The Contractor's Compass September 2016

THE

ASA’s

THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION

WWW.ASAONLINE.COM

SEPTEMBER 2016

TM

Implementing a

Corporate Ethics Policy

Fifty Shades of Grey—

Ethical Considerations for the Construction Industry

How to Win Defective

Documents Every Time

How to Win Conflicts or Omissions Every Time

How to Win Ambiguities Every Time

DOL Overtime Rule Legally Speaking: Acting Ethically and the Law

Save the Date

March 15-18, 2017 Denver, Colorado

Focusing on

Get Paid Faster

EPP

™

Textura’s Early Payment Program™ (EPP™) allows general contractors to offer subcontractors optional earlier payment.

With EPP, subcontractors can get paid about 5 days after invoice approval – 30 to 90 days sooner than normal payment timing – in exchange for a modest fee.

EPP works by leveraging the financial strength of the general contractor’s balance sheet and using Textura’s CPM® solution to facilitate early payment to subcontractors through Textura’s financial partner, Greensill Capital.

Cash Flow Faster payments Predictable timing Non-recourse funds Financials Reduce reliance on high-cost working capital Strengthen balance sheet Ability to fund growth, expansion Business Reduce business owner’s risk Offer more competitive bids Stronger relationship with general contractors www.texturacorp.com 866-839-8872

THE

ASA’s

September 2016

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.

Implementing a Corporate Ethics Policy.......................................... 11

by Brendan M. Keating

Fifty Shades of Grey­—Ethical Considerations for the Construction Industry...................................................................... 14

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 Laura Cataldo

EDITORIAL STAFF Editor-in-Chief, Marc Ramsey

How to Win Defective Documents Every Time................................ 16

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

by Anwar Hafeez

How to Win Conflicts or Omissions Every Time............................... 18

by Anwar Hafeez

How to Win Ambiguities Every Time................................................. 20

by Anwar Hafeez

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

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

DOL Overtime Rule.................................................................................. 22

by Jamie Hasty

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

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

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

CONSTRUCTION IN THE COURTS........................................................ 8 LEGALLY SPEAKING............................................................................... 24 Acting Ethically and the Law

by Bruce R. Demeter

Quick Reference

LAYOUT Angela M Roe angelamroe@gmail.com © 2016 Foundation of the American Subcontractors Association, Inc.

T H E

C O N T R A C T O R ’ S

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

C O M P A S S

S E P T E M B E R

2 0 1 6

3

Contractor Community Get a Competitive Advantage: Apply for ASA’s Ethics Awards to Demonstrate Your Integrity Subcontractors that are committed to professionalism and sound business practices are encouraged to apply for ASA’s Excellence in Ethics Awards, which recognize subcontractors that demonstrate the highest standards of internal and external integrity.

Applicants must meet a number of critical milestones before the Dec. 16, 2016, deadline, particularly those who have yet to develop a documented ethics program. ASA provides a timeline to help applicants keep on track. 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.

Applicants can learn about the judging criteria and submission requirements in the brochure and download the application. ASA also provides a resource guide to help firms prepare and submit applications.

This guide contains model documents, such as sample recommendation letter requests and model policies on topics ranging from competition and conflicts of interest to internal procedures and whistle blowing.

ASA will present the 2016 Excellence in Ethics Awards during SUBExcel 2017, which will take place March 1518, 2017, in Denver, Colo. Information about these awards is located under “Education & Events” on the ASA Web site.

4

S E P T E M B E R

2 0 1 6

Employers Must Provide Workforce Data to EEOC

by Sept. 30 The Equal Employment Opportunity Commission announced it has completed its mailing of the 2016 EEO-1 Survey notification letters.

The EEO-1 is an annual survey that requires all private employers with 100 or more employees and federal government contractors or firsttier subcontractors with 50 or more employees and a contract/subcontract of $50,000 or more to file the EEO-1 report. The filing of the EEO-1 report is not voluntary and is required by federal law.

The annual filing deadline is Sept. 30. Employers who meet the criteria listed above, or employers that filed the EEO-1 report in 2015 and have not received the 2016 EEO-1 notification letter should immediately contact the EEO-1 Joint Reporting Committee at (877) 392-4647 (tollfree) or email e1.techassistance@ eeoc.gov.

Deidre M. Flippen, director of the office of research, information and planning, announced new enhancements for uploading EEO-1 data files. “Companies will now be able to test and upload their data files without needing to email data files or wait for confirmation. This new method of submitting data files will save time and provide companies with immediate notification of any errors requiring corrections. This should go a long way toward helping employers to meet the Sept. 30 deadline,” Flippen said.

Additional information on EEO-1 Data Load Enhancements is available online. EEOC’s EEO-1 survey Web site for EEO-1 contains reference documents such as a sample form, instructions, FAQs, a fact sheet and EEO-1 Job Classification Guide.

T H E

ASA Introduces New White Paper on Consolidated Insurance Programs Have you discovered the hard way that the project savings promised to owners by a consolidated insurance program—commonly know as insurance wrap-ups—too often come out of the pockets of subcontractors?

ASA’s new white paper Consolidated Insurance Programs: Using ASA Tools to Address Costs and Hidden Risks will show you how to use ASA’s tools “ASA Wrap-Up Insurance Bid Conditions” and “ASA Wrap-Up Insurance Subcontract Conditions” to reduce the risks of participating in a wrap-up.

The white paper, written by Richard B. Usher, the principal managing member of Hill & Usher, LLC, in Phoenix, Ariz., reviews wrap-up basics, addresses things to watch out for, and suggests how to prepare for success within the wrap-up arena. Usher suggests that the most important issues for a subcontractor considering working on a project with wrap-up insurance are: • How subcontractors will be protected by the program.

• What impact the program will have on its costs and administrative burden.

He advises subcontractors to obtain and review carefully the wrap-up plan’s manual to obtain a full understanding of the insurance program’s coverage. He also advises a subcontractor to involve its insurance agent or broker as early in the process as possible in order to assist in the analysis of the wrap-up plan. These ASA wrap-up documents give subcontractors the right to supplement the insurance provided by the wrap-up; limit their own insurance to not apply to the work covered by the wrap-up; indemnify

C O N T R A C T O R ’ S

C O M P A S S

against paying wrap-up deductibles; and procure replacement insurance or terminate the subcontract agreement at the client’s cost if the wrap-up insurance is discontinued.

Both of ASA’s model wrapup documents are part of ASA Subcontract Documents Suite 2016. Both the white paper and the documents are no-cost member benefits available under the Contracts and Project Management section of the members-only area of the ASA Web site. If you are not a member of ASA, you can join ASA through a chapter near you, or join as a national member at-large if there is no chapter in your state.

Federal Government Takes Step to Curb Bid Shopping and Payment Abuse The federal government took a small step toward curbing bid shopping and payment abuse by its prime contractors in a final rule issued on July 14. The new rule requires a prime contractor to make “good faith efforts” to use the small business concerns that it used in preparing its bid or proposal to the federal government, in the same or greater scope, amount and quality used in preparing the bid or proposal.

The new rule also prohibits a prime contractor from prohibiting a subcontractor from discussing payment or utilization matters with the contracting officer. The amendment to the Federal Acquisition Regulation implements ASA-initiated provisions in the Small Business Jobs Act of 2010 (Public Law 111-240).

“This new rule may be a baby step but it is an important step in deterring predatory prime contractors from abusing subcontractors on federal construction,” said ASA Chief Advocacy Officer E. Colette Nelson. “It

T H E

C O N T R A C T O R ’ S

also shows the importance of patience when working with government to change its rules,” she said, noting that the Association had worked on getting the 2010 law implemented for more than six years.

The new rule, which takes effect on Nov. 1, 2016, specifically says that an offeror will be considered to have used a small business concern in preparing its bid or proposal if: • The offeror identifies the small business concern as a subcontractor in the bid or proposal or associated small business plan, to furnish certain suppliers 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 will be awarded a subcontract for the related work if the offeror is awarded the contract.

Nelson said that ASA will continue its work to curb bid shopping and bid peddling in the construction industry.

OSHA Delays Enforcement of Injury/Illness Tracking and Reporting Rule In response to calls by ASA and others for additional guidance and educational materials to assist employers with compliance, the Occupational Safety and Health Administration has delayed enforcement of its new injury and illness tracking rule. Originally scheduled to begin Aug. 10, 2016, enforcement will now begin Nov. 1, 2016.

Under the rule, employers are required to inform workers of their right to report work-related injuries and illnesses without fear of

C O M P A S S

retaliation; implement procedures for reporting injuries and illnesses that are reasonable and do not deter workers from reporting; and incorporate the existing statutory prohibition on retaliating against workers for reporting injuries and illnesses.

To help its members prepare to comply with the new OSHA rule on tracking and reporting occupational injuries and illnesses, ASA has revised its PowerPoint presentation on the rule that is available as a PDF on the ASA Web site. Furthermore, ASA will offer a complimentary webinar, “OSHA Illness/Injury Data Collection,” from noon to 1:30 p.m. Eastern time on Oct. 4, 2016.

Presenter Jamie Hasty, SESCO Management Consultants, Bristol, Tenn., will examine the requirements and explain what subcontractors should be doing to be in compliance.

FASA Helps You Identify Lien and Bond Rights in Each State Construction subcontractors and suppliers rely on mechanic’s lien and payment bonds to assure their payment. To help you learn your lien and bond rights in the states in which your company does business, reference the Foundation of ASA’s Lien & Bond Claims in the 50 States, a downloadable manual which outlines the lien and bond laws in each state and the District Columbia.

