, or contact ASA’s Subcontractors Legal Defense Fund.

Subcontractors continue to report that one of the most objectionable

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ASA Task Force on Contract Documents: Working to Get Subs a ‘Fair Deal’ Protecting subcontractors’ legal rights in construction documents and representing their interests in the negotiating of various model documents is a key goal of ASA. The ASA Task Force on Contract Documents, charged with these responsibilities, approaches its task with a seriousness and intensity equaled by few other ASA committees.

Task Force on Contract Documents Chair Brian Cubbage, contracts administration counsel for Heico Construction Group, Alexandria, Va., exemplifies his task force’s commitment to assuring that subcontractors’ get a fair deal in their contract dealings. He realizes that fair contracts and documents can often make-or-break a subcontractor.

According to Cubbage, the most important focus of the task force is to “remember what our middle name is — ‘subcontractors,’” and its most important function is to “educate subcontractors on what to look for when a subcontract arrives on their desks,” he said. “If the work the task force does saves one subcontractor from signing a bad subcontract, we’ve done our job.”

This year, the task force’s projects include continuing to represent subcontractor interests within the ConsensusDocs coalition, launching the tongue-in-cheek Subcontractors Are Prey Awards, and developing frequently asked questions documents on key subcontract terms and other new educational tools.

“The personal knowledge that I have gained from reading documents and talking with the representatives of the other organizations represented in ConsensusDocs has not only helped me deal more effectively with onerous contracts, but also has given me

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insight into the broader construction contract process,” Cubbage said. “A few years ago I might not have been as sympathetic to the problems of owners and prime contractors. My involvement with ConsensusDocs has broadened my vision to see that they have problems as well.”

The ASA Task Force on Contract Documents’ next meeting will be held on Friday, Oct. 16, in Austin, Texas.

ASA Calls on FAR Council to Protect Subcontractors In comments filed on Aug. 10, ASA called on the Federal Acquisition Regulatory Council to strengthen and expand its proposed rule on subcontracting to better protect subcontractor bidding and payment on federal construction. The proposed amendment to the Federal Acquisition Regulation would implement ASAinitiated provisions in the Small Business Jobs Act of 2010 (Public Law 111-240).

Issued on June 10, the proposed rule would require an offeror to provide assurances that it will make “a good faith effort” to acquire construction work from “the small business concerns that the offeror used in preparing its bid or proposal, in the same or greater scope, amount, and quality used in preparing and submitting the bid or proposal.” The offeror will be considered to have used a small business concern in preparing the bid or proposal if: • The offer identifies the small business concern as a subcontractor in the bid or proposal or associated small business subcontracting plan, to furnish certain supplies or perform a portion of the contract; or • The offeror used the small business concern’s pricing or cost information or technical expertise in preparing the bid or proposal, where there is written evidence of an intent or understanding that the small business concern

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will be awarded a subcontract for the related work if the offeror is awarded the contract.

However, the FAR proposal would require an offending contractor to submit a notice and explanation of its failure to use such a subcontractor’s bid to the contracting officer only within 30 days of contract completion.

ASA Chief Advocacy Officer E. Colette Nelson said, “Such timing makes illusory the anticipated statutory relief.” ASA recommended that the rule be amended to require the prime contractor to notify the contracting officer “within 5 days of making a decision not to use a subcontractor or supplier” and to provide a written explanation “within 10 days, unless an extension is granted by the contracting officer, for good cause shown.”

The proposed rule also would require a prime contractor to provide assurances that it will not prohibit a subcontractor from discussing any material matter pertaining to payment to or utilization of a subcontractor.

Nelson told the FAR Council that, in ASA’s experience, “such contractual ‘gag orders’ are unfortunately too common.”

Surety Bond Fraud Case Reminds Subs to Verify Bonds The five-year prison term handed out to a California man for surety fraud should serve as a reminder to construction subcontractors and suppliers to verify the validity of the surety bonds provided by their prime contractors.

Able Carreon, former CEO of Tripartite Escrow of Fresno, Calif., was sentenced on Aug. 3 in the U.S. District Court in Fresno in connection with a scheme involving surety bonds and government contracts. Carreon and Tripartite defrauded the United States and private companies by offering bonding services to prospective government contractors that included false bid, performance, and payment

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bonds to secure government contracts.

According to court documents, Carreon submitted bond packages containing false statements and fraudulent documents. He pledged as collateral common stock that did not exist, was worth substantially less than represented, or was pledged across multiple bonds without full disclosure.

Under the federal Miller Act, prime contractors on most federal construction projects are required to provide performance bonds to guarantee to the government that the prime contractor will perform according to the contract referenced in the bond and a payment bond to assure that the prime contractor will pay its subcontractors and suppliers. In this situation, the U.S. and government contractors paid for false and fraudulent payment and performance bonds, resulting in a loss of approximately $1.2 million. Further, subcontractors and suppliers on the projects did not have the payment assurance that normally would have been provided by the payment bond.

ASA advises subcontractors and suppliers to obtain a copy of the prime contractor’s surety bond before signing a subcontract and certainly before starting work. Federal law requires a prime construction contractor to provide copies of its bond to its subcontractors and prospective subcontractors upon request. Once a subcontractor obtains a copy of the bond, it can expeditiously check the validity of bonds by confirming that the surety is licensed in the jurisdiction of the project and that the bond has been authorized by the surety.

The National Association of Surety Bond Producers provides step-by-step guidance in its publication Always Verify Your Bond! In addition, ASA is pursuing legislation in Congress that would help government contracting officers better manage individual surety bonds, such as those issued fraudulently by Tripartite Escrow; see the following story.

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March 3-5, 2016 Hyatt Regency Miami, Florida

www.SUBExcel.com

Ask U.S. Senators to Co-Sponsor Federal Construction Procurement Reform Contact your U.S. Senators and ask them to co-sponsor S. 1526, the “Construction Consensus Procurement Improvement Act of 2015.” Introduced

by Senator Rob Portman (R-OH) and Senator Maize Hirono (DHI), S. 1526 would help assure subcontractor and supplier payment and curb government bid shopping on government contracts.

Specifically, the bill would curb the use of fraudulent individual surety bonds on federal construction projects. Under the Federal Acquisition Regulation, unlicensed persons, commonly known as “individual sureties,” can provide the bonds required by the Miller Act. These individual sureties are subject to

neither the same vetting process as corporate sureties nor are they required to relinquish custody and control of the assets that they pledge to secure the surety bonds. As a result, unfortunately, such assets may be illusory, inadequate or not readily convertible to cash so that subcontractors can be paid for work performed.

S. 1526 would require federal agencies to use an existing standard in the Miller Act to make sure that performance and payment bonds issued by an individual surety are backed by assets that are real, adequate and readily available. In addition, S. 1526 would prohibit federal agencies from using reverse auctions for awarding contracts for federal construction and design services.

A reverse auction essentially is an online, real-time dynamic auction

between a buying entity (e.g., owner, contractor) and pre-qualified vendors who compete against each other to win a contract. These vendors compete by bidding against other, usually over the Internet, by submitting successively lower-priced bids during a specified bid period, usually about one hour.

S. 1526 also would broaden the opportunity for small firms in the federal construction market by increasing the guarantee of SBA’s Surety Bond Guarantee Program and encourage more efficient use of the design-build method on federal construction by requiring that the first step in the acquisition process is qualifications based followed by a second step that is price based.

Use the ASA alert system at https://www.votervoice.net/ASA/ campaigns/41281/respond to send an email to your senators.

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Feature In Compliance With What?

The Unforgiving Regulatory Landscape

by Brendan M. Keating and Dr. Nitish Singh The burden of regulatory compliance is growing at a staggering rate. In 1960 the Code of Federal Regulations (CFR), which contains all federal rules and regulations (collectively: administrative laws), consisted of 22,877 pages published in 68 volumes; by 1981 that number had ballooned to 107,109 pages in 180 volumes; and as of 2012 the CFR consisted of 174,545 pages in 235 volumes, according to The George Washington University, Washington, D.C. The latest year of data readily available from the Federal Register, 2014, has the current page count at 175,268 laws. These numbers may be welcome news for lawyers, federal prosecutors, administrative agencies, and compliance professionals, but are disheartening for businessmen attempting to navigate the regulatory field. And it is only getting worse.

On top of this avalanche of regulation, another wrinkle in the compliance field is the unsettled law.

