The Contractor's Compass November 2017 by American Subcontractors Association

THE

ASA’s

THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION

WWW.ASAONLINE.COM

Construction Economic

Outlook: An Underwriter’s Perspective

NOVEMBER 2017

Construction Outlook

by Paul K. Reimer, AFSB, Liberty Mutual Surety

When Two Doesn’t Go Into

One—The Mistakes and Pitfalls of Mergers and Acquisitions by Gregg M. Schoppman, FMI

Common Misperceptions

of Self-funded Healthcare by Mike Bechtol, Redirect Health

Legally Speaking: Securing

Payment for Your Work and the Priority When Equitable Subrogation Applies by Karen A. Palecek and James J. Palecek, Palecek & Palecek, PLLC

February 28 – March 3, 2018 Tempe, Arizona

AMERICAN

SUBCONTRACTORS ASSOCIATION

TEMPE MISSION PALMS HOTEL & CONFERENCE CENTER | TEMPE, AZ

www.subexcel.com

THE

November 2017

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.

Features Construction Economic Outlook: ........................................... 8 An Underwriter’s Perspective

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 Paul K. Reimer, AFSB, Liberty Mutual Surety

When Two Doesn’t Go Into One—The Mistakes..................... 10 and Pitfalls of Mergers and Acquisitions

EDITORIAL STAFF Editor-in-Chief, Marc Ramsey MISSION FASA was established in 1987 as a 501(c)(3) taxexempt entity to support research, education and public awareness. Through its Contractors’ Knowledge Network, FASA is committed to forging and exploring the critical issues shaping subcontractors and specialty trade contractors in the construction industry. FASA provides subcontractors and specialty trade contractors with the tools, techniques, practices, attitude and confidence they need to thrive and excel in the construction industry. FASA BOARD OF DIRECTORS Richard Wanner, President Letitia Haley Barker, Secretary-Treasurer Brian Johnson Robert Abney Anne Bigane Wilson, PE, CPC

by Gregg M. Schoppman, FMI

Common Misperceptions of Self-funded Healthcare............. 13 by Mike Bechtol, Redirect Health

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

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

LEGALLY SPEAKING...............................................................................16 Securing Payment for Your Work and the Priority When Equitable Subrogation Applies

ADVERTISING Interested in advertising? Contact Richard Bright at (703) 684-3450 or rbright@ASA-hq.com or advertising@ASA-hq.com. EDITORIAL SUBMISSIONS Contributing authors are encouraged to submit a brief abstract of their article idea before providing a fulllength feature article. Feature articles should be no longer than 1,500 words and comply with The Associated Press style guidelines. Article submissions become the property of ASA and FASA. The editor reserves the right to edit all accepted editorial submissions for length, style, clarity, spelling and punctuation. Send abstracts and submissions for The Contractor’s Compass to communications@ASA-hq.com. ABOUT ASA ASA is a nonprofit trade association of union and non-union subcontractors and suppliers. Through a nationwide network of local and state ASA associations, members receive information and education on relevant business issues and work together to protect their rights as an integral part of the construction team. For more information about becoming an ASA member, contact ASA at 1004 Duke St., Alexandria, VA 22314-3588, (703) 684-3450, membership@ASA-hq.com, or visit the ASA Web site, www.asaonline.com.

by Karen A. Palecek and James J. Palecek, Palecek & Palecek, PLLC

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

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CONTRACTOR COMMUNITY Appeals Court Hears Oral Arguments on OSHA Silica Rule On Sept. 26, business and labor lawyers, as well as representatives of OSHA, made oral arguments concerning OSHA’s silica rule before the U.S. Court of Appeals for the District of Columbia Circuit. Industry attorneys, including those representing ASA and the Construction Industry Safety Coalition, argued that the OSHA rule is not technologically or economically feasible for construction employers. They also contended that OSHA’s use of various control measures as alternative means of compliance shows that OSHA is acknowledging that its new permissible exposure level is not attainable. However, lawyers for organized labor argued that the rule does not go far enough to protect already-exposed workers. In addition, attorneys representing OSHA told the court that OSHA’s risk assessment findings are supported by numerous public health organizations, including the National Institute of Occupational Safety and Health and the American Public Health Association. They questioned industry assertions that the rule is not technologically feasible, arguing that respirators may be used if companies can not reduce exposures below the new PEL. The three-judge panel hearing the case vigorously questioned the advocates for all the parties. Judge Karen Henderson noted that silicosis is the most common occupational illness in the world. Judge Merrick Garland posited that OSHA has discretion to protect workers in the face of scientific uncertainty over the level of exposure that health effects will occur. Garland said, “The law is clear

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when scientists on both sides” draw different conclusions, “it’s perfectly appropriate for OSHA to weight in favor of occupational safety.” OSHA began enforcing its rule on Sept. 23; under a temporary enforcement policy, OSHA will take into account the good faith efforts of employers to comply with the rule for 30 days. The oral arguments in the case can be heard at www.cadc.uscourts.gov/ recordings/recordings.nsf. ASA’s legal fees in this case were paid for by its Subcontractors Legal Defense Fund. Contributions to the SLDF may be made online.

ASA Calls on OSHA to Delay Crane Operator Certification Requirements In comments submitted on Sept. 29, ASA called on the Occupational Safety and Health Administration “to proceed promptly to finalize the proposed rule” that would extend the deadline for operator certification of cranes and derricks in the construction industry by one year to Nov. 10, 2018, and extend the existing employer duties for the same period. In August 2010, OSHA issued a final standard establishing requirements for cranes and derricks used in construction work. In September 2014, OSHA extended the deadline by three years to Nov. 17, 2017. That rule also extended by three years the employer’s responsibility to ensure that crane operators are competent to operate a crane safely. OSHA is now proposing an extension of the enforcement date to address construction industry concerns over the operator certification requirements.