A mechanic’s lien is a claim against property to secure a debt, such as a debt owned to a construction subcontractor for the value of work performed and materials furnished on a construction project. A payment bond, which is required on most public construction, assures the owner that the prime contractor will pay its subcontractors and suppliers.

S E P T E M B E R

2 0 1 6

5

The FASA manual provides a summary of the basic requirements of each state’s lien and bond laws, including who is covered; critical deadlines for notices, claims and suits; filing procedures; and more.

The summary of laws was prepared

by Donald W. Gregory, Esq., and Eric B. Travers, Esq., Kegler, Brown, Hill & Ritter, Columbus, Ohio, ASA’s general counsel, with input from attorneys from around the country. Lien & Bond Claims in the 50 States (Item #3006) is $55 for ASA members and $80 for nonmembers.

DOL Publishes New Guide to Family and Medical Leave Act The U.S. Department of Labor’s Wage and Hour Division has published a new comprehensive resource to help employers comply with the 1993 Family and Medical Leave Act. The Employer’s Guide to the Family and Medical Leave Act walks readers stepby-step through the FMLA leave administration process. The new guide is designed to provide essential information about the FMLA, including information about employers’ obligations under the law

and the options available to employers in administering leave under the FMLA. The guide is organized to correspond to the order of events from an employee’s leave request to restoration of the employee to the same or equivalent job at the end of the employee’s FMLA leave. It also includes a topical index for ease of use.

SBA Introduces New Universal Mentor-Protégé Program On July 25, the U.S. Small Business Administration introduced its new mentor-protégé program in a final

ASA EXCELLENCE IN ETHICS AWARDS 2016 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 2017, March 15-18, 2017, in Denver, Colorado.

HELPFUL LINKS • Watch the Excellence in Ethics Awards Video.

• Download the 2016 Excellence in Ethics Awards Brochure.

• Download the 2016 ASA Excellence in Ethics Awards Application.

• ASA provides useful model documents to help with your submission and your ethics program. View the 2016 Excellence in Ethics Awards Resource Guide.

• Download the 2016 ASA Excellence in Ethics Awards Timeline.

6

S E P T E M B E R

2 0 1 6

• 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 2015 ASA Excellence in Ethics Awards may re-apply for 2016 using the Re-Certification Form.

T H E

TM

AMERICAN

SUBCONTRACTORS ASSOCIATION

APPLICATION DEADLINE: DECEMBER 16, 2016

C O N T R A C T O R ’ S

C O M P A S S

rule, which extends the tenets of its existing program to all small businesses. SBA issued its rule to comply with laws enacted in 2010 and 2012 that require the agency to expand eligibility for its mentorprotégé program beyond contractors participating in its 8(a) program.

Under the rule a firm would qualify as a protégé if it is a small business under its primary NAICS code. SBA will verify that a firm qualifies as a small business before approving a firm as a protégé in a small business mentor-protégé relationship. A firm can be approved as a mentor if it demonstrates a commitment and the ability to assist small business concerns.

The expanded program is intended to enhance the capabilities of protégé firms by requiring approved mentors to provide business development assistance to protégé firms’ ability to successfully compete for federal contracts. This assistance may include technical and/or management assistance; financial assistance in the form of equity investments and/ or loans; subcontracts, either from the mentor to the protégé or from the protégé to the mentor; and/ or assistance in performing prime contracts with the government through joint venture arrangements.

A joint venture between a small business protégé and its SBAapproved mentor will be deemed small for procurement purposes provided the protégé qualifies as small for the NAICS code assigned to the procurement.

Under the rule, the mentor and protégé must execute a written agreement identifying specifically the benefits intended to be derived by

T H E

C O N T R A C T O R ’ S

the protégé. SBA must approve the written mentor-protégé agreement before the mentor and protégé may receive any benefits under the mentor-protégé program. A mentorprotégé agreement would be limited to a three-year period with an option for one three-year extension. SBA also uses its final rule to emphasize that the small business rules apply even when the procurement is made using a reverse auction.

Workers in Construction and Extraction Have 53.3 Percent Suicide Rate, CDC Reports Workers in construction and extraction have a 53.3 percent rate of suicide—second only to workers in the farming, fishing, and forest occupational group, according to the Centers for Disease Control and Prevention.

In its July 1 issue of Morbidity and Mortality Weekly Report (MMWR), the CDC said, “Construction workers might be at higher risk because of financial and interpersonal concerns related to lack of steady employment, and fragmented community or isolation.”

In 2012, overall, approximately 40,000 suicides were reported in the United States, making suicide the 10th leading reported cause of death for persons aged 16 and older. The CDC analyzed suicide by occupational group, by ascribing occupational codes to 12,312 suicides in 17 states in 2012 from the National Violent Death Reporting System. Persons working in the farming, fishing, and forestry group had the highest rate of suicide overall (84.5 per 100,000 population), followed by construction and extraction (53.3), and installation, maintenance, and repair (47.9).

C O M P A S S

“Suicide prevention approaches directed toward persons aged ≥16 years that enhance social support, community connectedness, access to preventive services, and the reduction of stigma and barriers to help-seeking are needed,” the CDC said. CDC’s National Violent Death Reporting System collects information on violent deaths, including suicides, from multiple sources, including death certificates, coroner and medical examiner reports, and law enforcement reports, to monitor trends, understand violent death characteristics and risk factors, and inform prevention efforts. The most recent NVDRS data set available for analysis (2012) includes data from 17 states.

The CDC suggested that some potential suicide prevention strategies include workplace approaches, such as employee assistance programs, which might serve as gateways to behavioral health treatment.

Workplace wellness programs can provide education and training for staff members and supervisors to aid in recognition of suicide warning signs (e.g., withdrawal, increased substance abuse, agitation, and putting affairs in order). Employers also can use technology to provide online mental health screenings, Web-based tools for mental health information, and mental health screening kiosks for their employees, as well as ensure that employees are aware of the National Suicide Prevention Lifeline, (800) 273-8255.

S E P T E M B E R

2 0 1 6

7

Construction in the Courts Appeals Court’s ‘Erroneous’ Ruling in ‘Pay-If-Paid’ and ‘Unjust Enrichment’ Case Must Be Reversed, ASA Tells Kentucky Supreme Court by the American Subcontractors Association A Kentucky Court of Appeals ruling in a case involving the construction of a condominium and garage in Covington, Ky., contradicts the Commonwealth’s strong public policy that those who furnish construction materials or labor under written agreements must receive just compensation, ASA told the Supreme Court of Kentucky. The appeals court’s ruling precluded steel subcontractors from recovering payment for their extra-contractual work under a “pay-if-paid” contract clause and permitted the project owner to benefit from valuable extra-contractual work provided by subcontractors without payment, known as “unjust enrichment.” The appeals court decision, if left standing, could have a profound impact across Kentucky, where billions of dollars of construction work is either in planning or in progress.

In an amicus brief, filed on July 18, ASA urged the Supreme Court of Kentucky to reverse the appeals court’s decision in Superior Steel, Inc. and Ben Hur Construction Company, Inc. vs. the Ascent at Roebling’s Bridge, LLC, Corporex Development & Construction Management, LLC, Dugan & Meyers Construction Company and Westchester Fire Insurance Company.

The Kentucky Court of Appeals has set a “perilous precedent” in its decision, as it currently stands. ASA

8

S E P T E M B E R

2 0 1 6

said the Court of Appeals erroneously reversed the Kenton Circuit Court on two bases: “First, it held that because Appellants entered into subcontracts with the general contractor, Appellee Dugan & Meyers Construction Company (“D&M”), Appellants could not, as a matter of law, prevail on an unjust enrichment theory against the Owner,” ASA wrote. “The Court of Appeals so held despite the undisputed fact that neither Appellant ever entered into any contract with Owner. Second, the Court of Appeals held that a pay-if-paid clause in the subcontract between Appellant Superior Steel, Inc. and the D&M (the “Subcontract”) precluded Appellants from recovering payment for their extra-contractual work.”

“Thus, in one fell swoop, the Court of Appeals completely and erroneously eviscerated Appellants’ right of recovery for the significant labor and materials incorporated into the project,” ASA wrote. “The Court of Appeals’ decision to deny recovery against the Owner based upon an unjust enrichment theory, even where there was no contract between Appellants and Owner, is contrary to well-established precedent in Kentucky and throughout the nation.

Its approval of Appellees’ incorrect claim that no case in the country holds that the owner is responsible under unjust enrichment when a contract is

T H E

in place is erroneous where, as here, there was no contract in place between Appellants and the party who was unjustly enriched (the Owner in this case).”

The equitable doctrine of unjust enrichment “is applicable as a basis of restitution to prevent one person from keeping money or benefits belonging to another.”

Pay-if-paid clauses have the effect of stripping a subcontractor of its mechanic’s lien rights and are, therefore, void under Kentucky’s Fairness in Construction Act, ASA told the Supreme Court. “It has been the policy of Kentucky law to construe mechanic’s liens liberally to protect those who furnish labor and materials,” ASA wrote. “Applied here, enforcement of the pay-if-paid clause of the Subcontract has the practical effect of eviscerating Appellants’ lien rights.

Appellants’ mechanic’s liens, which have been bonded off, are now left solely dependent on the outcome of this appeal. If the pay-if-paid clause is held applicable, and the Appellees are found not liable as a result, the effect is to strip Appellants of their lien rights.