A comedic (and perhaps horrific) example is the case Yates v. United States (13-7451 - Slip Opinion – 02/25/2015), which detailed how federal prosecutors invoked provisions of the infamous Sarbanes-Oxley law to indict a commercial fisherman. The defendant was accused of disposing of undersized fish that were found during an inspection of his boat. This was, according to federal prosecutors, in violation of the Sarbanes-Oxley provision that “imposes criminal liability on anyone who ‘knowingly … destroys … any record, document, or tangible object 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

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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 grouper, a similarly ‘tangible object’, according to federal prosecutors. It took a United States Supreme Court decision — a narrow 5 to 4 decision at that — to determine that a fish did not fall within the scope of the law’s intent. Likely no one, not even the U.S. senators who drafted the bill, would have thought the government would attempt to apply it to fish or fowl back in 2002, when the law was originally passed. But whatever the merits of the federal prosecutor’s position, this case underscores the notion that the compliance field is anything but predictable.

Another example of this quagmire of ambiguity can be seen with the Foreign Corrupt Practices Act, which became law in 1977. “Instrumentality” in relation to foreign governments was not legislatively prescribed within the act itself, and it was not defined until May 16, 2014, when the U.S. Court of Appeals for the 11th Circuit clarified the term in the case of United States v. Esquenazi. In the 37 intervening years from the legislation’s passage, compliance professionals were flying blind. Any unfortunate organization or individual could be chosen to serve as an example to the business community and charged with a violation centering on this term, courtesy of federal prosecutors.

Having established that at any given time organizations are subject to regulatory compliance diktats beyond count, some meanings of which may yet be determined, where does this leave businesses and compliance professionals? Unfortunately, it leaves them very much in the dark. There is a real difficulty of knowing whether

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one is fully “in compliance” with the countless obscure regulations, let alone in contending with the confusion associated with the unsettled nature of the regulations.

Because of this uncertainty in the compliance field, savvy businesses are increasingly developing and formalizing business ethics programs to mitigate their risk exposure.

Elements such as a Code of Conduct and a business ethics program, serve as adjuncts to your compliance program. This is because many generic (i.e., non-industry specific) business regulations are associated with core ethical principles — they translate desired ethical behavior into codified legal mandates. For instance, the ethical basis of Sarbanes-Oxley is a prohibition of fraud and dishonesty against shareholders. While there are also very specific compliance and reporting requirements associated with “SOX,” for which you need a compliance program, a business which also has a strong ethical program will be less likely to run afoul of these laws.

While not every employee can be well versed in the myriad of business regulation your organization faces, they all can and must be equipped with good ethical decision making tools, allowing them to identify and avoid unethical — and potentially illegal — behavior. Further, an ethical workforce is a vigilant workforce, helping you identify potentially problematic areas, initiate investigations and resolve problems internally. Honest, trained workers will recognize and report potential fraud.

In this pursuit, it is important to establish the proper “tone at the top.”

You must ensure that your leaders and management are serving as role models, working to instill the proper ethical climate in the organization.

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Do your supervisors and managers welcome employees coming to them with potential ethical and compliance concerns, or do they tend to project a “kill the messenger” attitude? Do supervisors and managers investigate worker concerns, or sweep them under the rug? If your management is not sending the right signals to your workers, then those who observe potential problems will not bring them to the attention of supervisors, whether due to fear of reprisal, or simply apathy. Once you head down this road, you are at risk that your first discovery of compliance problems may be when you read about them on the front page of The Wall Street Journal!

How might a company uncover problematic areas, deficient attitudes and apathetic or ethically-challenged workers, before undesirable behavior occurs? One effective way is through a process called psychometric testing. This process involves testing and statistical analysis, seeking to identify root causes, attitudes and motives behind certain behaviors.

Psychometric testing can identify the impact of training and other employee guidance initiatives via quantifying changes in employee attitudes. This approach stands in stark contrast to the route taken by organizations which utilize simple indicators, such as reporting hotline call-in statistics, training program completion rates, and violation or fine metrics. These statistics fail to provide you with an understanding about the ethical orientation of your organization and workers for several reasons: (1) workers may be apathetic about, or afraid of using, hotlines; (2) training may fail to take root; and (3) fine metrics only reflect known violations, after the fact at that. This traditional approach is akin to touching a stove to see if it is hot — you are only cognizant of trouble after you have run into it.

In contrast, psychometric testing involves a holistic, pro-active approach to potential ethics and compliance

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obstacles — this tact allows organizations to avoid violations rather than simply quantifying an incident’s fallout. Psychometric testing can help you identify what type of ethical decision-making style your workers use, their perceptions and viewpoints on ethical and compliance wrongdoing, as well as give you a better understanding of how your workers approach work-related problems.

These results will then help you focus your training efforts on areas that need additional focus, departments that need management restructuring, or simply give you peace of mind knowing that your workforce is as committed to ethical and compliant behavior as you are. Simply put, psychometric testing provides the insight you need to ensure that your workers are all on the same page as you are with respect to ethics and compliance.

In an era of growing compliance uncertainty and increasing focus on enforcement, businesses must be ever vigilant, willing to utilize whatever resources are at their disposal to mitigate their risk-profile. Business ethics programs are not a replacement for compliance programs — but they certainly can serve as robust adjuncts.

A solid compliance program is absolutely essential, but to undergird it, one must also establish an ethics program. Such a program will provide your organization with a strong ethical foundation, serving as a bulwark against the types of behavior that lead to many compliance violations in the first place, e.g., fraud, dishonesty, and theft. Additionally, it will help develop and reinforce a good ethical orientation, enhancing desirable traits like honesty, fairness, and compliance — with your compliance program itself!

Instructive in its lesson for all businesses (and individuals) who run afoul of the myriad of regulations is the reflection of Justice Elena Kagan, in her dissent in Yates.

While she would have upheld the

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fisherman’s conviction, she candidly and ruefully noted “the real issue: over-criminalization and excessive punishment in the U. S. Code.” This judicial admission (apology?) serves as a reminder that you may inadvertently run afoul of the limitless legal strictures on one’s conduct. So, better to ground your actions — and that of your company — in a solid ethical foundation to better ensure sound decision-making.

To learn more about establishing or auditing an ethics and compliance program, psychometric testing, and related topics, please visit www. integtree.com. IntegTree provides a host of ethics and compliance solutions, ranging from off-the-shelf programs to custom-built modules, inperson seminars, online courseware, and more. Additionally, you can follow the authors’ blog, www. ethicsresources.org, which provides in-depth articles on these topics, complimentary ethics and compliance courseware, and lecture material.

Dr. Nitish Singh is associate professor at St. Louis University’s John Cook School of Business and president of IntegTree. He developed and taught one of the first university Certification programs in Ethics and Compliance Management. His educational expertise in ethics and compliance has been sought by executives from a host of Fortune 500 companies.

Additionally, he is the author of the newly released Compliance Management: A How-to Guide for Executives, Lawyers, and Other Compliance Professionals. He can be reached at ncsingh@IntegTree.com.

Brendan M. Keating is vice president of IntegTree advising on ethics, compliance, courseware development and also serves as a digital marketing expert for the company. His ethics and compliance research insights are widely circulated through the blog, www.ethicsresources.org. He can be reached at Brendan.Keating@ IntegTree.com.

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Need Help Establishing Your Firm’s Corporate Ethics Program? Use ASA’s Resources More and more general contractors and project owners are requiring that their subcontracting partners have established ethics programs. If your firm does not yet have such a program, you could be missing out on opportunities to pursue more work!

Through ASA’s Excellence in Ethics Awards program, subcontractors can access resources, such as a timeline and resource guide, that provide guidance and tools to help them get started. Subcontractors can also get an edge over their competitors who don’t have an ethics program.

“The ASA Excellence in Ethics Awards are a great way for subcontractors to let their clients, employees, and others in their community know that their company is committed to professionalism and sound business practices,” said Shannon MacArthur, MEMCO, Spring, Texas, chair of the ASA Task Force

on Ethics in the Construction Industry, which developed the awards program.

Each applicant is required to respond to questions concerning the firm’s corporate ethics policies and procedures, its construction practices, and its general business practices. Each applicant also is required to submit detailed documentation, including sealed letters of recommendation from a customer, a competitor, and a supplier.

Download the awards program brochure and application to get started today.

Applications, which will be evaluated by Dr. Nitish Singh, St. Louis University and IntegTree, will be accepted through Dec. 11, 2015. ASA will present the ethics awards during SUBExcel 2016, which will take place March 3-5, 2016, in Miami, Fla. More information and details are available under “Education & Events” on the ASA Web site.