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ASA Calls on OSHA to Halt Beryllium Rule for Construction In an Aug. 28 letter to the Occupational Safety and Health Administration, ASA told the agency that neither its final rule for general industry nor its proposed rule for construction and shipyards on occupational exposure to beryllium are necessary to protect workers in the construction industry. ASA said that its review of academic and industry safety literature found “no evidence that exposure to beryllium in the construction industry causes a significant risk to workers.” ASA also joined with the Construction Industry Safety Coalition in more detailed comments to OSHA, addressing procedural issues with the rule, the cost effectiveness of the proposed rule, and regulatory alternatives proposed by OSHA. The CISC told OSHA it “believes strongly that a comprehensive standard regulating beryllium exposure in construction is unnecessary from a safety and health standpoint and would impose significant burdens on construction contractors.” CISC posited that while the rule for construction that OSHA proposed on June 27 is preferable to the final rule for general industry on Jan. 9, “substantial evidence does not support lowering the permissible exposure limit for beryllium in construction at all. Furthermore, substantial evidence does not support adoption of a Short Term Exposure Limit broadly in the construction industry.” CISC wrote that both the final and proposed beryllium rules represent “regulatory overreach, requiring contractors to expend resources to address health outcomes that do not exist in

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construction.” Both the ASA and CISC letters requested that OSHA adopt the approach set forth in the agency’s 2015 proposed rule and maintain the previous PEL for beryllium compounds in construction.

Make Your Hotel Room Reservations for SUBExcel 2018 Make your hotel reservations at Tempe Mission Palms in Tempe, Ariz., and register online for SUBExcel 2018, the premier education and networking event for construction subcontractors and suppliers. ASA’s annual national convention will take place Feb. 28-March 3, 2018. ASA has negotiated the special room rate of $204 single/double. The early-bird registration deadline and cutoff date for the hotel room block is Jan. 31, 2018. For more information, visit ASA’s SUBExcel 2018 Web site or enter via the SUBExcel 2018 Web portal, www. SUBExcel.com.

ASA Asks House-Senate Conferees to Approve Freeze of Miller Act Threshold ASA called for approval of a freeze of the statutorily-required periodic inflation adjustments to the threshold for the federal Miller Act in an Oct. 16 letter to members of a Congressional conference committee appointed to resolve differences between the House- and Senate-passed versions of the National Defense Authorization Act for 2018 (H.R. 2810). ASA Chief Advocacy Officer E. Colette Nelson told the conference committee, “This provision is necessary to help protect the payment of construction subcontractors and suppliers on federal

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construction.” The provision, which was included only in the Housepassed bill, would freeze the threshold at $150,000, rather than allowing it to increase by $50,000 every five years. The 1935 Miller Act requires a prime contractor on federal construction projects to provide a performance bond for the protection of the government and a payment bond for the protection of subcontractors and suppliers. Congress is expected to approve the NDAA before the end of the year.

ASA Supports Extension and Changes to OSHA Reporting Rule ASA called on the Occupational Safety and Health Administration to postpone its previously-established enforcement deadline for its employer reporting rule. In a July 12 letter, ASA said the enforcement delay would give employers additional time to comply with the rule, which require many employers, including those in the construction industry, to submit the information on their OSHA Forms 300A to OSHA electronically beginning on July 1, 2017. On June 28, OSHA proposed to delay the initial submission deadline to Dec. 1, 2017. In its letter, ASA also urged OSHA to reconsider the rule’s reporting requirements. OSHA has indicated it intends to reconsider and will likely revise the rule before the new Dec. 1 effective date.

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ASA Introduces White Paper on ‘Subcontractor Bidding and the Law’ ASA’s newest white paper explores the ways subcontractors can get in trouble when bidding, from failing to comprehend the scope of work upon which they are bidding to making careless errors. Subcontractor Bidding and the Law discusses the bidding process, contract award, bid errors and the legal concept of promissory estoppel. The white paper sets forth seven guidelines: • Beware of bids that refer to the prime contractor’s standard subcontract which is not furnished with the bidding documents. • Avoid acceptance based upon the prime contractor’s standard subcontract. • Consider developing and using your own bid proposal that includes those subcontract terms that are the most important to you. ASA includes a model “Subcontractor Bid Proposal” as part of its Subcontract Documents Suite, which is available to ASA members on the ASA Web site. • Watch out for acceptances that vary or add to the bid documents upon which your bid is predicated. • When bidding via email or telephone, establish that the bid is an estimate only and not a firm price. Advise the prime contractor of any variation to the bid documents. • Verify a telephone bid with an email to the appropriate representative of the prime contractor, stating the date, time, place, the nature of conversation, variation to bid documents, and the conditional aspect, if any.

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• Upon discovery of a mistake, take the following actions immediately: • Notify the prime contractor of the error in writing. • Take no action that could be construed as an acceptance of the subcontract. • Offer to meet with the prime contractor’s representative and bring your work sheets to explain the basis of the error. • Demand the return of your bid deposit. • Offer not to rebid the project if excused from your bid to avoid charges of collusion. The new white paper is available under “Bidding and Market Development” in the members-only section of the ASA Web site.

ASA Publishes White Paper on Progress Payments Receiving timely payment for work properly performed is vital to any subcontractor. Avoiding or preventing late payments is essential. Education is the key. An educated subcontractor negotiates better contracts. ASA’s new White Paper on Progress Payments advises subcontractors to keep in mind that: • You are not only a subcontractor but also a creditor. You are a creditor because your work is performed on the promise of a future payment by a customer. • You, as a responsible creditor, must hold up your end of the bargain according to the payment rules to which you agreed in the contract document. • You must have and use collections tools.

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The white paper also provides tips that a prudent subcontractor can use to protect itself from the potentially devastating effects of late progress payments, including starting with the bidding process, establishing unambiguous terms, submitting proper invoices, and implementing an effective collections program. The white paper is free for ASA members and is located in the “Contracts & Project Management” section of the Member Resources area of the ASA Web site.

ASA’s Manual Charts State AntiIndemnity Laws How does your state handle indemnity? You can easily find out with ASA’s Anti-Indemnity Statutes in the 50 States: 2016. This chart is a resource for identifying which states have anti-indemnity laws and indicates which states prohibit indemnity for partial fault or sole fault of the indemnified party. Furthermore, the chart indicates in which states a party is prohibited from requiring a subcontractor to name it as an additional insured, thereby closing the additional insured loophole. Anti-Indemnity legislation is important to subcontractors because too often contractors and owners shift their own liability and risk to the subcontractors. Specifically, “hold harmless” and “additional insured” provisions in a construction subcontract seek to hold the subcontractor accountable for worksite accidents or other losses that are not the fault of the subcontractor. These “hold harmless” and “additional insured”

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provisions are problematic to subcontractors because they may unfairly shift the financial responsibility for claims to the subcontractor or its insurance company. As a result, a party who is indemnified by the subcontractor may use less care to avoid injury or loss because the indemnified party is not liable for its own actions. This carelessness may result in more accidents on the worksite that could have been avoided. Many states have enacted laws that address at least some of the issues in shifting the burden of liability to a subcontractor. Forty-three states have some form of law which prohibits a construction contract that requires a subcontractor to indemnify another party for its negligence (but some of these states limit the application of the law, for example, only to public projects). Only 28 states prohibit a subcontractor from indemnifying another party for its sole or partial fault, meaning 15 of the states with some form of antiindemnity legislation only prohibit a subcontractor from indemnifying another party for its sole fault. Even fewer states have addressed the additional insured dilemma so far. Only six states prohibit a party from requiring another party to name it as an additional insured under a policy of insurance, but the trend is moving in this direction. ASA-member law firm and ASA general counsel, Kegler, Brown, Hill and Ritter, Columbus, Ohio, prepared the manual, which contains contributions from construction attorneys from across the country.