Such a result is wholly incongruous with Kentucky’s strong public policy toward protecting the lien rights of suppliers and laborers.”

In the underlying case, the owner—Ascent at Roebling’s Bridge,

C O N T R A C T O R ’ S

C O M P A S S

LLC—entered into a construction management contract in 2006 with the construction management company— Dugan & Meyers Construction Company—to provide construction management services for a 21-story, 72-unit condominium and garage project in Covington, Ky. The CM entered into subcontracts with a number of trade contractors, including steel subcontracts with Superior Steel, Inc. for various elements of the structural steel supply and fabrication and Ben Hur Construction Company, Inc. for the steel and metal decking erection and installation. The steel subcontracts each contained: (1) written change order requirements that all changes were to be in writing; and (2) a “pay-if-paid” provision, stating the owner’s payment to the CM was a condition precedent to the CM’s obligation to pay the steel subcontractors, Superior Steel and Ben Hur. As the project started, the drawings were revised several times. Both Superior and Ben Hur made claims for the additional materials and extra costs related to the changes. Though the CM verbally directed the steel subcontractors to proceed with the

HELP ASA FUND PRECEDENTSETTING BRIEFS

extra work and keep track of their time and costs (apparently on the direction of the owner), no change orders to the steel subcontracts were executed.

After the work was completed, the owner refused to pay for the extra work and the CM refused to pay the steel subcontractors, pointing, among other things, to the pay-if-paid clause in the subcontracts. As a result, after providing collectively hundreds of thousands of dollars in additional work, Superior Steel and Ben Hur filed mechanic’s liens as security for their claims. The liens were bonded off, and the matter went to trial.

At trial, the steel subcontractors asserted breach of contract claims against the CM and unjust enrichment claims against the owner. The jury ultimately found that the steel subcontractors were entitled to over $400,000. The jury found (a) the CM liable to Superior and Ben Hur for the extra work claims, and (b) the owner liable to the steel subcontractors under the equitable doctrine of unjust enrichment. The Kentucky Court of Appeals, however, reversed.

The Appeals Court held that the steel subcontractors could not

recover against the owner for unjust enrichment because “the contractual relationships that were in place … preclude the application of an equitable remedy.” The Appeals Court also reversed the judgment against the CM, holding that the pay-if-paid clauses “are essentially conditions precedent to performance under the contract.” Thus it was reversible error for the trial court not to have been “explicitly instructed” about the pay-if-paid clauses, and specifically that the failure of a condition precedent constitutes a legal excuse for non-performance. The Appeals Court brushed off the CM’s verbal assurances of payment, saying it did “not agree that [the CM] waived these provisions by agreeing to pay for the extra work,” and reversing the judgment “[b]ecause the circuit court did not include such an instruction, the jury could not decide whether [the CM] had breached the contract.”

ASA member Thomas R. Yocum, Benjamin, Yocum & Heather, LLC, Cincinnati, Ohio, prepared the brief for ASA. ASA’s Subcontractors Legal Defense Fund financed the brief.

Contributions to the SLDF may be made online.

Have you ever wondered what you can do to improve the business environment for construction subcontractors? One answer is to support ASA’s work to protect payment and other subcontractor rights in federal and state courts.

ASA’s Subcontractors Legal Defense Fund has been financing “friend of the court” briefs for 20 years. The SLDF allows ASA to intervene in court cases where it can have a meaningful impact on cases involving subcontractor rights, such as the enforceability of pay-if-paid clauses, mechanic’s lien and payment rights, bid shopping, no damage for delay, the applicability of the duty to defend, insurance coverage for construction defects, and more. In addition to the featured case in Kentucky, noted in this month’s Construction in the Courts, ASA is involved in a lawsuit to block OSHA’s implementation of its new rule on crystalline silica, and another case that will clarify the difference between a lienable improvement of real property and a non-lienable trade fixture.

ASA can’t continue its work in support of subcontractors unless it has the funds to pay for participation in the court cases that matter most to subcontractors. With the help of ASA members, ASA can marshal the financial resources needed to invest in precedent-setting litigation to establish subcontractor rights.

You can make your contribution through the ASA online store. For more information, visit the ASA SLDF Web site at www.sldf.net.

T H E

C O N T R A C T O R ’ S

C O M P A S S

S E P T E M B E R

2 0 1 6

9

www.SUBExcel.com

March 15 – 18, 2017

Denver Marriott City Center Denver, Colorado

Feature Implementing a Corporate Ethics Policy—Why Bother?

by Brendan M. Keating Every industry has its ethical minefields, but navigating the construction industry is particularly perilous. Beyond more general business ethics concerns, health and safety issues (which are both regulatory and ethical in nature), subcontractors, in particular, must traverse additional minefields. While some unethical conduct is driven by personal interest (e.g., embezzlement for financial gain), one study, which will be discussed further, found that in the construction industry a fair amount of pressure came from the job per se, such as compromising standards to stay on time and on budget.

There are numerous reasons to develop a corporate ethics policy, not the least of which is that ethical behavior is its own reward. But in more concrete financial terms, government contractors are now required to have one, via the Federal Acquisition Regulation (48 CFR 52.203-13 - Contractor Code of Business Ethics and Conduct).

T H E

C O N T R A C T O R ’ S

Additionally, contractors must generally include such requirements in subcontracts in excess of $5 million or for projects lasting more than 120 days.

Additionally, it pays to be ethical.

The Institute of Business Ethics in the United Kingdom released a report, “Does Business Ethics Pay? Ethics and Financial Performance.”

While this study focused on large UK companies, it identified a precept that has similar relevance in the world of subcontracting: The general conclusion from this study is that there is strong evidence to indicate that larger UK companies with codes of ethics, e.g. those who are explicit about business ethics, out-perform in financial and other indicators those companies who say they do not have a code. Having a code of business ethics might, therefore, be said to be one hallmark of a well managed company.

Finally, it is worth remembering that subcontracting, procurement and

C O M P A S S

other types of business arrangements all involve tying multiple brands together into a single work-product.

Even if your organization does not place a value on a code of ethics, the general contractor or client may do so. You are known by the company you keep, and those with whom you associate. No organization wants to open the newspaper and see its name even remotely connected to a firm engaging in unethical conduct.

Without an effective program, the risk of such conduct—and negative publicity—rises, and businesses are increasingly aware of this. In fact, Ethical Issues in the Construction Industry: Contractor’s Perspective noted “subcontractors’ lack of safety ethics” as a primary concern among general contractors—in this instance, in the Malaysian construction industry. Not focusing on the concerns of a client is a good way to end up out of business, so it is also in your own self-interest to implement such a program.

S E P T E M B E R

2 0 1 6

11

A Survey of the Problem In 2013 the Ethics Resource Center released a National Business Ethics Survey of the U.S. Construction Industry: Gauging Industry Practices & Identifying Ethics Challenges.

Of the construction organizations surveyed, less than half (45 percent) of employees felt that their company had an effective, solidly implemented ethics and compliance program.

Subcontractors in particular were less likely to be talking about ethics, and felt less encouragement in relation to ethical conduct.

The survey also outlined the types of observed and reported misconduct, including those least likely to be reported. Improper conduct included behavior such as “creating fictitious vendors, invoices or business deals” and “failing to correct work which does not conform to project specifications”, as well as “failing to correct conditions to meet or comply with health and safety regulations,” among others. These are, again, on top of classical business

ethics concerns such as conflict of interest, theft, discrimination, sexual harassment, and so on. With all this in mind, the necessity of a business ethics program is clear.

Laying the Foundation The United States Sentencing Commission prepared The Federal Sentencing Guideline for Organizations (FSGO), which in part provides seven key steps for an Effective Compliance and Ethics Program. These steps are so vital for an effective program, that in consideration of penalties for misconduct “[i]f a company meets these requirements, it may qualify for a potential reduction in its overall culpability score.” However, because every organization has different risks, these steps are provided in the form of barebones strategic requirements and goals, rather than specific, implementable policies. The steps are as follows: Step One—Policy Creation.

This step consists of establishing

procedures to prevent and identify unwanted conduct. At this stage, management should perform a risk analysis to identify the types of conduct for which the organization may have exposure. In essence, managers should be asking “what could go wrong?” and “what are we trying to prevent?”

Step Two—Program Oversight. This step consists of providing the proper level of oversight—who will oversee and administer the program, and do these individuals have authority within the company? This is an area in which organizations may run afoul by not providing the department with the clout necessary to ensure efficacy.

Step Three—Quality Individuals.

Bad actors need not apply—from a pure compliance standpoint, this one is rather straightforward: do not allow nefarious individuals to be involved in your program, and so management will need to perform its due diligence in this regard. From an ethical perspective, consider the moral character of the individuals involved in program oversight—are they honest,

New On-demand Video from FASA When it comes to managing your business, the Foundation of ASA is your partner in education. View and listen to FASA’s on-demand videos at an individual workstation or in a conference room for group training. Your order includes access to the on‑demand video any time, and as many times as you’d like!

This is just one of the on-demand videos available through the FASA Contractors’ Knowledge Depot to meet your business management training needs.

TM

“Sleeper Clauses: Contract Clauses That’ll Make You Lose Sleep at Night” (Item #8091)

Subcontracts typically contain numerous “boilerplate” and other clauses that many subcontractors overlook and fail to negotiate before signing the contract. In this video-on-demand, presenter Daniel F. McLennon, Esq., Smith, Currie & Hancock, LLP, San Francisco, Calif., examines seemingly innocuous contract clauses and explains how to remove their hidden dangers.