“Developing a Corporate Ethics Policy” (Item #8011) The video-on-demand, “Developing a Corporate Ethics Policy,” available from the Foundation of ASA, provides tips on how to develop an ethics policy that fits your company’s unique needs and helps employees make the right choices.

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 annual convention, SUBExcel 2016, March 3-5, 2016, in Miami, Florida.

HELPFUL LINKS • Watch the Excellence in Ethics Awards Video.

• Download the 2015 Excellence in Ethics Awards Brochure.

• Download the 2015 ASA Excellence in Ethics Awards Application.

• ASA provides useful model documents to help with your submission and your ethics program.

View the 2015 Excellence in Ethics Awards Resource Guide.

• Download the 2015 ASA Excellence in Ethics Awards Timeline.

• ASA’s Excellence in Ethics Awards Program Q&A LinkedIn Group — a forum for getting answers to your questions about the award and application process. This forum includes current award recipients who have been through the application process and are willing to help guide new applicants through their application process.

• Recipients of the 2014 ASA Excellence in Ethics Awards may re-apply for

APPLICATION DEADLINE:

DECEMBER 11, 2015

2015 using the Re-Certification Form.

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Feature Why You Can’t Trust Your Bookkeeper

by Todd Kimball

We spend over half our waking hours at work. Is it any wonder we form close relationships with those people? We build mutual respect, share in the ups and downs of life, and many times form long-lasting, deep friendships. A common building block of that friendship — trust. It’s our human nature to build trust with each other, and completely reasonable.

The problem, however, is that this “trust” shouldn’t simultaneously expose the company to an incredibly high risk. Unfortunately, some of the people you trust most, are simply in the best position to cause you harm.

There is an old Russian proverb that former President Ronald Reagan loved to repeat when dealing with the Soviet Union, “Trust, but verify.” You may trust your bookkeeper, but that doesn’t mean you shouldn’t protect your company through monitoring the accounting activities. Blind trust simply exposes the company to risks that are unnecessary and preventable.

The most shocking fraud stats from the Association of Certified Financial Examiners (ACFE), is that businesses typically lose 5 percent of revenue to fraud each year. Within the construction industry, the average fraud loss is an astonishing $245,000!

Most contractors wouldn’t dare to operate without insurance, but yet similar safeguards are frequently ignored in the accounting department.

There are two key areas that business owners need to develop in order to adequately protect the company from employee theft. First, create a workplace environment that promotes a high level of ethics, and second, implement specific

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internal controls to prevent and deter employee theft attempts. How can you protect your business?

Workplace Environment Create a Workplace of Integrity. As the business owner, set an example of how you expect your employees to behave. If you cut corners, are dishonest with customers, or borrow from the petty cash account, how do you think your employees will behave? They set their workplace standard from you. Unethical behavior and managing company assets frivolously will seep into your workplace culture and you shouldn’t expect employees to hold a higher standard than the boss. It’s never too late to change the culture if you’ve allowed it to slide in this direction, but you’ll need to face the challenge head-on.

Threat of Detection. The threat of detection is probably one of your best methods of employee theft prevention. Convince your employees you take employee conduct seriously.

Create the perception that your eyes are watching everything. The easiest way — ask questions! Inspecting an employee’s work, ask a question about the quality. Reviewing a timesheet, ask a question about their hours. Reviewing an expense report, ask a question about a purchase. It doesn’t have to be an accusatory line of questioning, but rather solely an effort to clarify something. All of these questions instill a culture that you care and are watching attentively.

People Change. The day you hired your bookkeeper, he/she was simply happy to have a job. And you were thankful for the extra help. Things

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are different now. Your bookkeeper isn’t satisfied with $14 an hour anymore and has noticed you’re making more money than ever. Or worse yet, your bookkeeper may have financially suffered another way, such as incurring medical bills, a spouse losing a job, or a child going to college. The pressures caused by life might be enough reason to look for other financial opportunities, and your bank account could become a target. It may be hard to believe, but given the wrong pressures and opportunities, a once loyal employee might turn against you.

Some warning signs that something might be going on with your bookkeeper include: family problems, hoarding his/her job duties, financial problems, and evidence they are living beyond their means.

If these warning signs are present, you must have proper internal controls in place, and some key ones will be highlighted later.

Implement Reference Checks. It may be too late to perform reference checks for your bookkeeper and other current staff, but going forward, make a commitment to always make at least two reference checks. Criminal background checks are good too, but they don’t give you a full picture of the potential employee’s work history.

Oftentimes when hiring we start to trust our instincts and believe we can skip the reference check. Don’t fall victim to your own instincts because sometimes they can lead you astray.

If you can speak to a former employer it can be shocking what they’ll tell you sometimes. The longer you can keep the discussion going, say 10 to 15 minutes, the more honest the feedback will be.

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Create a Mechanism for Feedback.

Fraud hotlines, whistleblower programs. Call them what you want, but even in an organization of five employees, creating an avenue for co-workers, customers, or vendors to communicate unusual behavior at your company could catch fraud. It might be as simple as a suggestion box at the office, or a request for feedback included on invoices or email correspondence. According to the ACFE research, over 43 percent of fraud cases were detected from a tip, either by an employee, customer or someone else.

While all of these tools provide an excellent foundation to create an ethical and honest workplace environment, you must also implement specific employee theft prevention internal controls. While the list isn’t exhaustive, performing most of the following will significantly increase your chances of preventing and detecting fraud.

Specific Internal Controls

• First and foremost, as the business

owner, you should physically open, review and reconcile the bank statement. There are many critical components to this, but perhaps the most significant is to inspect all canceled checks, front and back, for any evidence of tampering. If your bookkeeper is writing checks to him- or herself, or siphoning vendor payments, a quick glance at the bank’s canceled checks will usually alert you to defaced checks, or checks endorsed by your employee.

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• Review a list of all vendors directly

from the accounting system. Keep on the lookout for unfamiliar vendors, or any vendors with the same name, or very similar vendor names. It could be an attempt at creating a fake vendor. It’s quite easy to pull the vendor report from the system, and a regular review would put your bookkeeper on alert.

• Review the details of the payroll register to ensure all employees are valid, and paid the correct amount. A common fraud scheme involves the creation of fake employees. If a detailed review isn’t performed, it’s easy to miss small additions to payroll expense, given that payroll is typically one of your largest expenses. This too is an easy monthly task that adds significant protection.

• Do not allow your bookkeeper access to blank check stock. The blank checks should be prenumbered, tracked, and used in order. They must be securely held by the owner, or by another employee who does not have access to the accounting system.

Owners frequently believe that if they are signing the checks, fraud couldn’t happen. So why can’t the bookkeeper keep the blank checks?

Simple. Signatures can easily be forged by the bookkeeper. By limiting access to the blank check stock, you have better control over how many checks are written and to whom. The number of businesses that suffer fraud caused by the bookkeeper writing checks to themselves is astonishing

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— and is easy to prevent with controls like this one.

• Segregate the person opening the mail from accounting access. An office assistant or the owner could personally open the mail. Better yet, require two people to open the mail together. Additionally, the person opening the mail should immediately stamp all checks with a restrictive endorsement such as “For Deposit Only.”

• Personally address all customer complaints regarding billing issues. Mischievous accounting practices may be the cause.

• Consider hiring professional help to assist with setting up your internal controls. Employee theft prevention controls should be created to offer the protection needed, but not overly burdensome to company operations.

There can be a significant peace of mind knowing you’re doing everything you can to create an ethical workplace environment and this can go a long way to deterring employee theft.

However, if employees get desperate or see an opportunity to personally benefit from the company’s resources, specific internal controls around the accounting functions are critical to preventing and detecting the theft.

You should be able to trust (and verify) all your employees, even your bookkeeper.

Todd Kimball, CPA, is co-founder of ironumbrella.net, providing affordable, customized, easy-to-implement, e-learning tools needed to prevent employee theft for construction companies.

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Feature The Most Common Subcontractor Ethical Concerns in 2015: The New and the Old That Remain

by Bruce R. Demeter

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There have been tremendous strides in promoting the practice of ethical conduct in the construction industry. Subcontractors and the American Subcontractor Association have been leading the way. More and more subcontractors, general contractors, and clients are voluntarily adopting codes of conduct and, most importantly, these parties are establishing processes and procedures that ensure employee understanding and compliance with the codes of conduct. Public entities and government are reinforcing ethical conduct on projects through the passing of statutes, codes, and regulations that require ethical conduct on projects.