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CONTRACTOR COMMUNITY

The ASA Anti-Indemnity Statutes in the 50 States: 2016 is a members-only resource located on the ASA Web site in the “Insurance and Risk Management Documents” section under “LogIn/Access Member Resources.”

FASA Manual Helps Subcontractors Navigate Retainage Laws in the 50 States A reference manual published by the Foundation of ASA, Retainage Laws in the 50 States, is helping construction subcontractors understand retainage laws where the projects they bid and work on are located. As it applies to subcontractors, retainage is the practice of regularly holding a portion of progress payments that subcontractors earn for performing construction services. “In many states, the retained funds are to be held in escrow, to be paid back to the contractor or subcontractor with interest,” the guide explains. “Many states also permit contractors and/or subcontractors to substitute securities in lieu of retainage. The majority of states permit contracting agencies or owners to reduce or even eliminate the rate of retainage once a certain portion of the contract is complete.” Each state entry in the manual reviews critical factors in retainage law for private and public work, including the retainage rate permitted under law, retainage release milestones, and any options to provide alternative securities in lieu of retainage. Retainage generally is held as an

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assurance for the timely completion and quality of a contractor’s or subcontractor’s work. It is calculated as a percentage of the total contract price. However, the practice places a severe financial hardship on contractors and subcontractors. When contractors and subcontractors are forced to complete work without full payment, they, in essence, finance the job, making it difficult to timely pay their own creditors. In some cases, contractors and subcontractors are burdened with sizable retainage receivables long after project completion. The ASAmember law firm and ASA general counsel, Kegler, Brown, Hill and Ritter, Columbus, Ohio, prepared the manual. The manual is available to ASA members as a downloadable PDF document in the Member Resources section of the ASA Web site under “Contracts & Project Management.”

Report Sheds Light on VeteranOwned Businesses and Their Owners The U.S. Small Business Administration has released a report on veteran-owned businesses. The report gives a detailed profile of this robust business population based on the latest available data, the U.S. Census Bureau’s 2012 Survey of Small Business Owners. • In 2012, the United States had 21.2 million veterans, and 2.52 million businesses were majority-owned by veterans.

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• Almost all of veteran-owned businesses (99.9 percent) were small businesses. • Veteran-owned firms had receipts of $1.14 trillion, employed 5.03 million people, and had annual payroll of $195 billion. • These firms represented 9.1 percent of all U.S. firms. • 13.2 percent of these firms were in the construction industry. • The three states with the most veteran-owned businesses were California, Texas, and Florida. • The three states with the highest percent of veteran-owned businesses in their populations were South Carolina, New Hampshire, and Virginia. The report, titled Veteran-Owned Businesses and Their Owners: Data from the U.S. Census Bureau’s Survey of Business Owners, is one of the only large-scale compilations of data on veteran-owned businesses in the United States, and it provides valuable data for analytical and policymaking.

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Feature Construction Economic Outlook: An Underwriter’s Perspective by Paul K. Reimer, AFSB, Liberty Mutual Surety At the end of fiscal year 2016, the vast majority of construction companies had an optimistic but cautious outlook on the economy. Backlogs were healthier than they had been in years, profit margins had returned for GCs and subcontractors alike, and construction spending overall was on the rise. Per the U.S. Census Bureau, Construction Put in Place in 2016 was more than $1.18 billion versus $1 billion just two years prior. This resulted in what many felt was the true start of an economic turnaround after several struggling years. The outlook was bright. Daily discussions revolved around how a new government majority would result in increased infrastructure spending, increased bank lending, and tax reform. The outlook has somewhat adjusted as we move through 2017 and toward 2018. We are no longer seeing prominent growth in the marketplace but more of a sustained outlook. The market has remained consistent with the overall economy, a general 2 percent to 3 percent gain, while certain pockets of the construction market are exceeding others. From this surety underwriter’s perspective, the market has flattened out and remains steady in the majority of marketplaces. Construction contractors pushing programs have somewhat leveled off and profit margins appear sound. Work is more steadily available than in recent years and we are now hearing stories of subcontractors turning away work because they are at capacity after downsizing their organizations in prior years. As we continue to progress through the year and beyond, three topics that will remain on the forefront

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of an underwriter’s mind while evaluating contractors are the current skilled labor shortage, material costs, and interest rates.

Skilled Labor Shortage Whether you are a union or nonunion firm, you have been affected by the inability to find qualified skilled labor. Per Tradesman International, over a five-year period through 2011, the construction industry lost 2.3 million jobs. As backlogs shrunk from the rougher times of the construction downturn, underwriters constantly questioned how overhead would be covered and what, if any, cuts could be made. Numerous contractors reduced their work forces’ overtime to cut overhead that simply could not be covered. A surplus of available employees was created that had limited options. In the past few years, the market has returned but the laborers have not. Many individuals either left the industry altogether for other careers or simply retired. Compounded with a generation of students whose high schools were graded on college placement or did not encourage the trades, we have a current shortage and troubling labor outlook. The average subcontractor now faces an abundance of profitable work with a depleted staff and resources. While cutting staffs down to their “A&B” teams may have saved their organization in the downturn, it now hamstrings their ability to expand. Many find themselves forced into bringing in new employees who may not understand their corporate mindset and methodologies. This is a major concern from the underwriting side as owners are forced to decide

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between simply standing firm with the resources on hand or hiring and growing. If you can find an employee with the skills you are looking for— great. However, keep in mind that hiring the wrong employee could have drastic ramifications on the project you assign him or her. What is the potential trickle-down or up effect on the overall organization? One poor decision could potentially jeopardize the company’s balance sheet and ability to obtain future work. In order to have the construction marketplace grow as an industry, we need to focus on acquiring the right talent and retaining it. Without a newfound emphasis on this somewhat simple principle, we could see a combination of poor construction products and increased costs driven by wages. This mixture could have longterm negative results on construction returns.