Price: $65 Members/$95 Nonmembers

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

ethical individuals? Seriously consider psychometric testing as part of your due diligence process, as well as background checks.

Step Four—Communication and Training. Here is another area in which organizations drop the ball.

Effective training may require more than a one-size-fits-all lunch and learn, in the same way that students are known to have different learning styles, and psychometric testing can help you identify if employees are effectively internalizing their training.

Here it is also worth consideration: if a company has and emphasizes the importance of its code via rigorous training, unethical employees may not wish to stay in the organization. An environment that is seen as too rigid or serious about potential malfeasance in essence sends a signal—you are not welcome here, and we will catch you.

In this area, psychometric testing can also help you by identifying potential troublemakers.

Step Five—Monitoring and Audit.

This critical step can include features such as an anonymous hotline system, but also monitoring your business practices and your program itself to ensure that your program is keeping up with your risk profile. Additionally, auditing your systems to ensure they are working smoothly is crucial to a program’s long-term success.

Psychometric testing is another tool organizations may find effective in auditing their programs efficacy—in particular, whether or not training is having the desired impact on employees, finding key ethical hangups, and rooting out potentially bad actors.

Step Six—Enforcement. This step involves both incentives for employees to comply, as well as disciplinary measures to discourage misconduct.

Well thought-out, appropriate responses are one hallmark of a wellfunctioning ethical organization.

Step Seven—Self-Reporting.

If improper conduct is detected, organizations must respond appropriately and take steps to prevent similar such conduct in the future—

T H E

C O N T R A C T O R ’ S

including changing your program!

For a more detailed exposition on these steps, see generally: Compliance Management: A How-to Guide for Executives, Lawyers, and Other Compliance Professionals by Dr. Nitish Singh and Thomas J. Bussen JD/MBA, (Praeger, 2015). (Specifically: Chapter 1, Section VI – The Federal Sentencing Guidelines for Organization (FSGO), pages 12-13.)

More Than Paper Such is, in broad strokes, the basis for any program. However, the devil is in the details, and while there are any number of readily available quasi-off-the-shelf policies out there, many organizations can still run into problems in several key areas. First, it is vital to remember that programs are never done. Once your program is established, it becomes a process loop whereby you are constantly receiving new information via investigations, hotline calls, audits, training and more.

This data will help you further finetune your program and keep it running smoothly, but organizations that desire good outcomes are never finished with the program.

The next issue is to understand that having a policy is a necessary, but insufficient requirement to being an ethical organization. By way of analogy, consider a dining experience: what matters more—the giant blue Grade A health inspection sticker on the window, or the fly in your soup? A written policy, without proper implementation, training and audit could even be considered counterproductive in so far as that it provides a false sense of security—akin to taking the batteries out of your fire alarm—of course we’re fine, we’ve got a policy!

A Concern for Management “Tone at the top” is a phrase used to describe the organizational leadership’s attitudes and behaviors relating to ethical and compliant conduct. While many business concerns may pay lip-service to

C O M P A S S

this concept, the covert signals that leadership sends may indeed outweigh hollow words. Consider: if an employee comes forward with a concern about a safety issue, does the leadership bemoan the delays such an issue will cause with the project schedule, thereby signaling that they do not want to be bothered with these issues? Or instead do they respond in an ethical manner befitting the seriousness of the alleged problem?

Employees will develop a gut-feel for the tone of their organization, and adapt their behavior accordingly.

If you would like more information on building and managing an ethics and compliance program from the ground up, Compliance Management: A How-to Guide for Executives, Lawyers, and Other Compliance Professionals by Dr. Nitish Singh Ph.D. and Thomas J. Bussen JD/MBA is a well-grounded and comprehensive resource.

A commitment to ethical business practices requires a rejection of unethical, short-term gains, and an investment in time and resources into the building and maintenance of a program. Fortunately for those committed to ethical business practices, not only will they sleep more soundly at night, but the weight of evidence suggests that their organization will reap long-term, sustainable economic rewards for their endeavors.

Brendan M. Keating is vice president at IntegTree LLC, an ethics, compliance and sustainability consulting company. He is also adjunct faculty at Wilmington University, where he served as course developer for two courses in their Compliance Certificate Program. He serves as an instructor for the Governance and Accountability Institute’s Certification in Corporate Responsibility & Sustainability Strategies, and has authored articles published in the Society of Corporate Compliance and Ethics Compliance and Ethics Professional journal. He can be reached at (314)397-1230 or Brendan.Keating@IntegTree.com.

S E P T E M B E R

2 0 1 6

13

Feature Fifty Shades of Grey­—Ethical Considerations for the Construction Industry

by Laura Cataldo The construction industry is plagued with ethical challenges— many of which make the news and cast a dark shadow on our industry.

Bid rigging, bid shopping and overbillings happen regularly in the construction industry and the fact is that while these actions are legal, they are not necessarily ethical.

Ethics is defined as a code of morality—a system of moral principles governing the appropriate conduct for an individual or a group. Professional societies like the American Bar Association, National Society of Professional Engineers or American Medical Association have Codes of Ethics for attorneys, engineers or doctors that define the acceptable values and behaviors of their profession. Trade associations, like the American Subcontractors Association, have been challenged when adopting, let alone enforcing, ethical provisions due to the potential to restrict competition among members. The Federal Trade Commission’s concern is that Codes of Ethics have the potential to violate anti-trust laws.

What Is Your Shade of Grey?

Ethical guidelines and standards are often not discussed or undefined in our industry. Many issues in the construction industry are not necessarily black or white and many contractors need help understanding the “shades of grey” often encountered. Here are four

14

S E P T E M B E R

2 0 1 6

recommendations for you to consider in defining your company’s ethical guidelines: 1. Discuss the “line in the sand” between legal and ethical.

2. Educate employees on ethical standards.

3. Establish a Code of Conduct.

4. Enforce adherence to the Code of Conduct.

Ethics are a reflection of a company’s culture and values. The best way to define your ethical standards is to engage in internal conversations to define what is and is not acceptable. These topics could include: • Bid Shopping • Intellectual Property • Confidentiality • Over-Billings • Acceptance of Gifts • Safety • Shortcuts Let’s consider the common ethical dilemma of bid shopping. Bid shopping occurs when a contractor uses the lowest bid received to pressure other contractors or suppliers to submit even lower bids.

Sometimes this happens after a bid has been submitted. Contractors and their trade associations have historically condemned the practice of bid shopping yet it remains legal and continues to plague the industry.

Why? Some will profess that bid shopping is a fine example of the free market system, designed to give opportunities to companies willing to make the extra effort to submit lower

T H E

priced bids. They view bid shopping as a matter of survival—either turn in the lowest bid or don’t win the work. If you are the lowest bid for the winning team, you are happy. Some states now require that the names of subcontractors be included in the base bid as a way to minimize the chance of bid shopping after contract award.

In many states this is not the case so it is important that your company engage in a discussion to define your position on bid shopping. Defining your company position on bid shopping could include: 1. Tracking general contractor performance and past history with bid-worthy qualifications: a. Sufficient time to review documents. b. Demonstration of project financing. c. Prompt availability of addendum. d. Time-frame for submitting bids (at least four hours before). e. No unapproved substitutions. f. Prompt award of contracts. g. Payment procedures and schedule.

2. Contract amendments that impose a penalty for refusal to accept bid after project award.

3. Refusing to change bid once submitted unless for warranted scope change.

4. Refusing to bid to general contractors with a history of bid shopping.

C O N T R A C T O R ’ S

C O M P A S S

Once your company defines your position on an ethical dilemma, it is critical that everyone involved in the process understands the “shades of grey” that you are willing to accept. If acceptable ethics are not understood within an organization, people will push the limits. For example, you may have an estimator that chooses to ignore the guidelines and resubmits a number at the last minute because he or she is bonused on successful bids.

This leads to poor public perception of the company and industry, low morale and decreased company loyalty.

A great resource to use for these discussions is the “Guidelines for a Successful Construction Project” prepared by ASA, AGC, and ASC. This resource cites best practices for the construction industry in areas such as bidding, preconstruction, contract administration and project close-out.

Many companies today are including a Code of Conduct in their employee manual. A Code of Conduct is a personal commitment to follow the company’s ethical guidelines and creates a framework for addressing ethical issues. The American Institute of Constructors and Construction Management Association of America both offer models that you can use as an example.

Some key concepts you may want to consider for a Code of Conduct are: • Obey the applicable laws and regulations governing our business conduct.

• Be honest, fair and trustworthy in all your company activities and relationships.

T H E

C O N T R A C T O R ’ S

• Avoid all conflicts of interest

between work and personal affairs.

• Foster an atmosphere in which fair employment practices extend to every member of the organization.

• Strive to create a safe workplace and to protect the environment.

• Sustain a culture where ethical conduct is recognized, valued and exemplified by all employees.

• Support the dignity of each individual, encourage professionalism, nurture innovation and reward achievement.

Consistent following of ethical standards by everyone in the company is critical. Everyone in the company (including the president) should be held to the same level of accountability. The employee handbook should define the disciplinary policies that will be utilized for those that fail to follow the Code of Conduct.

It’s About Building Trust Without sound ethical decision making, it is difficult to build trust with your owners, fellow contractors or employees. Without trust, it is nearly impossible to enter into mutually beneficial partnerships.