The efforts of all construction parties have elevated the image of the industry and the reputation of all those who practice ethical conduct.

Making ethics and ethical conduct a construction industry practice has not been easy, but it has been highly rewarding for the industry players and the public. Despite these efforts, unethical behavior remains a reality. What are the most common ethical complaints and situations that continue to plague subcontractors?

who are bidding on the same project is a highly unethical practice. There is no doubt that bid shopping does not promote fairness in the bidding process or protect the work of the subcontractor. Bid shopping also remains a common practice because few subcontractors ever push back against those owners and general contractors who regularly engage in the practice.

Too many subcontractors are concerned about losing a current or future bid, rather than refuse to quote a contractor or owner who is known to bid shop. Although they know that by quoting bid shopping contractors and owners they are promoting the unethical behavior, the thought of destroying a relationship with the contractor or owner ensures a subcontractor’s silence. Subcontractors can no longer continue to support the bid shopping practice by continuing to work with contractors and owners who engage in the practice. Active and vocal support of contractors and owners who do not bid shop will go a long way in eliminating a practice that is clearly unethical and detrimental to the construction industry.

Bid Shopping

Paid, When Paid

Unfortunately, one of the most common ethical complaints forwarded by subcontractors in 2015 remains one of the oldest unethical behaviors — bid shopping. Many contractors and owners still engage in this practice because they continue to view bid shopping as a proven means of getting the best price for the project. They do not accept the argument that the quote of one subcontractor and providing to others

Another “old” ethical issue that is trending in 2015 is the “paid-whenpaid” clause. These clauses are once again appearing in many general contractor/subcontractor agreements with increasing frequency. These provisions require the general contractor to receive payment from the project owner before the subcontractor receives its payment.

Most of these provisions allow the general contractor to withhold money from the subcontractor even though

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a general contractor action is the owner’s reason for withholding all or a portion of a progress payment.

“Paid-when-paid” provisions do not usually require any reason why the payment was withheld by the owner. Ethical conduct demands that the subcontractor be paid for all services rendered. “Paid-when-paid” clauses should be eliminated from the contractor/subcontractor agreement.

If it cannot be negotiated out, then the “paid-when-paid” provision should allow only the withholding of payment from the subcontractor where it is shown that the owner has withheld all or a portion of the progress payment because of issues with the subcontractor’s work or performance.

Agreements — Increasing Risk A rising ethical complaint from subcontractors in 2015 involves the ever-increasing contract obligations that are being pushed upon subcontractors via agreement. In ever-increasing frequency, contractors are requiring subcontractors to assume risk exposure on projects for which the general contractor traditionally was responsible. From increasing spheres of site safety responsibility to larger project delay exposure, subcontractors are being unreasonably required to assume risk that they do not control. Every project involves risk and every party is responsible for some part of that risk. Ethics demands that each party assume that risk that they can directly control. However, subcontractors are being required to go beyond that risk assumption that they can control. This is unethical behavior. Contractors and clients need to be made aware

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that they cannot pass their risk exposure off onto the subcontractor.

Subcontractors need to negotiate unreasonable and unethical terms out of their agreements or walk from a project on which their risk exposure is too great. Acting ethically is not easy.

More and more contractorsubcontractor agreements are also holding the subcontractor to the terms and conditions that are contained in the owner-client agreement. A contract provision requiring the assumption of the terms and conditions of the prime agreement is not unethical. However, asking a subcontractor to assume those terms and condition without first having an opportunity to review and understand the owner-contractor terms and condition is unethical.

Many contractors refuse to provide its agreement with the owner despite the “assumption clause” in the subcontract agreement. They argue the terms and conditions are the same as the terms and conditions in the subcontract. If that is the case then there is no reason to not provide the prime agreement. It also should not be the obligation of the subcontractor to chase down the agreement. The ethical concern properly rests with the subcontractor who is being denied a copy of an agreement to which it will be legally held. Ethics demands the prime contract be provided and, if it is not, the subcontractor should consider walking away from the project.

FAR 52 Requirements Another rising ethical issue for subcontractors, ironically, involves contractual ethical obligations set forth in the federal code of conduct regulation contained in FAR 52.

FAR 52 requires code of conduct requirements be passed down from the general contractor to the subcontractor. Contractors are placing

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FAR 52 requirement compliance in their subcontractor agreements. This is not an unethical practice. In fact, it is necessary to comply with FAR 52 requirements. The ethical line is being crossed by many contractors that place these requirements in subcontractor agreements even though the subcontractor’s contract is less than $5 million in value and less than 120 days in length. These are the present requirements for imposing FAR 52. By signing the contractor’s agreement with the aforementioned requirements the subcontractor is assuming all the obligations and risks contained in FAR 52. The subcontractor will be held to provide services in accord with FAR 52 even though FAR 52’s requirements would not have applied to the subcontractor but for the contractor’s agreement.

While abiding by an ethical standard is recommended, that standard should ethically relate to the risk being assumed by the subcontractor.

Employee Businesses With regard to their internal operations, some subcontractors are seeing an increase of employees establishing their own side businesses, which presents an ethical dilemma, as well as legal.

It is no secret that the construction economy continues to struggle to recover from the recent prolonged and deep recession. In an attempt to supplement their income, some employees have opened their own after-hour and weekend businesses.

The first ethical dilemma presented by these side businesses involves whether the employee should tell his or her full-time employer about the side business. Many argue that the employer has no control over the employee’s “off” hours, so there is no obligation to tell. Ethical action suggests that it is in the best interest of both parties to know about the

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endeavor. For the full-time employer, it needs to know if the employee is somehow competing with the fulltime employer. The employer also needs to know if the employee will be using company equipment or time in the side business. An employee using a company vehicle or taking side business calls during their fulltime employment not only would be unethical, but also could cause a side business client to think the full-time employer is part of their project. The employee needs to know what the full-time employer expects of them.

Full disclosure is the ethical course of action.

The below is an ethical situation recently submitted to the American Institute of Constructors’ Mr. Ethics:

“I am going to leave my current employer for a cross town rival.

Before I give my two (2) week notice I want to take my paid two (2) week vacation. I have about four (4) weeks before I need to start my new job. I told my new employer my plan and she is fine with it. She would like me to look over a couple of jobs when on vacation so I can hit the floor running. Not surprisingly they are projects my current company plans on bidding. Should I look over those jobs while on my two (2) paid vacation? Regards, Beach Bound.”

How would respond? How do you think Mr. Ethics responded? Too see Mr. Ethic’s response check the next issue of the American Institute of Constructor’s e-Newsletter.

AIC’s Mr. Ethics is Bruce R. Demeter, vice president of Design Professional Liability, OneBeacon Professional Insurance.

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Feature Out of Sight, Out of Mind: Ethical Considerations for Field Leaders

by Christine Rahlf Collusion, bribery and bid-rigging are the types of ethical violations in construction that make the headlines.

What we tend to overlook are the dayto-day ethics challenges faced by our field workers, the employees most removed from the home office and management supervision. We forget that these employees have the most direct contact with our customers and influence how we are perceived in the marketplace. How do we ensure that our field workers act in a manner consistent with our values? What are the ethical challenges faced by field employees and how can we craft and implement an ethics program that reaches the field level?

For a typical self-performing subcontractor, up to 85 percent of annual revenue flows through the company as direct costs including labor, equipment, and material.

We rely on our field leaders to request, receive, and manage the resources with minimal oversight.

Unfortunately, with control of these resources comes daily temptation to act unethically. Here are a few examples: • Vendor gifts. Most of us are comfortable with our field employees receiving small gifts (lunch, hats, and coolers) from equipment and material vendors.

But, are guidelines or measures in place as the value of these gifts increase, to a point which could influence purchasing behavior?

• Material selection. Some companies leave the selection of installation material to individual project managers or field leaders and then incentivize them to bring projects in below budgeted cost. By doing this, we’ve created the temptation to cut costs by

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selecting lower grade material that may compromise the quality of the installation.

• Scrap material. In some trades, it is considered standard practice for the field to collect and turn in demolished or scrap material for cash, which is then kept by the foreman or distributed among the crew. Unchecked, this practice can encourage deliberate damage or over-ordering of material. If the project is a cost-plus or time and materials project, the actual cost of the project to the owner can be impacted by this practice.

• Field labor tracking. Many of our field leaders are responsible for tracking crew time and preparing or reviewing time cards. How do we ensure that the time entered is valid and that work is being accomplished as reported?