Material Prices Material pricing for contractors on long-term projects has, and always will be, a concern and a key component to overall project pricing. Once a project has started, a contractor has little leverage to bill material cost increases to a job (unless they include an agreement in their contract) so the ultimate effect is a reduction of the original profit margin. We have recently seen increases in fuel, metals, drywall, and lumber, which are key to multiple facets of construction. Per the Producer Price Index, increases in metals—copper, iron and steel scrap and brass—have shown the highest increases over 2017. Products such as drywall, glass, and cement have all shown lesser increases—2 percent to

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7 percent respectively—over the year. The only material decreases we are seeing in 2017 have been insulation and asphalt paving. “Buy American” provisions have also become more prevalent in many construction contracts. These clauses typically require GCs and subs to purchase at minimum a certain percentage, or a particular product, for a project from a U.S. supplier. This has, in certain instances, increased trade costs and put stress on suppliers. While the intent of these provisions is to stimulate the U.S. economy, it has artificially increased construction cost and added another stress point to contractors prosecuting work. Ideally, contractors can lock in prices with suppliers at the time of award and also bill for stored materials either on-site or in warehouses. This limits price fluctuation risks. Having strong supplier relationships remain key to protecting contractors, especially specialty contractors with limited sources to find materials. As contract terms become more onerous, owners look to push costs such as stored materials back on the contractors. If these terms are accepted, we could see additional stress put on subcontractors and material suppliers.

Interest Rates One of the biggest factors driving construction has been, and will always be, cost. With interest rates low, we have seen private sector building increase. One of the major beneficiaries of this low-interest rate cycle has been single-family construction. New starts hit a historic low in 2009 and increased by doubledigit margins through 2015. Low availability of existing inventory combined with first-time buyers looking to take advantage of low 30year mortgages has provided a boost. Residential building has historically

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been a leading indication of economic cycles. With interest rates at historic lows, one would think that this trend will hold steady until we see significant adjustments. Nonresidential construction has not seen the same robust uptick that residential has from low-interest rates; however, things remain steady for most. We do, nevertheless, continue to see an overall lag in infrastructure spending resulting in site work and heavy/highway contractors continuing to look for work. Many now await to see what President Trump’s infrastructure plans turn out to be and what Congress will ultimately approve. The belief of seeing any impact in 2017 or early 2018 is no longer a reality. As we have already seen the Federal Reserve do in 2017, we will continue to see increases in interest rates throughout the coming quarters that will affect construction lending and overall borrowing. Many authorities believe that we will only see moderate increases in an attempt to deter any downturns. From a corporate standpoint, contractors have been able to take advantage of low-interest rates over the last several years as well. Refinancing or purchasing of equipment at lower rates has driven down CAPEX and allowed fleets of construction equipment to be revamped at a lower cost. We have also seen the decreased cost of bank line usage, which has helped reduce interest expense burdens. The flip side of this is as interest rates rise, underwriters will be concerned about those same interest expenses now increasing. Contractors should be proactive, lock in low rates when possible, and limit working capital line usage where possible. Cash will remain king in the underwriting world and the ability to self-finance or float costs without bank help will continue to be beneficial.

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Outlook While some economic experts see insecurity for 2018 and beyond, I believe the industry will continue to see moderate growth in large metropolitan markets around the United States, with additional opportunities via larger, mega projects. The AIA Consensus Forecast projects annual growth in the 3.5 percent to 4.0 percent range for the remainder of 2017 as well as for 2018. Potential factors such as corporate tax cuts, increased private investment through public-private partnerships, and state and local governments playing a more pivotal role in infrastructure improvements will be critical moving forward. As several sectors of construction have shown positive trends, we must continue to monitor infrastructure, healthcare, and retail closely. Uncertainty around a potential infrastructure spending package promised by the federal government, the failed attempt at repealing/ replacing the Affordable Care Act, and the continued closing of major chain stores that move shopping to the internet will all play key factors. I truly feel that the economic outlook through 2018 is a positive one. Contractors must continue to stay the course, maintain the profit margins they have worked back to, and invest in the future so construction can continue to evolve and advance itself in a fiscally allowable way. Paul Reimer is a contract underwriting officer at Liberty Mutual Surety. He began his career in Liberty’s training program in 2007 before working in the field and eventually assuming a home office role in 2014. Reimer graduated from Penn State University with a Bachelor’s of Science in marketing.

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Feature When Two Doesn’t Go Into One—The Mistakes and Pitfalls of Mergers and Acquisitions by Gregg M. Schoppman, FMI

Experts will tell you that the mergers and acquisitions market is ripe for activity. Several conditions lend themselves to creating an attractive marketplace. First, the industry is seeing continued positive traction in revenue growth and more importantly profitability. Secondly, the demand for construction services, specifically in the infrastructure arena, provide a stimulus thus further improving the attractiveness of many candidates by inflating potential backlog. Finally, the industry still continues to age, leaving many firms seeking a quick and expedient succession plan. There are arguably plenty of other reasons driving firms to seek acquisition or seek to be acquired. While valuations will vary and due diligence abounds, there are plenty of hazards that firms fail to identify long before the transaction is complete.

An acquisition target should have some other compelling feature(s) that makes them desirable. For instance, it may be that firm’s strategy in dealing with customers or maybe some internal system discovered during the due diligence phase. So often a firm acquires another only to conduct a wholesale overhaul, leaving very little semblance of the original target. By forcing an integration or wholesale change to the parent firm, teams, customers, vendors and trade partners become disenchanted and there is flight, leaving that parent with nothing short of an office. Leverage the acquisition appropriately and view the target as something with more intrinsic value than simply an office and equipment. It should be attractive for multiple reasons. Find a way to learn from this new organization and bring those lessons back to the mothership.

It’s the Strategy!

It’s the Technology!

Mergers and acquisitions often fulfill the strategic needs of a firm. It may be a niche market or geography that enables the buyer to claim an additional competitive advantage. However, there has to be more to a firm than either of those characteristics. Using this rationale, if a buyer moved to a new city, any residence would be acceptable. In reality, the sector, niche or geography should be the starting point to engage in deeper conversation rather than a terminal point to make an offer.

It sounds simple but so many firms forget the costs of integrating multiple and sometimes incongruous systems. This is more than just transferring data from Timberline or Viewpoint or Spectrum. Think about all of the costs and challenges associated with some of the following: • Estimating platform—Whether it is some customized, elaborate macroenabled spreadsheet or some off-the-shelf estimating program, there is a level of integration that must occur.