It is just as important for contractors to drive home good ethics to retain and grow good people in our industry, as well as improve public perception. One of the major challenges that our industry faces is low public perception. This is thanks in part to the media image of the construction industry. How

C O M P A S S

many shows on Dateline have you seen that portray the contractor as the merciless thief, stealing from little old ladies? It is so wonder that many parents do not encourage their children to work in this industry— seemingly plagued with ill-intent.

Jimmy Gill from Louisiana State University was quoted as saying, “There are no ethics in construction.

There are ethical people in construction.” Your reputation is the most valuable asset you have. You must treasure it, nurture it and defend it through ethical behavior.

Laura Cataldo, associate director at Maxim Consulting Group, works with construction organizations of all sizes to evaluate business practices and assist with management challenges. Having worked in the construction industry for over 20 years, Cataldo offers a depth of experience working with contractors, associations and workforce partners to improve profitability and succeed in the changing marketplace. She understands the challenges of today’s construction industry and is keenly in touch with future trends. Cataldo can be reached at (608) 616-2835 or laura. cataldo@maximconsulting.com.

S E P T E M B E R

2 0 1 6

15

Feature How to Win Defective Documents Every Time

by Anwar Hafeez Why do subcontractors get paid for incomplete or non-buildable defective plans and specifications? This goes back to the most famous Supreme Court construction case of U.S. v.

Spearin, 248 U.S. 132 (1918)—also known as the Spearin Doctrine:

• Applies to Public Work and Private Contracts.

• The Supreme Court said in this case that when:

p The Owner provides an Implied

Warranty:

m That the Plans & Specs are

NOT DEFECTIVE.

m That are Plans & Specs are

complete and suitable for building a project.

m Justice Brandeis stated in this

court case that:

• If the contractor is bound

to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications.

• This implied warranty is not

overcome by the general clauses requiring the contractor to examine the site, to check up the plans, and to assume responsibility for the work until completion and acceptance.

What does this all mean? How do subcontractors apply it to every day work when they encounter defective contract documents?

16

S E P T E M B E R

2 0 1 6

Example 1 Scenario: Subcontractor wrote an RFI to which the response comes back with an added sketch or drawing or revision to the specification. Why did the designers issue another sketch or drawing or revised the specifications?

Solution: The contract documents were defective since they were incomplete or not buildable or a combination of both, otherwise why would the designer issue another sketch. Now, if this costs the subcontractor to make this revision, he will get paid for it since the contract documents were defective.

Example 2 Scenario: Subcontractor completely finishes his work on the project in accordance with the plans and specifications, at the end, the designers and/or inspector comes to you and states the system is not functioning the way according to our design intent or in three places your work does not meet the code requirements.

Solution: As long as the subcontractor has built his work in accordance with the contract documents, this is all it is required to do. Meeting the design intent or meeting the code requirements is outside the scope of the contract.

T H E

Example 3 Scenario: Subcontractor agreement states that it has to: 1. Meet all the applicable codes in building this project.

2. Owner wants a complete, operable and functional system.

3. Subcontractor warrants that it has thoroughly examined all the contract documents prior to bid.

Solution: All this language is not legally enforceable since this tries to overturn the Implied Warranty guaranteed by the Spearin Doctrine.

Solution: 1. Ask the owner, what did you pay your designers to do? You paid them to design this structure in accordance with the applicable code requirements. Since you have a code violation, this proves that the design did not meet the applicable code—thus the contract documents were not complete or buildable. Now we have defective contract documents. Now we have a breach of the Implied Warranty and now we get paid for this.

2. Since the owner did not design a complete, operable and functional system, they are not entitled to it. They get what they designed.

3. This is an intent to overturn the Implied Warranty.

The Spearin Doctrine will make statements two and three not enforceable.

C O N T R A C T O R ’ S

C O M P A S S

Example 4 Scenario: Electrical subcontractor discovers on-site that there are 78 duct detectors shown on four different floors but there is no power designed to be provided. Designer states that any competent electrical subcontractor should have known that power needs to be provided to the duct detectors for them to function and this is part of the life safety system. Therefore, the subcontractor should have bid to provide power to the duct detectors or he should have written a pre-bid RFI and clarify what was needed if he had a question. Don’t you love these backhanded compliments?

Solution: Instead of saying you only had two weeks to bid this and the designers had eight months to design this, state the following: I did not see that the duct detectors had no power designed for it at bid time. Therefore, I did not write a pre-bid RFI. You are only required to write a pre-bid or post-bid RFI if you find that part of the work that you have to perform is not complete or not buildable. If you never saw the problem in the first place how can you write a pre-bid RFI? At bid time, subcontractors are not looking for constructability, they are taking off material quantities as fast as they can.

It is easy to not take-off a quantity of materials that are now shown. After all whose problem is this? This is the designer’s problem in that their design was incomplete and not buildable.

One word of caution, if you saw this problem and decided not to write a pre-bid RFI and you blurted out that you did not write the RFI so you will get a change order at post-bid stage, you will not get paid this design error since you tried to trick the designers and tried to take advantage for this situation.

Example 5 Scenario: What is a subcontractor required to do to examine the site? Two scenarios: 1. Electrical subcontractor walks into the existing electrical room at an airport where the airport is installing a new control tower.

T H E

C O N T R A C T O R ’ S

Many months later when the two transformers arrived, they would not fit side by side in the electrical room. The FAA blamed the subcontractor for not catching this problem in the pre-job walk.

2. Excavation subcontractor walks the site and discovers that there is a pond of water that is not shown on the contract documents.

Solution: Regarding both scenarios, the subcontractors are only required to do a visual examination of the site for obvious things that are not shown on the contract documents, which means no destructive testing, no tape measurements, no potholing, no borings, etc. The solution to the two scenarios is the following: 1. In an actual case, I informed the FAA that my client bought the two transformers that you specified and the fact that they do not fit in the electrical room is not our problem, as they are not buildable as they would not fit in the room as required by the Spearin Doctrine. The FAA agreed with me and issued a change order to stack the transformers on top of each other using a designed steel structure.

2. The excavation subcontractor decides that he is not going to write a pre-bid RFI as he is bringing out pumps anyway and he will drain the pond of water at his expense in two hours.

This is fine but don’t ask for a change order later as everyone who walked the site saw that the pond of water was not shown on the plans. If the excavation subcontractor wanted a change order, he should have written a pre-bid RFI about this pond of water that was not shown on the plans.

Finally, consider scenarios where there are conflicts: 1. Between drawings and drawings.

2. Between specifications and specifications.

C O M P A S S

The “Order of Precedence of Documents” section won’t help here or maybe there is no Order of Precedence in the contract. Courts have ruled that the more stringent of the two requirements is what the subcontractor should have bid.

For example, reflected ceiling plans showed 12 lights and electrical drawings showed eight lights. How many lights would the subcontractor need to install? The answer is 12, but how many of the 12 lights are constructible? According to the Spearin Doctrine, when an owner issues a set of contract documents for bid, the owners provides an implied warranty that these contract documents are not defective and are complete and suitable for building a project. In this case, four of the 12 lights are not constructible, since the subcontractor does not know what the conduit and wiring requirements are; what panel board these lights are connected to; and whether any of these lights are to be on the emergency system. In fact, he does not know what type these lights are. If the subcontractor argues this correctly, it can get paid for wiring the four lights and get paid the difference between providing the cheapest light fixture versus the more expensive fixtures that the owner wants in a change order. This is a clever way of applying the Spearin Doctrine to the most stringent legal rule.

Armed with this knowledge, subcontractors can win defective document problems every time!

Anwar Hafeez is president of SDC & Associates, Inc., San Diego, Calif., a construction claims consulting firm that prepares and negotiates change orders/claims with 99.999 percent success rate; CPM scheduling; and teaching seminars on project management and change orders/ claims, (www.sdcassociates.com).

Hafeez can be reached at (800) 7323996 or ah@sdcassociates.com.

S E P T E M B E R

2 0 1 6

17

Feature How to Win Conflicts or Omissions Every Time

by Anwar Hafeez Typically, construction contract general conditions provide contractors with a built-in system to deal with conflicts and omissions errors in plans and specifications. Construction owners and architects put provisions in the general conditions under the heading of “Order of Precedence of Documents” (or similar language) that communicate which document governs when there is a conflict between them. The hierarchy usually is: 1. Contract between owner and general contractor 2. Special provisions 3. General provisions 4. Specifications 5. Details on drawings 6. Plan drawings For example, if the plan drawings and details on drawings conflict, then the details on drawings shall prevail. Or, if the drawings and details on drawings conflict with the specifications, then the specifications shall prevail. The higher element in the “Order of Precedence of Documents” governs or prevails.

The “Order of Precedence of Documents” aims to create resolution in cases of conflict without writing an RFI. However, many contractors are not aware of the distinction between conflicts and omissions between documents. An example of a conflict is when the details on drawings show one thing to construct and the plan drawings show something different to construct. An example of an omission is when the details on drawings show one thing to construct and the specifications are silent and do not indicate anything. The difference is critical, as a real-life example illustrates.

18

S E P T E M B E R

2 0 1 6

Actual Claim Example Subcontractor encountered a problem on the last day it was waterproofing a hospital. Subcontractor had completed all of its work on the project, which consisted of installing waterproofing membrane on the footing and turning it up the wall (see Figure 1):

Figure 1

Inspector told the subcontractor that it did not follow the detail shown in the detail. The detail stated that this is a typical termination detail and the small print stated “Powder-Driven Pin and Washer @ 18” O.C. through continuous anchor strip.” The inspector told the subcontractor that its work is not complete until it complied with this detail.