• Out of scope work. Horse trading, for example. The performance of minor work items for either no cost, in-kind trade, or future consideration is common and sometimes a necessary part of project execution. When does this practice become undesirable and is that answer different for different projects or clients?

While there is no silver bullet that can address and control all possible ethical issues in the field, a company can significantly influence field behavior by intentionally addressing ethics in the recruitment and hiring process, project planning, execution standards and practices, and employee performance management.

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Interviewing for Ethical Behavior How do you hire an ethical field employee? This is easy. All potential employees are ethical! That is, everyone has his or her own internal ethics and will act in accordance with them. The question is how do you hire employees whose values align with your company’s values?

Many companies rely on behavior assessments based on personality tests like DiSC and Meyers Briggs to determine if employees are a good fit. While these tools can be useful, the most reliable way to ensure the candidate’s internal ethics match your company’s is to ask detailed interview questions that identify specific past behavior that confirms the match.

Many companies ask hypothetical questions to identify behavioral traits. This is ineffective because the candidate is now guessing at what you want to hear and crafting their response accordingly. Instead, come to the interview prepared with detailed questions and follow-up questions. For example, if you are hiring a field superintendent with purchasing authority, you could use the following series of questions: • Tell me about a time a vendor or other party was trying to influence your purchasing decision?

• What was the nature of the purchase?

• What was your role in the purchase?

• How did the vendor try to influence you?

• What action did you take?

• Who did you notify?

• What was the final outcome?

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By asking for a specific experience and then details, it is much harder for a candidate to fabricate an answer or try to anticipate what the interviewer wants to hear. The best predictor of future behavior is always past experience.

Standards and Processes The way to improve a business is to establish standards and processes, consistently apply them, and measure the outcome. These same standards and processes can also be used to encourage ethical behavior on the job site and identify potential problems. Many companies have standards and processes that address office functions, such as accounting and human resources, but lack standardized processes for the field.

The following processes specifically relate to areas that present field ethical challenges:

Installation Material Standards Who determines what installation materials are used? In some specialty trades, such as mechanical or electrical construction, there is a tremendous material selection available at both the system and component level. Leaving the decision of what to buy to the discretion of individual project managers or field leaders creates the temptation to purchase lower grade material to reduce cost or to buy the brand of material that a favored vendor carries.

Incentivizing project teams to cut costs only serves to increase that temptation. By selecting material standards at a company level, rather than a project level, a company can not only negotiate more favorable volume pricing, but they can also standardize tooling and installation processes, improving both quality and productivity. Materials should be

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standardized at both the component level (boxes, nuts, supports) and system level (fans, motors, fixtures), understanding that there will be special project exceptions. Solving at the 80 percent level will free field supervisors’ time to focus on the exceptions where standard material cannot be used and ensure that it is purchased in an appropriate manner.

Procurement Process Many contractors struggle with the issue of whether to centralize the purchasing function. Some have such a decentralized system that any employee (or person claiming to be an employee), can go to a vendor and place an order on the company account. Others have such a tightly centralized system that only one purchasing agent can buy material, creating a bottleneck that impedes productivity. Best-inclass contractors have a purchasing process with appropriate controls, while still providing flexibility to cover unplanned or emergency material orders. Elements of a good purchasing process include: 1. Documented Value Stream Map of the purchasing process (order to pay) that includes a detailed listing of each step and any templates or forms required.

2. Designation of authorized personnel who can buy material and what their purchasing limits are. For a decentralized purchasing system, anyone authorized to buy should be well-trained on both the material procurement process and the material standards of the company.

3. Price verification. A good purchasing system allows companies to quickly compare prices both to items previously purchased and to published pricing information. This market research is essential to determining fair and reasonable pricing.

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4. Purchase order generation.

Each material order should be confirmed with a unique purchase order number that clearly identifies who made the purchase, the material being purchased, and the project it has been purchased for.

5. Receipt of delivery confirmation.

All material delivered to job sites should be accounted for by acknowledging receipt of the material in a purchasing software or sending a copy of the receipt ticket (preferably electronically) to accounting to match to the purchase order. This should be done prior to invoice approval. On large orders, a release of claims signed by the vendor may also be required.

6. Material disposition. The steps for material returns and disposition of scrap should be clearly identified and communicated to field personnel. As scrap returns can often be a trouble area, clear steps for scrap disposition and clear consequences for mishandling of scrap should be spelled out in detail and incorporated into company policy.

Clear guidelines for accepting vendor gifts and gratuities. If this is an area of particular concern, you might draft a “purchasing ethics” policy and require anyone with purchasing authority to sign. This policy should also be shared with vendors so they understand how to interact with your purchasing professionals.

Written guidance on gift and gratuity acceptance will also assist the human resources department in the event an employee must be disciplined or excused due to infractions of policy.

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Field Labor Management Process Labor is obviously the most variable cost element of a project, and if not tracked properly, it is easy to overlook misreported or over-reported hours.

An effective field management process includes: 1. Work breakdown structure: The labor budget should be broken down into work tasks with measurable production quantities. That allows for actual reported labor being compared to installed quantities to determine if the desired production rate (actual installed quantity/actual hours) is being met. Any significant overruns are red flags that can be investigated and used for process improvement.

2. Short interval planning with resource loading: By requiring project managers and field leaders to produce short interval plans (one- to threeweek schedules) that indicate crew size, work tasks, and expected production, managers can monitor field staffing levels and time reporting to ensure that the desired production levels are achieved and that excessive man-hours are not being buried into the project.

3. Effective time card entry and approval process. Field employees should only be allowed to charge time in accordance with the budgeted work breakdown process. Time cards should also go through an approval process so that a second set of eyes is reviewing time entry prior to payroll processing.

Field Change Order Process Almost all projects have change orders, but not all contractors are successful at recovering the cost of

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those changes. Field personnel can be tempted to perform work for the customer or other trades in order to build good will or sometimes in exchange for gifts. When is this behavior desirable and when is it considered unethical? This is a grey area that one can hardly expect to navigate without a clearly spelled out process that includes: 1. Clear authority levels detailing who can authorize additional work and what the dollar value of that authorization is.

2. Approval process detailing who gets notified about potential change of scope, how they get notified (phone call, email), and the time requirement for notification.

Contract terms and conditions usually stipulate the requirements to get paid for change order work so the specific field change order process will change from contract to contract.

Therefore, as part of the project planning process, the field change order process should be established and reviewed with all field leadership.

Training and Performance Management While standards and processes can encourage ethical behavior and provide guidance for field employees, they are only effective when employees receive adequate training and support in the execution of those standards.

Training can be accomplished using a variety of mediums including traditional classroom learning, online courses and tutorials, and toolbox talks. Toolbox talks with case studies are particularly effective for guiding discussions on ethics issues, such as lower quality material substitution and vendor gifts. By having field employees walk through case studies, they can examine how they would react to a potential vendor-driven incentive or conflict of interest.

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Policies and standards for ethical behavior must be reinforced though consistent performance management.

“Demonstration of Company Values” should be a key accountability that is rated and discussed during performance reviews. If a specific field policy spells out disciplinary action for noncompliance, it must be administered consistently, regardless of the employee’s rank, tenure, or quality of work.

Your field employees should also have a means of recourse outside of their supervisory chain if they see unethical behavior or feel pressured to act unethically themselves.

Whether this is direct access to the HR manager, or a 1-800 ethics hotline, they need to feel safe and free from reprisal while seeking help with an ethics problem.

Conclusion Your field personnel face ethical challenges and make decisions that align with their personal values, but those decisions may not necessarily align with company values or interests. By focusing more on desired ethical behaviors during the hiring process and reinforcing those behaviors after hire through clear standards, processes, and effective performance management, you can ensure that your field employees are true ambassadors of your company.

Christine Rahlf is an associate director at Maxim Consulting Group.

Rahlf works with construction-related firms of all sizes to evaluate business practices and assist with management challenges. She has extensive experience in both the government and private industry where she has managed complex projects and led technical teams to successful results.

Areas of specialization include productivity improvement, process reengineering, scheduling, cost control, risk analysis, and training.

She can be reached at christine. rahlf@maximconsulting.com.

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Feature The Moral Obligation: An Examination of Ethics and Integrity in the World of Construction

by Gregg Schoppman

Integrity. For every set of core values that exist, integrity and safety are the most frequently used words to describe a firm’s irrefutable truths. Integrity and safety are the cornerstones to which firms build their businesses. Unfortunately, for every firm that acknowledges these words as sacred, there are others that feel they are obligated to utilize them because that is what their customer base, firm constituents, and public want to see. Blasted on placards in a conference room, or finely printed on the back of a business card, “Integrity” and “Safety” serve more as space warmers rather than the indelible, inalienable truths that these words should represent.