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• CRM platform—Are customers and activity tracked via a database or by a cloud-based application? • Accounting—This is normally the item that has the most hair and gets the most attention, but integrating disparate systems can sometimes be a big-dollar proposition. • Web sites and social media—The good news is the firm will be able to announce the assimilation of the new firm. The bad news is does this look like one firm or two firms that share an accounting system and a light bill? • Infrastructure—With a mass migration to the clouds, there seems less emphasis on hardware and storage. Regardless, this takes time and requires a great deal of thought. • Phones and hardware—Apple vs. PC. Samsung vs. iPhone. VOIP and rotary phones. Hopefully no one is concerned about the latter but the mechanics and costs associated with simply determining the “right tools” opens up Pandora’s box. • Other considerations—There are no shortage of tools outside of the traditional spreadsheets and word processing programs. Scheduling, BIM, document control, project management, close-out/punch list control, etc., are just a sample of considerations that may or may not require additional transition time and energy.

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Often, firms look at the equipment with a heavy emphasis on yellow iron. In today’s construction world, acquisitions would be better suited to look equally at the integration of these new tools. The raw costs are one serious consideration, but when one adds in the effect of transitioning 10, 50, 100, 500 people onto a new system, as well as all the training and heartache associated, it may drastically change the complexion of the deal.

It’s the Culture In the end, it all comes down to the people. For all of the bluster about strategy, information technology, yellow iron, offices, etc., it truly is about the people. The bells and whistles of the deal lie within the most important asset within the transaction. These are the people that know the market, know the players, know the customers, know the “hot buttons” and know the intricacies of doing business within that sector or geography. The fascinating aspect is that this is the one variable of the deal that is NOT guaranteed. In the end, the computers, the office, and the equipment will stay put. If the people do not buy in, they will leave. One of the most common reasons for acquisition failure is the failure to recognize the impact of culture. This amorphous, intangible component that so many leaders wrestle with has such an important impact on strategy

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and tactics yet defining it accurately is almost impossible. In the end, there has to be a cultural fit between the two companies. Hostile takeovers resembling an episode of “Dallas” or “Dynasty” are farfetched and usual fail. Think of an acquisition as a marriage—it is an intricate blending of two individual firms into one that often begins with a relationship predicated on similar compatibilities. The people must buy in so careful consideration should be given to the following: • Communication—How frequently will the parent and target be in communication? How will this transaction be portrayed internally? In the marketplace? • Leadership—How will the satellite or target firm be lead? Who will lead this initiative from the parent company’s perspective? • New opportunities—How will the satellite or target be brought into new opportunities within the firm? For instance, as promotions and advancements spring up, how will the new target’s team be tapped as potentials? • Culture integration—As said previously, what can the parent firm learn from the target? What can be brought back “home” to make everyone better and demonstrate a truly symbiotic relationship?

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All signs point to a fertile market, ripe for organizations to expand their empires. Growth can often occur organically through key leaders migrating to a new market or sector and plopping out their shingle. There are no shortages of challenges associated with this strategy, but it is clearly another perspective to consider. Mergers and acquisitions are an excellent vehicle to allow firms to grow quicker. However, in the haste to do something, it is always important to do it right. As a principal with FMI, Tampa, Fla., Gregg Schoppman specializes in the areas of productivity and project management. He also leads FMI’s project management consulting practice. Prior to joining FMI, Schoppman served as a senior project manager for a general contracting firm in central Florida. He has completed complex and sophisticated construction projects in the medical, pharmaceutical, office, heavy civil, industrial, manufacturing, and multifamily markets. He has also worked as a construction manager and managed direct labor. Furthermore, Schoppman has expertise in numerous contract delivery methods as well as knowledge of many geographical markets. He can be reached at (813) 636-1259 or gschoppman@fminet.com.

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Feature Common Misperceptions of Self-funded Healthcare by Mike Bechtol, Redirect Health

Interest in self-funded healthcare has skyrocketed in recent years, but so have misperceptions and bad information about this healthcare option for businesses. For many subcontractors, selfinsurance seems a perfect solution to their healthcare challenge. The model seems custom-built for contracting workforces—benefits are flexible, costs are low, and workers’ compensation costs are minimized—but many employers have questions about selffunding and are hesitant to adopt this method. Here, we address common myths and misperceptions about self-insurance to provide a clear snapshot of how the model works for construction industry businesses.

“I don’t know how self-funding would work in my business.” In a self-funded health plan, businesses create their own benefit plan for their employees, pay health claims directly, or work with a thirdparty administrator (TPA) to manage the plan. Self-insurance benefits can include medical, chiropractic, dental, vision, prescription medications and workers’ compensation. Businesses also have the option to customize benefits according to the needs of their employees. For example, an employer with a young workforce may choose to offer comprehensive family planning benefits, while a construction firm may opt for injury care. This level of flexibility simply isn’t available in fully-funded plans. For employees, a self-funded health plan may look and operate exactly the same as a traditional insurance plan.

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“It’s too time-consuming to implement and manage a selffunded plan.” It may seem difficult from the outside, but self-insurance is typically more manageable than traditional insurance plans. Costs are easy to control, and administration is streamlined and simple. Most companies hire a third-party administrator to manage their selffunded health plan. TPAs handle the bulk of the administration: they collect monthly premiums, pay health claims, communicate with employees about claims, and report back to the employer on the performance of the plan. In many ways, the administration is similar to a traditional insurance plan. But, there’s one critical difference: with a traditional plan, the insurance carrier collects and keeps the money. With self-funding, the TPA keeps the funds in the company’s claims bucket. The money benefits the business—it doesn’t go to back into the profits of the insurer. Moreover, TPAs provide monthly utilization reports to the business owner, allowing him or her to see how the claims dollars are being spent, identify any red flags (e.g., inflated pharmacy costs), and to make adjustments as needed.

“My healthcare costs will go up.” This myth is particularly pervasive, but easily exposed. With traditional, fully funded medical plans, employers have very little, if any, control over healthcare

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spending. Rates go up every year— even if utilization goes down. A business owner wouldn’t accept a 10 percent, or more, annual increase on the cost of materials or supplies—why should he or she agree to big increase in the cost of health insurance? With self-funding, employers maintain a high level of control over their costs. Among the tools for keeping costs in check: • Stop-loss insurance: With a smart self-insurance plan, the company covers health services up to a certain dollar amount; stop-loss kicks in if health claims exceed that cap. For example, if an employee is injured in a bad accident, stop-loss ensures the employee receives the healthcare he or she needs while protecting the business’ bottom line. • Employee education: Consider that an MRI costs $4,000 at a hospital, but just $400 at an independent imaging center—with absolutely no difference in quality. In fact, hospitals charge five to 20 times as much as offsite clinics for identical services—things like blood tests, X-rays and other common procedures. Why would anyone choose to go to a hospital for a nonemergent issue if they understand the difference in price? The same is true of prescription prices. A common antibiotic might cost $40 at a corner store pharmacy, but just $10 at a supermarket pharmacy. For a company that fills 500 prescriptions each year, simply switching pharmacies can add up to $15,000 in savings. Simply educating employees on factors that impact costs will help keep claims in check.