When you review specifications, you should understand how specifications work: • Section 1 – States Scope of Work and related Specification Sections.

• Section 2 – Specifies the materials to be used on this project and submittal requirements.

• Section 3 – States Installation Procedures. In this case, it states to install the waterproofing membrane in accordance with the manufacturer’s recommendations among the 12 notes.

T H E

Subcontractor reviewed the specifications and found no requirement for installing a “Powder-Driven Pin and Washer @ 18” O.C. through continuous anchor strip.” No material was specified for an anchor strip.

Response to RFI was: “The continuous anchor strip shown on the below grade waterproofing details is a 16 ga metal strip. Submit samples.”

The subcontractor went to the membrane manufacturer, who was horrified and said: (a) No! No! No! You cannot follow this detail; (b) You want to do what? Shoot through the waterproofing membrane and damage it; and (c) This will void five-year warranty.

When informed of this, the architect said that the manufacturer’s response was not acceptable—five-year warranty must be in place. Manufacturer devised a method to install a 2nd layer of waterproofing membrane and mastic to cover the holes created by shooting through the waterproofing membrane. The subcontractor installed this additional work.

Subcontractor asked for this compensation for the extra work. The owner and architect rejected the claim, stating that “since anchor strip is shown on contract drawings, it is part of your contract.

Conflict or Omission?

Owner and architect denied the subcontractor’s claim on the basis of other verbiage contained in the “Order of Precedence of Documents” section of the general conditions: “If something is shown on the drawings but is not in the specifications—it is part of your contract.” This language pertained to omissions, not conflicts.

Owner and the architect saw the anchor-strip installation as an omission problem, when in reality it was

C O N T R A C T O R ’ S

C O M P A S S

a conflict problem. The conflict was between the detail on the drawing and the specification: • Detail on the drawing showed a typical termination detail and stated “Powder-Driven Pin and Washer @ 18” O.C. through continuous anchor strip.”

• Specifications Section 3, under Installation Procedures, said to install the waterproofing membrane in accordance with the manufacturer’s recommendations, which also had a typical termination detail, which the subcontractor followed in installing the waterproofing membrane.

Under the “Order of Precedence,” specifications prevail over details on drawings, and so the subcontractor’s claim was valid, since there were two ways of terminating the waterproofing.

Ten months after the subcontractor’s work was performed, SDC explained the conflict to the owner and the architect and won the “Entitlement for Merit” for this case, over the architect’s protests.

Other Scenarios In the preceding example, the subcontractor ultimately was able to resort to the order of precedence documents to resolve a conflict and defend its claim. But what if there had been a true omission? The general conditions also stated: “If something is shown on the drawings but is not in the specifications—it is part of your contract.”

Suppose a subcontractor was working on a project for which plans showed wood base in a room— owner said to install wood base per the contract. However, there was no specification for the wood base. The subcontractor should simply state that since there was no specification for the wood base, it did not know the quality of the wood base to be furnished nor were there any installation procedures specified, since the

T H E

C O N T R A C T O R ’ S

architect was negligent in not providing this information. Subcontractor’s obligation is to install the cheapest wood base available (pine) along with the cheapest installation. It is likely the owner will say that it wants mahogany wood base and it wants it glued to the wall; subcontractor will get a change order for the material price difference between pine and mahogany plus additional labor installation costs.

Other verbiage in the general conditions that deals with omissions says: “If something is specified in the specifications but is not shown on the drawings—it is part of your contract.”

Suppose the specifications specified oak wood base and the owner said that it wanted the subcontractor to install it. This time, however, the plans did not show the wood base anywhere. The subcontractor needs to argue that it does not have to install the oak wood base. However, in order to prevail in a claim situation, the subcontractor must explain what the purpose of drawings was for: • To do take-off of quantities for the bid.

• To see locations for installation of specified materials.

Subcontractor must explain that the owner’s architect was negligent in not showing the location of the oak wood base on the drawings. Get the owner to acknowledge that if he did the take-off the wood base prior to bid— he would come up with a quantity of ZERO—thus the take-off at the bid time was a quantity of ZERO and you owe the owner a quantify of ZERO. If the owner wants the subcontractor to install the oak wood base, he has to pay for the entire wood base.

On another potential claim, an electrical subcontractor client called us and stated that on his punchlist, the owner stated that they wanted a redundant fuel oil system for the emergency generator, as required by a note in the specifications. The subcontractor stated that this was a

C O M P A S S

$250,000 problem and what should he do? The owner told the subcontractor that they wanted a credit for not installing the redundant fuel oil system.

After examining the contract documents, I wrote a letter to the owner stating the following: • The reasons we have contract drawings is for us to do a takeoff of the materials and to show the locations of the installation of materials that are specific.

• There is no specification section for the redundant fuel oil system, thus no material is specified, so we don’t know the type of pipe to buy to be installed and we do not know the diameter of the pipe to be installed. We have no installation procedures.

• There is no routing shown on the contract drawings as to the location to install the piping and we do not know which emergency generator requires the redundant fuel oil system.

Mr. Owner, if you and I were sitting together and doing a take-off of all the redundant fuel oil system piping (since nothing is shown), the only quantity we could have bid would have been ZERO and therefore, we owe you ZERO quantity of that redundant fuel oil system. We would highly advise you to take if off the punchlist.

The owner agreed and the problem was resolved.

Armed with this knowledge, subcontractors can solve drawing and specifications conflicts and win every time!

Anwar Hafeez is president of SDC & Associates, Inc., San Diego, Calif., a construction claims consulting firm that prepares and negotiates change orders/claims with 99.999 percent success rate; CPM scheduling; and teaching seminars on project management and change orders/claims, (www.sdcassociates.com). Hafeez can be reached at (800) 732-3996 or ah@ sdcassociates.com.

S E P T E M B E R

2 0 1 6

19

Feature How to Win Ambiguities Every Time

by Anwar Hafeez Many construction contract documents contain ambiguities. What are ambiguities?

Webster dictionary defines ambiguities as “word or expression that can be understood in two or more possible ways.” In other words, a contract language has one interpretation by the contractor while the owner has a different interpretation.

1. Who is right?

2. Who will the judge rule for?

First there are two types of ambiguities, they are: 1. Latent (means hidden) 2. Patent (means obvious)

Latent Ambiguity Latent Ambiguity is defined by http://uslegal.com as “an ambiguity that does not readily appear on the face of a document. The ambiguity becomes apparent only in the light of knowledge gained from a collateral matter. Extrinsic evidence can be used to clarify latent ambiguities, but not patent ambiguities.

When used in the context of wills, latent ambiguity is an ambiguity which is not discoverable from reading the will, but which appears upon consideration of the extrinsic circumstances.

The following is an example of a case law on latent ambiguity: A latent ambiguity exists if the meaning of language used in a written agreement becomes uncertain when applied to the subject matter of the contract.

The latent ambiguity, however, must become evident when the contract is read in the context of the surrounding circumstances, not after evidence of intent is admitted to create an ambiguity.

Thus, in determining whether a

20

S E P T E M B E R

2 0 1 6

latent ambiguity exists, courts may examine surrounding circumstances and the subject matter of the contract. [Amigo Broad., LP v. Spanish Broad. Sys., 521 F.3d 472 (5th Cir. 2008)]”.

Scenario No. 1 Reading part of the contract document paragraph leads the subcontractor to conclude that the owner is supposed to get all the permits and pays for the permits. The owner’s interpretation of the same contract document paragraph is that the subcontractor is to get all the permits and pays for the permits. Who is right? Who will the judge rule for?

Who do you want the judge to rule for (joke)?

Solution The judge would always rule for the subcontractor. Why? Because the writer of the ambiguity gets penalized, which in this case is the owner. The owner is required to write contract language that contains no ambiguities.

Such as he could have written, contractor is to obtain all the permits and pays for all the permits. (end of sentence and end of paragraph). This would not contain any unambiguous language.

Patent Ambiguity Scenario No. 2 In Mechneer v. United States {FAA} (82-2 BCA 15,831) at Dulles International Airport in Virginia—the Washington, D.C., area:

• General contractor submitted claim for mechanical subcontractor.

• FAA issued 16 drawings (11

architectural; 1 plumbing; 2 electrical; 2 mechanical).

• There was an error on Drawing M-1—shows a ¼” scale, while M-1 duct dimensions shows a 1/8” scale.

T H E

• M-1 noted that the continuation of

the ductwork was on M-2; where the scale was correct; i.e. ¼” scale.

• M-1 & M-2 both had ¼” scale.

• Mechanical subcontractor received the M-1 and M-2 drawings for bid.

• President of mechanical subcontractor did take-off (31 years of estimating experience). Another officer of mechanical subcontractor also did took off quantities and noticed no discrepancies.

• Ductwork delivered to the jobsite was a lessor quantity than bid.

The mechanical subcontractor and the general contractor sought to recover added costs.

• FAA denied the change order request stating that this is due to patent ambiguity and that they were not going to pay this change order request. FAA stated that a reasonable, prudent bidder should have recognized this discrepancy and requested clarification during bidding; in other words written a pre-bid RFI. • FAA’s expert stated what a reasonable and prudent bidder could be expected to discover.