There are no shortage of jokes about contractors and ethics, similar to the litany of lawyer jokes that persist. Unfortunately there are many contractors that view their lack of integrity as “simply playing the game.” They don’t view its absence as a punchline, but rather normal operating procedures. Many toe the line that “everybody is doing it,” which allows them to shop numbers, reduce quality, shortcut safety, etc.

Breaking the law is fairly black or white, whereas breaches of integrity and moral lapses rarely see a courtroom or legal brief. “Doing what is right when no one is looking” is arguably one of the best definitions of integrity. None better for construction, considering all of the shortcuts that can be taken from the paperwork, to the workmanship to even safety.

Firms often spend an exhaustive amount of time on codifying the right set of core values that accurately depict their behaviors today and what they will strive to be in the future. In the world of construction, there are only so many words that come to

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mind — quality, innovation, customerfocused, team-oriented, etc. In the end, would not “integrity” be the one word to encompass everything?

Adopting a one-word value set might not be the most attractive set of core values, but if it is true, it might be the most definitive list a firm will ever need.

The First Litmus Test — Ask Your People Being ethical means many things to many people. For some, integrity means “don’t get caught in some big corporate scandal” like the ones that have been plastered on the news over the last decade. For others, integrity is taken extremely literal and even the slightest whiff of impropriety is viewed as an ethical breach. Who is correct? Ultimately, if one has to spend an inordinate amount of time “talking themselves” into something as being morally correct, is it really morally correct? One of easiest tests is to ask the team, the members of the firm. Whether it is a grading scale or even a question as simple as, “Are we a company of integrity,” the people of the firm is one of the most accurate voices you can hear. If the answer is resounding “no,” this does not mean the firm is doomed to live in seething underbelly of the construction universe. However, the perception of the masses needs to be shifted over time. Unlike safety, which presents a fairly visceral image, it is hard to provide equipment and training to promote and reinforce integrity.

For most firms, this will require a complete shift in biases relative to integrity and view integrity issues with the same black or white lens that safety is viewed. Rationalization is

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the enemy to integrity and just like safety, most people can be internally convinced of a decision. “Well, I had to shop the painter’s number!

Otherwise we would have lost the entire project.” In a defined integrity world, there is only one answer, “We lost the job because we did the right thing.” While on the surface it appears to promote failure, the firm is in fact reinforcing the more important message. We will do the right thing and not compromise our integrity even if it means holding up the projects, losing money, etc. Sounded easy until we started talking about losing money.

Are You Willing to Get the Tattoo?

Even if one’s pain tolerance is low, the question that has to be asked is, “Is Integrity such a core value that you would be willing to get it tattooed on your body?” As stated previously, firms are quick to blast it on their Web site, Facebook page, LinkedIn account, business cards, and board rooms, but that is “easy printing.” In many cases, this demonstration of propaganda can be met with a certain amount of cynicism. Whether it is integrity or safety, there is a certain group of the population that will say, “Show me!” Obviously, one could have an “integrity” tattoo and still fail to be ethical or honest, but there is a high likelihood that someone that is that committed to an indelible marking such as that will not risk a breach. Posters can be edited and postings can be deleted. Ink is forever. While a more of a metaphor to illustrate a leader’s commitment, it should provide a certain pause in the decision-making when crafting a foundation that in and of itself lacks integrity. o c t o b e r

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How’s Our Ethics — Dial 1-888-I-N-T-E-G-R-I-T-Y

by Gregg Schoppman

Many firms have the dubious “Suggestion Box” that sits in the breakroom, capturing all of the great ideas that bobble around the office. For those that are brave enough to provide a suggestion or dare we say, critique, there is often the requisite fall out or belief that senior management is utilizing experts in hand-writing analysis to find the culprit. Rather than heed the suggestion or criticism, there are some managers that seek to change public opinion.

Many firms have pondered a similar concept in the form of an ethics hotline. Imagine the fallout in a culture that is close-minded or one that seeks to persecute a whistle-blower.

Implemented in the wrong way, the ethics hotline operator could look a lot like the Maytag repair person from the commercials.

Culture is one of the most important aspects of any firm.

Hard to define and equally hard to replicate, culture informally sets the parameters to which a firm will embrace or reject feedback. In the same vein as the truck drivers that have the phone numbers to comment on their driving, ethics hotlines would be only for those firms that truly care about their integrity. Furthermore, ethics hotlines cannot be used to persecute the caller or the subject of the call. Rather, it is imperative that the firm maintain a calm, yet inquisitive manner to seek the truth and most importantly provide corrective action. Short of someone with an axe to grind, no one wants to see their co-workers punished or even dismissed. However, the intent of any ethics hotline

The Second Litmus Test — Ask Your Suppliers and Customers Assuming everyone in the firm has consumed the “Integrity Message Kool-Aid,” the most important test of integrity efficacy is the public.

Ask your customers, your supply chain, and your subcontractors.

Have them grade you. Not everyone will be your greatest cheerleader, so a one-off comment about feeling disenfranchised is probably acceptable. However, if the court of public opinion speaks and the jury finds you guilty of lack of integrity, no poster or Web site in the world will convince them otherwise.

There are plenty of people that will say, “So what? We are the prime contractor,” or “We run the show — who cares what our supplier thinks?” Construction is a fickle world and one day you can be on top of the world and the next, the village idiot. The better question to answer is, “If you are not worried about

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should serve as a vehicle to uphold the firm’s core values.

Below are a few guidelines to consider when integrating the hotline into the firm: • Catching someone doing something right. Hotlines don’t have to be just to blow the whistle. They can be used to celebrate a win or someone.

• Using the issue to coach.

Obviously action needs to be taken, but depending on the issue, names can be stricken.

Coach personally but message broadly.

• Lessons become part of lore.

Good and bad, these are teaching experiences that become part of the firm’s history.

• Avoid the fad. Like the truck phone numbers, an ethics hotline can become a fad

integrity, DO NOT MAKE IT A CORE VALUE BECAUSE YOU LOOK LIKE A HYPOCRITE!” There are more than enough studies that show integrity pays in the long run but even for the non-believers, it just looks silly to advertise something you are not or something you don’t care about.

There are classes for ethics and integrity. Many will seek to determine the right definition for integrity or examine the fundamental tenets of ethics. The best teaching a firm can provide will come in the form of celebrating the right behaviors. In an industry that often seeks to find things that are wrong or broken, attempt to catch an associate or employee doing something right.

Provide the firm evidence of integrity and use these experiences to promote internally and even externally. Clear examples clarify a nebulous word in the eyes of the firm and ultimately create behavioral guideposts for everyone to strive to accomplish.

Integrity and ethical behavior is not limited to the CEOs and presidents of

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or “keeping up with the Joneses.” Do it for the right reason and not because Brand X is doing it.

• Stick with it. Just like any other initiative, excitement will wane. Continue to reinforce it through examples and metrics.

An ethics hotline is simply a tool to support a firm’s core values. The hotline by itself does not mean a firm has integrity.

It is the reaction to the issues and how the participants are rewarded and punished that sets the tone and establishes the legitimacy of the firm’s core value.

Gregg Schoppman is a principal with FMI, Tampa, Fla. He can be reached at (813) 6361259 or gschoppman@fminet. com.

the world. While many think this is a behavior exclusive to the corner office, project managers, estimators and superintendents wrestle with this dilemma daily. Taking short cuts with materials, “modifying budgets,” and looking the other way on safety failings are all subtle yet distinctly clear examples of systematic integrity breakdowns. When a process is not followed, by the letter of the law, it is breach of integrity.

Not every breach has an insidious undertone. For most, the breakdown is directly correlated to the amount of time a manager or superintendent has every day. Cutting corners becomes a matter of efficiency protocol rather than a dastardly manipulation. Ultimately, firms solving for these breakdowns find themselves in a better position longterm. The longer a firm tolerates the “small white lies” the easier it is to overlook the shades of gray.

continued on page 23

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Feature Mitigating Risks from the Increasing Threats of ‘Joint Employment’

by Terrence M. O’Connor Although the Bible tells us that “No man can serve two masters,” judges disagree and are increasingly ruling that, in some instances, a subcontractor’s employee can have two masters — the subcontractor and the prime contractor — under the “joint employment” legal doctrine.