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• Workers’ Comp: For contractors, self-funding can bring down workers’ comp costs by providing lower-wage employees with an affordable place to get healthcare. Consider that many workers— particularly those who earn less than $15 an hour—don’t have any healthcare except workers’ compensation. Sometimes these employees file workers’ comp claims for injuries sustained outside the workplace—simply because they don’t have money to pay for the care they need. A smart self-funded plan provides routine healthcare services at low or no cost, removing barriers for low-wage employees. As a result, workers’ comp costs go down and EMOD scores improve. It’s a win-win. • Extra funds: With self-funded healthcare, employers don’t pre-pay for coverage—they pay only when

claims are incurred. In addition, they keep any extra money they’ve put into their claims bucket at year’s end. With traditional insurance, the carrier keeps all of the money the business has paid into the plan, even if the money they paid far exceeded their claims. Likewise, businesses don’t bear the burden for insurance companies’ marketing costs or profit margins, a savings estimated at 10 percent to 25 percent in non-claims expenses. Self-funded plans are also exempt from state health insurance premium taxes—which typically cost 3 percent of the total premium dollar value of a traditional plan. The company gets these extra funds.

“My employees will be unhappy.”

To fully leverage the benefits, many companies choose to partner with an affordable healthcare provider to help their employees navigate the system and access care, while protecting the company from overpaying for services. The partner provides a concierge-level of service to ensure employees get the right care at the best price. For businesses, this means lower costs. For workers, it’s a simple, convenient and satisfying healthcare interaction—a tremendous difference from most people’s experience of healthcare. Mike Bechtol is director of Care Logistics for Redirect Health. For more information about self-funded healthcare for subcontractors, or visit redirecthealth.com/asa or call Redirect Health at (888) 995-4945 or email nextsteps@redirecthealth.com.

With a smart self-funded plan, employee satisfaction will likely improve dramatically.

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.

“Driving Project Success—Keys to Improving Productivity” (Item # 8090) Learn how to minimize waste and inefficiencies in this video-on-demand presented by Stephane McShane, Maxim Consulting. McShane explains how to get the best effort from field forces and provides practical tools that managers can implement to lower the cost of production, as well as how to quantify losses to substantiate claims for extra costs. $65 ASA members | $95 nonmembers This and other on-demand videos are available through FASA’s Contractors’ Knowledge Depot.

ORDER ONLINE AT www.contractorsknowledgedepot.com A AU UG GU US ST T T H E C O N T R A C T O R ’ S C O

’ S C CO OM MP PA AS SS S T TH HE E C CO ON NT TR RA AC CT TO OR R’ S N O V E M B E R 2 0 1 7

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2017 ASA CERTIFICATE OF EXCELLENCE IN ETHICS 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 2018, Feb. 28 —March 3, 2018, in Tempe, Arizona.

Online Resources: • Watch the Video. • Download the 2017 ASA Certificate of Excellence in Ethics Brochure. • Download the 2017 ASA Certificate of Excellence in Ethics Application. • ASA provides useful model documents to help with your submission and your ethics program. View the 2017 ASA Certificate of Excellence in Ethics Resource Guide.

• ASA’s Certificate of Excellence in Ethics Program Q&A LinkedIn Group—a forum for getting answers to your questions about the application process. This forum includes current recipients who have been through the application process and who are willing to help guide new applicants through their application process. • Recipients of the ‘2016 ASA Excellence in Ethics Award’ may re-apply for the 2017 ASA Certificate of Excellence in Ethics using the Re-Certification Form.

• Download the 2017 ASA Certificate of Excellence in Ethics Timeline.

APPLICATION DEADLINE: DECEMBER 15, 2017

THE

Win. Win. QQ

Sell your products and services. Advertising reaches industry leaders and decision-makers who spend $11+ billion annually on products and services. Support ASA. Advertising supports ASA, the industry voice of trade contractors.

That’s a win-win situation.

To advertise in The Contractor’s Compass, email advertising@asa-hq.com

Legally Speaking CONTRACTOR COMMUNITY Securing Payment for Your Work and the Priority When Equitable Subrogation Applies by Karen A. Palecek and James J. Palecek, Palecek & Palecek, PLLC How do you secure payment for the work you do on a construction project? Most states have mechanic’s lien laws which are statutory remedies that protect the rights of contractors, subcontractors, material suppliers, and certain professionals who add value to the property of another. Given the fact they are statutory, subcontractors will need to be aware of the specific details of mechanic’s lien statutes in their state. However, the concept is that those that improve private property should be protected because they have improved the property and they should have a secured position given the fact that they have incorporated labor and materials into the project and should be allowed to be paid out of the sale of the property that they improved. The essence of a lien is that if a contractor, subcontractor, or supplier to whom the obligation is owed remains unpaid for work performed, the lien claimant or subcontractor who records the lien can foreclose their mechanic’s lien. Through the foreclosure process, the improved property is sold and the contractor is paid out of the net sale proceeds. Many states require a notice before work begins to be given to the owner of the property and construction lenders that may have recorded deeds of trust on the property. Each state has different requirements and subcontractors are advised to know those requirements and prerequisites so that they have the ability to record a mechanic’s lien if they are unpaid.

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Clearly, this elevates an unsecured payment claim to a secured claim in the real property that has been improved.