FAA presented several architects as expert witnesses. The architects testified to the following: p Comparison of Architectural and Mechanical. Drawings would have shown the M-1 had a scale discrepancy. p Inspection on site would have revealed that M-1 had a scale discrepancy. p Comparison of room and duct size on M-1 and M-2 shows that even with same scale, the sizes of the rooms and duct were different.

C O N T R A C T O R ’ S

C O M P A S S

Therefore, this is a case of

m

patent ambiguity and no payments should be made for the mechanical subcontractors bid error.

You make the call—who won?

Answer BCA rejected the FAA’s contention that the standard for judging manner reasonable bidder review drawings is the same as architects; in other words architects do not know how to bid duct work and thus they were disqualified as expert witnesses.

Winning this point did not do the contractor much good; BCA then stated that:

• Contractor should have known

of this defect based on what normally happens during the bidding process.

• This was not a subtle or latent (hidden) defect.

• It was an uncomplicated task— measuring duct length from two drawings.

• Absent inquiry (Pre-bid RFI), contractor proceeded at own risk and lost the lawsuit.

• The case of patent ambiguity prevailed.

Why did Machneer Lose?

1. There were several places that the right answer could be found and only one place where the information was correct. There was overwhelming evidence to support the correct information was available.

2. Scaling while doing take-offs when common sense and/or dimensions are available is the wrong estimating method.

3. Spearin Doctrine did not help since the ductwork was buildable and the information provided was complete.

Scenario No. 3 A client came to our office and stated that the scale shown in three different civil drawings was incorrect (1:40) and the actual scale in the field

T H E

C O N T R A C T O R ’ S

is (1:20). The problem is that is in order to slope the soil as required, the subcontractor would have to put temporary shoring on both sides of the water tank to build concrete retaining walls which would cost $100,000-plus.

My client said that he talked to his attorney and the attorney believed the client was right. The client asked us to put this claim together as the client encountered boulders during the building of the shoring and costs increased to nearly $300,000.

Investigation & Conclusion We looked at the totality of the contract documents, which revealed that after looking at the structural drawings and all the shown dimensions, our conclusion was that the scale on the civil drawings is wrong—it is 1:20 and not 1:40.

After I explained that to my client’s attorney, he agreed that this was a case of patent ambiguity and the subcontractor had no merit to pursue this claim, but he could pursue the Differing Site Condition due to encountering boulders.

Fortunately, when we looked at how the project was bid, we discovered the following: 1. Lump Sum bid to install the water tanks, utilities and retaining walls.

2. Lump Sum bid for the shoring. a. 5 out of 6 bidders bid the shoring costs between $15,000 and $25,000—this was shoring the utilities. b. One bidder bid the shoring at $400,000. The owner never questioned the extremely high bid. c. We made the case that the owner had an Irregular bid.

California Law states that Irregular Bids May Be Rejected. Bids shall be considered irregular and may be rejected by the agency if they include: 1. Alterations of form, unauthorized additions, unauthorized conditional over

C O M P A S S

previous or alternate bids.

2. Incomplete information, recapitulations, obviously unbalanced prices, or uninitiated erasures.

3. Other irregularities, informalities and nonconformities.

A mathematically unbalanced bid is one that contains lump sum or unit bid items that do not appear to reflect reasonable actual costs.

Those reasonable actual costs would include a reasonable proportionate share of the bidder’s anticipated profit, overhead costs, and other indirect costs that the bidder anticipates for the performance of the items in question.

In this case, it should have been evident to the owner that the Bid Item price of $15,000 (our client bid for the utility shoring work) was insufficient for the amount of shoring that was required.

Reviewing the bids the owner received reveals that this scale error went unnoticed by all but one of the contractors.

Highest bidder, included $400,000 for the shoring. Upon receipt of the “irregular” bid, the owner should have questioned the extremely high pricing for the shoring item versus what all the other five bidders bid, but the owner chose not to do so. Why? Could it be that they wanted to keep our client as the low bidder. Based on the high bid, the owner should have questioned the lower bidder (our client) about the shoring costs; and given them a chance to bow out of the contract, and chose not to do so.

We prevailed during mediation.

Armed with this knowledge, subcontractors can solve drawing and specifications ambiguities and win every time!

Anwar Hafeez is president of SDC & Associates, Inc., San Diego, Calif., a construction claims consulting firm that prepares and negotiates change orders/claims with 99.999 percent success rate; CPM scheduling; and teaching seminars on project management and change orders/ claims, (www.sdcassociates.com).

Hafeez can be reached at (800) 7323996 or ah@sdcassociates.com.

S E P T E M B E R

2 0 1 6

21

Feature DOL Overtime Rule

by Jamie Hasty Two years ago, President Obama directed the Secretary of Labor to propose new regulations to the Fair Labor Standards Act (FLSA) to increase the number of workers eligible to earn overtime. In June 2015, the Department of Labor proposed an increase to the minimum salary threshold for most white collar exemptions.

On May 18, 2016, the DOL published its final rule. The final rule increases the minimum salary threshold for white collar exempt employees from $455 per week ($23,660 per year) to $913 per week ($47,476 per year).

The final rule also increases the salary threshold for highly compensated employees from $100,000 per year to $134,004 per year.

Background The FLSA provides that certain workers employed in executive, administrative, and professional positions, as well as highly compensated employees, may be exempt from having to be paid overtime. To qualify for exemption, there are essentially three requirements: (1) the employee satisfies a “duties test” for one of the

22

S E P T E M B E R

2 0 1 6

exemptions; (2) the employee is paid on a “salary basis;” and (3) the salary paid is at least the minimum salary threshold.

Some professional employees (including doctors, lawyers, and teachers) and outside sales employees are not subject to the salary basis test.

This has not changed with the implementation of the final rule.

Key Provisions of the Final Rule The effective date of the final rule is Dec. 1, 2016. The final rule establishes a mechanism to automatically update the salary threshold every three years.

Of noted importance, and as it relates to the executive, administrative, and professional exemptions (highly compensated excluded), is the ability for the employer to apply nondiscretionary bonuses and incentive payments (including a valid commission payment) to satisfy up to 10 percent of the guaranteed salary level requirement; this payment must be made on at least a quarterly basis.

T H E

Currently, employers are not permitted to include any type of bonuses or incentive compensation in calculating whether an employee’s compensation meets the white collar salary threshold. To account for the fact that an employer may not be able to calculate in advance what an employee’s non-discretionary bonus or incentive compensation will be, the final rule also allows employers to make catchup payments to bring employees up to the salary threshold as long as the catch-up payments are made no later than the pay period after the end of the quarter. Thus, under the final rule an employer can pay an employee a base salary of at least 90 percent of the salary threshold (or $821.70) and then make up the remaining 10 percent with non-discretionary bonuses and incentive compensation.

If at the end of the 13-week quarter the employee’s base salary plus his or her non-discretionary bonuses and incentive compensation are not at least $11,869 ($913 x 13 weeks) on the next payday after the end of the quarter, the employer can pay the employee the difference between

C O N T R A C T O R ’ S

C O M P A S S

the employee’s actual earnings and $11,869 without the employee losing his or her exempt status. Currently, employers are permitted to include certain types of bonus and incentive payments for the purposes of the highly compensated salary threshold; the final rule does not make any changes to how bonuses and incentive compensation are treated for the purposes of the highly compensated exemption.

Bona fide teachers, coaches, graduate assistants, and academic administrative personnel employed at an institution of higher education are not affected by the final rule. Additionally, the final rule does not alter the current requirements for employees of state and local governments or subdivisions thereof; the use of “comp time,” hours of work provisions for police and firefighters, elected officials and staff and legislative branch employees are not be affected. Enforcement of the final rule is delayed until March 17, 2019, for providers of Medicarefunded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds.

T H E

C O N T R A C T O R ’ S

What Employers Should Do Now While the final rule is not effective until Dec. 1, 2016, employers are encouraged now to assess their current liability by conducting a thorough review of salaried positions.

Specifically, employers are encouraged to determine the hours of work performed by those salaried positions of which their current salary is less than the new guaranteed salary requirement. Employers then have several options.

Employers may consider changing the method of compensation from salary to an hourly rate of pay with overtime (1½ times the regular rate of pay) for any hours that exceed 40 in a work week.

Employers may also consider implementing the fluctuating workweek method of payment. This method of payment provides a guaranteed salary per week with a straight time earnings calculation providing half time for hours that exceed 40 in a work week.

Retail and service establishments may consider implementing the Retail 7i Exemption to overtime. This exemption requires that the employee earn at least more than half (51 percent) of their total compensation from a non-discretionary bonus or incentive pay plan. Further, the employee must

C O M P A S S

yield an hourly rate of pay of least one and one half times minimum wage for all hours worked. This partial exemption does not remove the requirement for an employee to maintain a true and accurate time card for all hours worked.

Employers are encouraged to contact SESCO to schedule a Wage and Hour compliance audit. If your organization is not currently a retainer client of SESCO or a member of a retained SESCO Association, please contact SESCO to explore this exclusive offering which will provide the audit and ongoing telephone/email support.

Jamie Hasty is the vice president of SESCO Management Consultants, Bristol, Tenn., and Richmond, Va. Under an arrangement with ASA, SESCO provides results-oriented human resource consulting services to ASA members. SESCO provides a special “retainer” relationship that provides a free “hotline” to ASA members to discuss day-to-day employment issues such as policy development, employee challenges such as disciplinary actions, terminations, or workers’ compensation issues, compliance to federal and state employment regulations, and many other management and human resource matters. Hasty can be reached at (423) 764-4127 or jamie@sescomgt.com.