Contractors must deal with the expanding impact of this doctrine as it comes to include all levels of subcontracting and a wider range of workplace laws. The fact that a company can be liable for the way its supervisors treat non-employees is a threat that is not limited to the situation of a prime and its direct subcontractor. Joint employment is a risk that all companies and subcontractors at any tier must deal with. This means that contractors at all tiers need to know what this evolving joint employment doctrine involves so they can protect themselves and their employees from being hurt by it.

In addition, the joint employment doctrine is being applied to a wider range of workplace laws, not just allegations of sexual harassment and Title VII violations. As we have seen recently in the news, the National Labor Relations Board is applying the joint employment doctrine to franchisors like McDonald’s, allowing the employees of a local McDonald’s to negotiate for union membership with McDonald’s headquarters. In addition, courts have previously applied the joint employment doctrine to other federal laws, like the Fair Labor Standards Act. A recent decision of the U.S. Court of Appeals for the Fourth Circuit dealing with alleged sexual harassment at the Drive Automotive Industries plant in South Carolina adds to the growing body of “joint employer” law rulings that more than one “employer” can be sued for workplace discrimination. This decision serves as a good case study

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of the joint employer doctrine.

Because the critical question on “joint employment” is which company actually controls the work of the employee being harassed, we will first look at the work arrangement involved in the decision. Because a sexual harassment case is so dependent on the specific facts of the case, we have to get “into the weeds” of the employment situation involved. We will then discuss briefly why the appeals court here found joint employment.

Finally, we’ll discuss ways subcontractors can protect themselves in similar situations. As we will see, traditional boilerplate subcontract clauses may provide no protection.

Did the Prime Contractor Control the Subcontractor’s Employee?

Drive Automotive Industries makes car doors and fenders in Piedmont, S.C. Drive uses its own employees to make these parts but also uses workers from a temporary employment firm, ResourceMFG. Brenda Butler was one of those temporary employees from ResourceMFG that Drive used.

Different aspects of her work at Drive were controlled by each company.

She wore the uniform of the temp agency ResourceMFG, was paid by ResourceMFG, and parked in a special ResourceMFG lot at Drive. Curiously, although concluding there was joint employment, the appeals court said that ResourceMFG “had ultimate responsibility for issues related to discipline and termination,” Butler v. Drive Automotive Industries of America, Inc., 793 F.3d 404, 407 (4th Cir. 2015).

The prime contractor — Drive — determined her work schedule, arranged some of her training, and

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Drive employees supervised her while she worked on the Drive factory floor.

Butler claimed that one of her Drive supervisors, John Green, verbally and physically harassed her at work, negatively commented on her physical features and inappropriately touched her. She reported Green’s conduct to ResourceMFG and to Green’s supervisor at Drive but, according to her, neither took any action to curb the harassment. She also claimed that, after she refused Green’s demand that she work a particular piece of machinery because she had worked overtime the night before, he threatened to fire her and again verbally harassed her.

Drive asked the temp agency to fire Butler. Before the temp agency did fire her, Green allegedly called Butler and implied that he could save her job if she performed sexual favors for him. Butler refused. A ResourceMFG supervisor then called her to tell her she had been terminated from Drive.

She sued ResourceMFG and Drive but, early in the litigation, the judge threw her case out, ruling that Drive did not control Butler’s employment enough to make Drive her employer.

The appeals court disagreed, concluding that Drive could be liable under the “joint employer” doctrine, and sent the case back to the district court so Butler could continue her sexual harassment lawsuit against Drive.

Why Is the Joint Employment Doctrine Needed?

It is important to start the joint employment discussion with considering the reasons courts think that joint employment makes sense.

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Judges base the joint employment doctrine on the reality of the modern prime-subcontractor relationship.

Although subcontract boilerplate provisions claim that the subcontractor is “an independent contractor” and that “the employees of one party shall not be deemed employees of the other party,” that is often not the reality today. For example, in the Fourth Circuit case discussed above, the temp agency here had little control over the employees it provided to Drive.

Moreover, prime contractors routinely retain for themselves some control over the subcontractor’s employees.

Doing so only makes sense.

Courts cannot ignore that reality which would in effect let a company hide behind another company when it comes to enforcing the law. This is especially true with laws that Congress passed to aggressively fight discrimination and sexual harassment.

The result is that the word “employer” is not to be interpreted narrowly.

What Facts Proved That the Prime Significantly Controlled the Sub’s Employee?

Joint employment requires proof that the prime has “significant” but not total control over the subcontractor’s employee alleging sexual harassment.

It would be nice if we could start with workable definitions of “employer” and “employee.” Unfortunately, according to the U.S. Supreme Court, the definitions that Congress gave us “explain nothing,” Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992).

We do not, however, need a good definition of “employer” to determine if ResourceMFG is Butler’s employer.

The parties even agreed to it.

So the only question was whether Drive was also her employer.

Looking primarily at three factors, the appeals court found that Drive had significant control over Butler’s work.

First, Drive had the authority to hire and fire Butler. A Drive employee told ResourceMFG to add Butler “to the list for replacement” and ResourceMFG then fired her. In fact, ResourceMFG manager could not recall any instance when Drive requested a ResourceMFG employee to be disciplined or terminated and it was not done.

Second, Drive had day-to-day supervision including employee discipline over Butler. Drive employees supervised all workers and two Drive supervisors handled the day-to-day supervision of her on the factory floor.

Third, Drive furnished the equipment used and the place of work. All employees — Drive’s and ResourceMFG’s — worked side-byside, performed the same tasks, and

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The Moral Obligation continued from page 20 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

used the same equipment. Butler’s wearing the ResourceMFG uniform was irrelevant to the court: “Although Butler wore a ResourceMFG uniform on the factory floor, there was little or no effective difference between the work performed by the two sets of employees,” Id. at 415.

Although the court listed six other factors to consider in applying the joint employment doctrine, these three were the most important in finding that Drive — the prime — and ResourceMFG — the subcontractor — were joint employers of Butler, making Drive liable for any proven sexual harassment of Butler by a Drive supervisor.

How Can Subcontractors Limit Their Risks?

As mentioned earlier, contractors will find little protection from joint employment in contract boilerplate claiming that a subcontractor is “an independent contractor.” The appeals court said that subcontract language trying to establish the independence of the two contractors was “of minimal consequence,” Id. at 416, n. 12., in determining whether a joint employment existed. It went even further: “the fact that an employee signs a form disclaiming an employment relationship will not defeat a finding of joint employment,” Id. There are, however, several riskmitigation measures subcontractors can take.

• The easiest risk-mitigation measure is expanding supervisor training to make sure it covers a supervisor’s responsibilities to non-employees.

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contracting firm in central Florida.

He has completed complex and sophisticated construction projects in the medical, pharmaceutical, office, heavy civil, industrial, manufacturing, and multi-family markets. He has also worked as a construction manager and managed

Supervisors are at the heart of a company’s efforts to prevent workplace sexual harassment and discrimination. Because companies presumably are currently training their supervisors to prevent employee sexual harassment and discrimination, it should be no great effort to make supervisors aware of their obligation to prevent discrimination of non-employees including a subcontractor’s employees.

• Employment practices liability insurance (EPLI). This insurance covers a wide range of wrongful workplace activities including wrongful termination, discrimination, and sexual harassment.

• Indemnification provisions in subcontracts. Aside from being long, ridiculously compound, and in need of punctuation — or perhaps because of these characteristics — indemnification clauses often get ignored in the subcontract negotiation process. Careful drafting of an indemnification provision, however, has numerous benefits. First, each party must make sure that the joint employer responsible for its supervisor’s sexual harassment, for example, will indemnify the employer initially found liable for paying damages.

Second, because some states allow the recovery of attorney fees only if the parties had previously agreed to them in writing, indemnification provisions allowing recovery of attorney fees may be the only way for a company could recover

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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.

them. In any event, companies must negotiate indemnification provisions that are consistent with the specific limits their state law imposes such as limits on a company being indemnified for its own negligence.

Conclusion The joint employment doctrine is not only here to stay — it’s here to expand to cover more workplace conduct. A subcontractor at any tier must deal with the risks to its employees and its profits that the joint employment doctrine presents.

Dealing with it proactively is the preferred way. It’s easier and cheaper to prevent these problems than to litigate them.