Liens on Leasehold Interests Mechanic’s liens are also available to claimants that perform tenant improvement work and may serve as liens against not only the landlord’s fee interest but a mechanic’s lien against the tenant’s leasehold interest. The right to claim a mechanic’s lien on the landlord’s fee interest extends to everyone who, at the instance of the owner or its agent, furnishes services or materials for construction on the property. The contractor, architect, and others having control of construction are considered agents of the owner for this purpose. Thus, a subcontractor or materials provider on a tenant improvement project with no contract with the owner may still claim a mechanic’s lien against the fee if the claimant provided services or materials at the instance of the owner. In addition, that claimant could lien the leasehold and sue the party with whom the claimant was in privity for breach of contract. An analysis is required on whether or not the specific lease requires a tenant to perform some of the construction or if the lease merely permits the construction. If the owner has knowledge of the tenant improvements, a mechanic’s lien would extend only to the tenant’s leasehold interest in the property

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and not the underlying property of the owner. Each state has specific law relating to not only mechanic’s lien claims relating to the underlying real property or fee interest in the property, but may also have different laws and applications as it might relate to the leasehold interest in the real property. Subcontractors should seek counsel about the state laws with regard to not only mechanic’s liens on the real property, but mechanic’s liens on the leasehold interest. Once that information is obtained, a subcontractor can determine whether it can lien both the real property and the leasehold interest.

Priority and Equitable Subrogation Subcontractors should also be aware that their mechanic’s lien rights and the property that they improve may be subservient to the Deed of Trust lien of the lender on the project. For example, in Arizona, a construction lender has priority over a mechanic’s lien claimant if the construction lender records its Deed of Trust prior to or within 10 days of the date that the lien claimant began work. Each state may have difference statutory rules with regard to that priority position. What a subcontractor may not realize is that the original lender’s Deed of Trust lien may survive and remain senior to all mechanic’s liens, even though the Deed of Trust has been released. This concept is known as equitable subrogation.

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The Doctrine of Equitableb Subrogation is widely recognized in American Juris Prudence and allows a creditor who satisfies or pays a prior creditor’s lien to acquire that lien priority position based on the payment made. Again, each state may have specific rules and regulations that have been adopted as this doctrine has been evolving since the downturn in 2008. The four primary elements for contractors to be aware of with regard to equitable subrogation in general are: 1) the party claiming subrogation has paid the debt; 2) the party was not a volunteer; 3) the party was not primarily liable for the debt; and 4) no injustice or prejudice will be done to the other party by allowing the subrogation. Equitable subrogation may then be extended to elevate a junior deed of trust holder to a position superior to the subcontractor’s mechanic’s lien to the extent that the junior interest satisfied a senior lender’s interest. Part of the analysis involves the prejudice to the intervening lienholder, which would be the mechanic’s lien claimant. The reason this doctrine has been evolving, especially after the downturn, is there were many cases where a mechanic’s lien claimant’s work started before the priority date of the Deed of Trust. The mechanic’s lien claimant was then the intervening lienor, and whether or not the doctrine of equitable subrogation applies depends on whether or not there was prejudice to the mechanic’s

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lien holder. If the junior lienholder is elevated to the senior lienholder position through the Doctrine of Equitable Subrogation, then the mechanic’s lien claimant would not have priority. However, the analysis also involves how much was paid for that position and what the value in the property is. Thus, the advice to subcontractors is that it is always wise to follow the statutory prerequisites to perfect the mechanic’s lien regardless of the potential equitable subrogation doctrine that may or may not apply to the particular project. The position of the mechanic’s lien from a priority position may need to be analyzed, but most states’ analysis addresses the commencement as what was visible activity at the project site. The subcontractors that do work on the building, but not necessarily the original excavation ultimately will have the same priority position as the date the first shovel turns the dirt on the property. It is important for subcontractors to know what the law of the state is with regard to the priority position of the mechanic’s lien and the best advice for subcontractors is to obtain legal advice to perfect the mechanic’s lien and get legal advice with regard to the priority position. Because the law is an evolving doctrine regarding the priority position of mechanic’s lien and each state has its unique laws, the subcontractor should perfect the mechanic’s lien so they have

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the potential of not only a secured position in the underlying real property but potentially a leasehold interest and even a potential for a secured priority position to be able to be paid for the work that they did to improve the value of that property. Karen A. Palecek is co-managing member of Palecek & Palecek, PLLC, where she has more than 29 years of experience in the areas of construction law and litigation. Her clientele includes specialty trade contractors, suppliers, general contractors, design professionals, and owners. Her practice and experience is focused on every aspect of the construction industry including but not limited to contract review and negotiation, mechanic’s liens, bond claims, arbitration, mediation, bench trials, jury trials, payment and performance issues, claim evaluations, litigation from complaint through to collection on judgments, and appeals. James J. Palecek is co-managing member of Palecek & Palecek, PLLC. He has advised construction and other clients for over 21 years. His clientele includes subcontractors, general contractors, developers, and consultants in both the public and the private sector. In addition to a focus in construction law, he has also led the firm corporate transactional and real estate practice areas for the last 13 years. They can be reached at (602) 522-2454 or info@palecekaw.com.

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ASA/FASA Calendar

Coming Up

March 2018

14 — Webinar “Employment Law Mistakes Most Commonly Made by Subcontractors” presented by Philip J. Siegel, Hendrick, Phillips, Salzman & Flatt

13 – Webinar “Technology and Transparency, Part II—Linking Technology to Performance” presented by Stephane McShane, Maxim Consulting Group

December 2017

April 2018

12 — Webinar “Ownership Succession Planning” presented by Stephen Bonebrake, Maxim Consulting Group

10 — Webinar “Lien & Bond Claims” presented by Timothy Woolford, Woolford Law, P.C. May 2018

January 2018 9 — Webinar “Indemnity and Hold Harmless” presented by Lee B. Brumitt, Dysart Taylor Cotter McMonigle & Montemore, P.C. 23 — Webinar “How the Difference Between Extra Work and Additional Work Can Impact Claims for Payment” presented by Stephen Moore and James Morris, Galloway Johnson Tompkins Burr & Smith February 2018 13 — Webinar “Getting Better Subcontracts” presented by Eric Travers, Kegler, Brown, Hill and Ritter

8 — Webinar “Change Orders” presented by Joe Katz, Huddles Jones Sorteberg & Dachille, P.C. June 2018 12 — Webinar “Cash Management” presented by James L. Salmon, Benjamin, Yocum & Heather, LLC

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

THE

in the December 2017 Issue of ASA’s

November 2017

Theme: Business Taxes • Tax

Strategies

• Eliminating

the Agony of YearEnd Tax Preparation

• Transforming Your

Organization for the Future • How

Medical Case Management Helps Control Your eMod Score

• Legally

Speaking: Documenting Winning Claims

Look for your issue in December. PAST ISSUES: Access online at www.contractors knowledgedepot.com

28–March 3 — SUBExcel 2018, Tempe Mission Palms Hotel, Tempe, Ariz.