S E P T E M B E R

2 0 1 6

23

Legally Speaking

Acting Ethically and the Law

by Bruce R. Demeter In 1986 Robert Lund, an engineer and company manager, faced a dilemma. As a lead manager of a very time sensitive and highly public project he had to decide whether to proceed with the project or put it on hold due to a potential problem.

Project engineers recommended that the project be delayed even though they were uncertain the problem would arise. Lund’s fellow managers recommended the project proceed as scheduled. Lund was uncomfortable about proceeding with the project but equally uncomfortable about delaying the project. There was a lot of pressure on Lund. Delay the project and millions of dollars would be lost as well as his company’s reputation.

Proceed with the project and a serious problem could develop that could lead to the project’s destruction.

To Lund either decision seemed to represent an ethical choice. He decided, ultimately, to green light the continuation of the project after he was reportedly told to put on his business hat. The shuttle Challenger launched without further delay despite the concerns about cold “O-rings.”

The result of that decision, as we know, was catastrophic. In hindsight it

24

S E P T E M B E R

2 0 1 6

appears that Lund made an unethical decision. Even though the decision to proceed with the launch was based upon the experience and knowledge of many people, it is argued that Lund and his company, Morton Thiokol, acted unethically when they decided to ignore the potential “O-ring” problem and place human life and safety at risk.

Whether a decision is ethical or not is not determined by its outcome.

Acting ethically is not easy. It requires a person to weigh competing interests that will have consequences. These consequences can cause injury and/or damage to others for which the decision-maker and his or her company may be legally responsible even if an ethical decision was made.

For example, a foundation contractor was hired to work on an addition to an existing school. While doing prep work the subcontractor discovered that part of the school’s existing gymnasium/ auditorium foundation was severally bowed and cracked in several areas.

The subcontractor considered this condition to represent a potential, future collapse situation. The subcontractor reported this discovery to the general contractor who advised the subcontractor that that part

T H E

of the building was not part of the contract and therefore not a concern.

After careful consideration, the subcontractor approached the owner’s representative and told him of the situation and concerns. The response from the owner’s representative was that the school was not concerned about the situation. Since it provided notice to the general contractor and project owner about the situation, and was directed by both to proceed with its work, the subcontractor had most likely fulfilled any legal obligation it had to provide notice of the problem and potential consequences. It could also be argued the subcontractor had fulfilled its ethical obligations.

However, the subcontractor reported the condition to the building inspector who immediately shut down the project after inspecting the existing foundations. The subcontractor was held in breach of its contract by the general contractor and the owner tried to recover delay damages from the subcontractor as a result of ignoring directives to proceed. The subcontractor realized that it would likely be held accountable for its action before it acted. Nevertheless, the subcontractor considered the health

C O N T R A C T O R ’ S

C O M P A S S

and safety of the students and teachers to be more important than any negative consequences that it would incur.

Often the general contractor or the project owner will instruct a subcontractor to change its construction means and methods or the specified materials and equipment to control project costs. The subcontractor will usually follow those instructions without much thought.

The subcontractor will consider it to be legally protected from any legal action because it is following the direction of the general contractor and/or public owner. This is frequently not the case especially where health and safety issues are concerned. A subcontractor can be held legally liable, in whole or part, when fails to raise concern about a change in means and methods or substitutions that adversely impacts the project’s integrity and raises health and safety issues. Whenever faced with a safety and health issue the subcontractor is ethically, and potentially, legally obligated to present its concerns to the appropriate parties.

However, not all decisions made by a subcontractor involve health and safety issues. Contractors and subcontractors are always looking for ways of reducing time and costs spent on projects. To many this activity is considered to be the unethical act known as “cutting corners” even though the reduction of project time and costs is usually accomplished without adversely affecting project quality or safety. When looking for ways to save time and costs a subcontractor needs to ensure that any means or method they use does not violate the intent of the project or their agreement.

A framing subcontractor employed a different means of disposing and recycling jobsite materials than the project’s general contractor. The subcontractor’s jobsite waste handing complied with all applicable laws and regulations and also saved it money.

However, at the end of the project the subcontractor faced significant damages for having used it own disposal methods because the project was designed and built in a manner

T H E

C O N T R A C T O R ’ S

that would qualify it for a green building certification.

Green project certification programs usually have specific requirements for the handling of jobsite materials.

If those requirements are not met, the building’s certification could be denied. In this case the certification was denied because the subcontractor deviated from waste material handling requirements. As a consequence the subcontractor faced monetary damages that included the additional costs of using “green” materials in the construction of building. The subcontractor was also sued for the loss of tax breaks that a certified building would have received; the additional loan interest rates that had to be paid due to the lack of certification; and costs related to the reduction in rental rates because the building failed to be certified.

Acting legally does not always mean that you are acting ethically.

Staying within the law could still cause you incur damages even if you act unethically. It is critical that you are aware of all your contractual obligations and legal requirements for every project. You must also be able to identify those situations in which ethics demands that you go beyond just complying with your contract obligations and the law.

There is no doubt that all of us want to act ethically and legally.

Sometimes this desire creates legal situations that should not be assumed and where we have little control over that risk exposure.

Since 2007 certain federal and state projects have contractual ethics compliance requirements. Violation of those requirements can result in a breach of contract determination; a cancellation of the contract; and/or future contractor disbarment. Even most of these ethics requirements apply to general contractors due to contract’s dollar value ($5 million for federal contracts in accord with Federal Acquisition Requirement 52, “FAR 52”), this requirement and attendant potential penalties are being passed down to subcontractors via the project subcontract. Even though a subcontractor wants to act

C O M P A S S

ethically at all times, it should not assume liability not intended for it.

At the very most, a subcontractor should assume only those contractual ethical obligations that it can control.

A subcontractor should thoroughly review its agreements and remove any provisions that expose it to liability that is not intended for the subcontractor or for which the subcontractor cannot fully control the exposure.

As previously stated, acting ethically is not easy. It requires an individual to be able to stop and assess the situation from multi-perspectives. It requires an individual to recognize the potential consequences of acting or not acting. Most importantly, it requires that an individual recognize that making an ethical decision and acting upon it is left to solely to him or her.

In 1995 professional golfer Davis Love III was having a bad year. He was in a position of losing his 1996 Master’s exemption unless he either moved up on the PGA’s money list or won a remaining tournament.

During one of the last tournaments, he marked his ball to allow his playing partner to putt out. Love’s ball was 2 feet from the hole and he easily sank the putt after replacing the ball. While walking to the next tee Love began to question whether he had properly re-placed the ball. Neither his caddy nor playing partner could say if he had improperly replaced the ball. Without hesitation Love called a penalty on himself for not properly re-placing the ball even though he did not know if he had made that mistake. He missed the cut and did not move up on the money list. However, to Love, acting ethically and preserving the integrity of the game was more important than a Master’s exemption.

Bruce R. Demeter, Esq. is the author of the AIC Mr. Ethics column. Demeter has been a construction manager; construction litigator and director of professional liability insurance programs. He lectures frequently on ethics and construction industry risk mitigation issues. He can be reached at brucedemeter@gmail.com.

S E P T E M B E R

2 0 1 6

25

ASA/FASA Calendar 13 – Webinar: Using the ASA Subcontract Document Suite 15-17 – ASA Executive Committee and Board of Directors Meetings, Providence, RI October 2016

12-14 - ASA Mini-Committee Week: Executive and Finance Committee and Rap Council Meetings, Napa, Calif.

24 – Webinar: OSHA Transgender Bathroom Requirements (Complimentary)

in the October 2016 Issue of ASA’s

THE

September 2016

Coming Up

February 2017

4 – Webinar: OSHA Illness/ Injury Data Collection Requirements (Complimentary) 11 – Webinar: Is Your Cash Working for You? Understanding the Competitive Advantage of Cash Management 21-22 – ASA Legal & Advocacy Meetings, Kansas City, Mo.

14 – Webinar: Cost Coding Made Simple March 2017 1 – Webinar: OSHA Silica Rule—Applications for Subcontractors (Complimentary) 15-18 – SUBExcel 2017, Denver, Colo.

8 – Webinar: Change Orders—The Bane of All Subcontractors

13 – Webinar: U.S. Election Outcome & Potential Impact (Complimentary)

11 – Webinar: Incentive Compensation Plan Best Practices

9 – Webinar: Prompt Payment and How/When to Suspend Work June 2017

January 2017 10 – Webinar: Most Popular Benefits Employees Are Purchasing Without Employer Contribution

Development to Ensure Future Success

• Building

the Builders— Developing the Right Formula for Becoming a Talent Magnet Going to Run Your Business When You Are Gone?

May 2017

December 2016

• Leadership

• Who’s

April 2017

November 2016

THEME: Cultivating Future Leaders

13 – Webinar: Killer Contract Clauses

• Management

Level Hiring and Recruiting

• Legally

Speaking

Look for your issue in October.

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

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

26

S E P T E M B E R

2 0 1 6

T H E

TM

C O N T R A C T O R ’ S

C O M P A S S

JUNE 5TH , 11:08 A .M .

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

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

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

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

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

The examples provided in this material are for illustrative purposes only and any similarity to actual individuals, entities, 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. “CNA” is a service mark registered by CNA Financial Corporation with the United States Patent and Trademark Office. Certain CNA Financial Corporation subsidiaries use the “CNA” service mark in connection with insurance underwriting and claims activities.

Copyright © 2016 CNA. All rights reserved.