Terrence M. O’Connor, J.D., LL.M., is the director of government contracts at Berenzweig Leonard LLP, a business law firm located in the Washington, D.C., metropolitan area that helps companies, executives, entrepreneurs and HR professionals nationwide address significant legal issues impacting their businesses. For over 45 years, he has practiced government contract law handling transactional and litigation matters such as protests and claims. He is the author of several books including Understanding Government Contract Law and Federal Procurement Ethics: The Complete Legal Guide. He can be reached at (703) 760-0626 or toconnor@ berenzweiglaw.com. He would like to thank Stephanie Wilson, senior associate attorney at Berenzweig Leonard, for her comments on this article.

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Legally Speaking

The Why, When and How: Preserving Construction Documents and Other Evidence

by Jason R. Kennedy Almost every construction company now has a document retention and destruction policy. That policy may serve the company’s own business needs. However, that will likely not be enough if the company has a dispute that ends up in court or arbitration.

When disputes arise, the law requires a party to preserve potentially relevant evidence for the party on the other side to use in pending or reasonably foreseeable litigation.

This obligation can include not only the preservation of all the standard construction documents, but also ESI (electronically stored information, including emails and texts), and physical evidence, such as defective work that has been removed. The failure to preserve such evidence is referred to as “spoliation.” Why is preservation of evidence required?

When is it required? And how can you protect your company from spoliation sanctions?

Doctrine of Spoliation The loss of relevant evidence creates a significant problem in litigation because it can prevent the parties and the court from discovering the truth. Spoliation of evidence can make it more difficult, or even impossible, for a party to prove its claims or defenses.

For those reasons, courts (and arbitrators) have the authority to

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impose sanctions on a party for the failure to preserve relevant evidence.

Different states, and sometimes the courts within a state, differ on what sanctions are available and when and how they should be applied.

Possible sanctions include an adverse inference instruction (an instruction to the jury that it may conclude the lost evidence would be been unfavorable to the party that lost the evidence), having a party’s pleadings stricken, exclusion of evidence, exclusion of expert witnesses, monetary sanctions, dismissal, summary judgment, and contempt proceedings (civil and criminal). So the costs of spoliation are high. The most serious cases can hand a total victory over to your opponent. And spoliation cases are on the rise, as spoliation has become prevalent as a litigation strategy.

Therefore, it is essential that you develop a plan to avoid spoliation before your next construction dispute arises. If you wait to consider these issues until your attorney, or worse, your opponent, raises them, it may be too late.

When Risks Arise There is no general duty under the law to preserve documents or other information. However, in most jurisdictions a duty to preserve relevant evidence may arise when a party knows or should know that

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future litigation is probable (you should check with a local attorney as to the law in your jurisdiction).

But it can be very difficult to determine the point at which litigation becomes probable. Courts typically consider whether a party actually anticipated litigation and whether the party sent or received communications regarding potential or probable litigation. Examples of communications that can trigger the duty to preserve evidence include: notice of an accident, notices of default, breach, or termination, allegations of defective work or warranty claims, notices to cure, allegations or notices of delays, etc.

Duty to Preserve Once the duty arises, depending on the law of the jurisdiction, a party should consider calling its attorneys, suspending its routine document retention and destruction policy for the project, preserving information that is not usually kept (such as backup files, deleted data, legacy systems, and metadata), and instituting a legal hold. A legal hold may include instructing key personnel to preserve all manner of potential evidence that is relevant to the dispute (for example: paper files, emails, text messages, photos, BIM files, CAD files, etc.). In addition, a party should document its efforts and

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procedures to preserve the evidence, as that documentation may be needed to fend off a spoliation claim in court.

There are limits on the duty to preserve evidence. Courts recognize that the scope of preservation should be relative to the size of the dispute and magnitude of the burden the duty would put on the party. If preservation would be unduly burdensome, the party should consider asking the Court to limit the obligation.

In construction, circumstances can arise that make it impractical or impossible for a party to meet its duty to preserve evidence. For example, in cases of water or fire damage, or where a party is required to remove and replace defective work, there may be a legitimate need to destroy evidence. Nevertheless, once a duty to preserve has arisen, party should not proceed to remove or destroy potential evidence, or even perform a test, without first sending a notice to all interested parties that provides (1) reasonable, advance notice of the time and place of the repair, removal, or test, (2) the basis for the need to repair, remove, or destroy the evidence, (3) a description of the work to be performed, (4) an opportunity for all interested parties to be present and participate in all remediation efforts, testing, and removal, and (5) an opportunity for all interested parties to perform their own inspection and testing.

Extensive demolition debris removed during remediation of damaged or defective work is another circumstance that can make preservation impossible, or, at best, unreasonable. If there is simply too much debris to store, then a party may, with proper notice to all other parties, consider storing

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only some samples. However, the party should make its best efforts to assure that the samples it chooses are truly representative of the whole, and should disclose its process and methodology for selecting the samples to all interested parties.

Avoiding Spoliation Sanctions • Institute a retention and

destruction policy and establish a litigation hold procedure before spoliation issues arise.

• When a spoliation issue does arise, call your attorney and initiate litigation hold procedures: (1) discontinue standard document retention and destruction policies, (2) ascertain locations of relevant documents and other evidence and key personnel who should be notified of the hold, (3) give written notice to key personnel of the hold and of the need to preserve all types of relevant evidence, including documents, ESI, and physical evidence, and (4) document the efforts and procedures undertaken to preserve the evidence.

• If repair, replacement, testing, or destruction of potential evidence is necessary, then send notice to all interested parties that provides (1) reasonable, advance notice of the time and place of the repair, removal, or test, (2) the basis for the need to repair, remove, or destroy the evidence, (3) a description of the work to be performed, (4) an opportunity for all interested parties to be present and participate in all remediation efforts, testing, and removal, and (5) an opportunity for all interested parties perform their own inspection and testing.

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• Retain experts to be present and

participate in any testing, repairs, or removal of potential evidence.

• Thoroughly document all testing, repairs, and removal of potential evidence through the use of photos, videos, notes, diagrams, and expert reports.

Jason R. Kennedy is an attorney with Thomas, Feldman & Wilshusen, L.L.P., Dallas, Texas, where his practice focuses on construction law and bankruptcy law. Kennedy represents clients from all segments of the construction industry in all types of construction disputes, including delay and labor impact claims, defective work claims, performance and payment bond claims, breach of contract claims, breach of warranty claims, and mechanic’s and materialman’s lien foreclosure claims. He also assists clients by reviewing and drafting contracts and perfecting lien and bond rights. Kennedy also represents clients in all segments of the construction industry in a wide range of bankruptcy matters, including defense of preference actions, filing, protection and enforcement of mechanic’s liens, motions to lift stay, reclamation claims, administrative claims, objections to section 363 sales, and objections to Chapter 11 plans. As both a construction lawyer and bankruptcy lawyer, Kennedy understands the unique issues that arise when an owner, general contractor, subcontractor or supplier files for bankruptcy. He can be reached at (972) 993-8247 or jkennedy@tfandw.com.

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ASA/FASA Calendar October

February 2016

13 – Webinar: Cash Management for Subcontractors

9 – Webinar: Negotiating Retainage

16-18 – 2015 ASA Legal & Advocacy Meetings Austin, Texas

March 2016

November

April 2016

10 – Webinar: Implementing Technology for the Jobsite: Turning Refusers into Adopters

12 – Webinar: The Payment Dance in the Construction Industry

Coming Up in the November 2015 Issue of ASA’s

May 2016

December 8 – Webinar: Employment Law Changes and How They Affect Screening and Hiring Practices

10 – Webinar: Websites, Email, Social Media and Your Domain Name

12 – Webinar: The War for Talent Drives Construction Pay Higher: Pay Trends in the Construction Industry

THEME: Business Development • Key Principles in Building an

Enduring Organization

June 2016

January 2016

THE

3-5 – SUBExcel 2016 Miami, Fla.

14 – Webinar: Damages For Lost Labor Productivity

• Sales­—It’s a People Thing • How to Bring Value: BD Ideas • BD Is a Loaded Gun — Which

Direction to Point It?

• How to Sell and Negotiate

Jobs

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

• Building Your Brand • Establishing a Sustainable

and Successful Sales Process Using Technology Like CRMs

• Winning More Than Your

Share

Win. Win.

• Legally Speaking

THE

Look for your issue in November.

Sell your products and services.

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

Support ASA.

PAST ISSUES: Access online at www.contractors knowledgedepot.com

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 TM

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The examples provided in this material are for illustrative purposes only and any similarity to actual individuals, entities, places or situations is unintentional and purely coincidental. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice.

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