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C O N T R A C T O R ’ S

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“The flow and consistency of the documentation in Project DocControl was exactly what we had been looking for. We needed a tool that would allow employees to generate documents easily and consistently.” —Stephen Rohrbach, CPC President F.A. Rohrbach, Inc. Past ASA National President

50! Congratulations to ASA on your 50th anniversary! Project DocControl is proud of its decade-long ASA national sponsorship.

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 © 2017 CNA. All rights reserved.

AMERICAN

SUBCONTRACTORS ASSOCIATION

2016 â&#x20AC;&#x201C;17 Annual Report 3 Letter from the President 4 Letter from the Chief Operating Officer 6 Advocacy Report 14 By the Numbers 20 Financial Report

ASA Board of Directors (2016–17)

ASA Staff

Officers

Directors

President Robert Abney F. L. Crane & Sons, Inc. Southaven, Miss.

Jim Blauch Blauch Brothers Harrisonburg, Va.

Vince Irwin Irwin Products St. Louis, Mo.

Richard Bright Chief Operating Officer (703) 684-3450, Ext. 1335 rbright@asa-hq.com

Paul Brennan Corrigan Company St. Louis, Mo.

Chip Mabus F.L. Crane & Sons Fulton, Miss.

Brian Carroll Sanderford & Carroll, P.C. Temple, Texas

Shannon MacArthur MEMCO Spring, Texas

Brian Cooper AROK, Inc. Phoenix, Ariz.

Mike McAdams Walker Engineering Irving, Texas

Jason File Les File Drywall, Inc. Albuquerque, N.M.

Brad Miller Midwest Crane & Rigging Olathe, Kan.

Gloria Hale Hale Glass Placentia, Calif.

Patty Peterson Tindall Corporation Petersburg, Va.

Scott Holbrook Crawford & Bangs Covina, Calif.

Jeff VanderLaan Kent Companies, Inc. Grand Rapids, Mich.

Vice President Jeff Banker Banker Insulation Chandler, Ariz. Treasurer Courtney Little ACE Glass Construction Corporation Little Rock, Ark. Secretary Anthony Brooks Platinum Drywall Maumelle, Ark. Immediate Past President Letitia Haley Barker Haley-Greer Inc. Dallas, Texas

Jessica Enochs Membership & Accounting Coordinator (703) 684-3450, Ext. 1323 jenochs@asa-hq.com Beth Horan Director of Finance & Administration (703) 684-3450, Ext. 1333 bhoran@asa-hq.com E. Colette Nelson Chief Advocacy Officer (703) 684-3450, Ext. 1310 cnelson@asa-hq.com Marc Ramsey Director of Communications (703) 684-3450, Ext. 1321 mramsey@asa-hq.com

2016-17 ASA Committees and Task Forces Standing Committees

Standing Councils

Task Forces

Executive Committee Chair: Robert Abney

Attorneys’ Council Chair: Lee Brumitt

Task Force on Ethics in the Construction Industry Chair: Shannon MacArthur

Bylaws Committee Chair: Courtney Little

Chapter Leadership Council Chair: Mary Whitlow and Tyler Althouse

Finance Committee Chair: Darlene East

Executive Directors’ Council Chair: Gia Zamora

Nominating Committee Chair: Letitia “Tish” Haley Barker

Think Tank (Rap Council) Chair: Carol Floco and Tyler Althouse

Task Force on Meetings Chair: Tim Thomas Task Force on Contract Documents Chair: Brian Cubbage Task Force on the Subcontractors Legal Defense Fund Co-Chairs: Scott Holbrook Task Force on Government Advocacy Chair: Daniel McLennon

LETTER FROM ASA’S 2016 –17 PRESIDENT

Dear Members and Friends: It was an honor and privilege for me to have served as your president in 2016-17. I am truly amazed by the people and companies that make up this organization. As an association, we are built on a solid foundation with some of the best and brightest subcontractors in the trades, and so it is no accident that we are the premier association for subcontractors. The founders built this association with a vision of providing subcontractors with access to education, advocacy, and networking, thus creating a more informed and capable subcontractor, and I am immensely proud of the work my predecessors and the ASA staff accomplished. ASA offered a fantastic webinar series to help educate and assist subcontractors through a multitude of obstacles which subcontractors face. ASA delivered The Contractor’s Compass each month, so subcontractors can stay current on topics that are affecting our industry. The ASA Web site is robust with relevant, useful information and resources for our members, including the Lien & Bond Claims in the 50 States, produced for ASA by Kegler, Brown, Hill and Ritter, ASA’s general counsel. This past year saw significant changes in our national government. ASA Chief Advocacy Officer E. Colette Nelson monitored a flurry of executive orders and the impact to subcontractors throughout the transition. Her knowledge of the inner workings at the Capitol and White House are unmatched in the subcontractor arena. She spearheaded ASA’s “friend of the court” briefs in precedent-setting court cases. ASA attorneys prepared a brief in a case involving a decision of a trial court which refused to use the exclusive remedy provision of

workers’ compensation as a bar to a negligence claim against the contractor participants under a wrap-up insurance policy. ASA also used funding from the Subcontractors Legal Defense Fund to finance its share of legal fees in an industry lawsuit taking on OSHA’s rule on crystalline silica. In addition to her duties with legislative and regulatory issues, Colette and the ASA officers met with the AGC officers, as they do every year, and discussed industry trends that pose significant risk to subcontractors and general contractors and how we can collaborate to resolve those issues. While my business benefited from the education and the advocacy efforts of the association, it also benefited greatly from the networking opportunities. Sharing successes and lessons learned with other, like-minded, non- competing subcontractors continues to be an extremely valuable aspect of membership in ASA. While I am very happy with our accomplishments this past year, there is plenty of work to be done. One priority will be to continue to grow our membership. After all, the strength of our organization has always been in our members! I am confident that our newly elected national officers and Board of Directors are the right people for the job, and I am confident that our chapter executive directors and chapter leaders will achieve our association’s goals.

Sincerely, Robert Abney 2016–17 ASA President

LETTER FROM ASA’S 2016 –17 CHIEF OPERATING OFFICER

Dear Members and Friends: As you will see under “Membership” in the following pages of this report, ASA has seen an increase over the past few years in the number of individuals who receive membership benefits. In other words, 4,721 individuals from our 2,426 member companies now enjoy the benefits of their companies belonging to ASA, such as government advocacy representation, education resources and opportunities, model contracts, weekly news through ASAToday, in-depth coverage of topics and issues that most impact them via our monthly educational journal, The Contractor’s Compass, and discounts on products and services provided by our sponsors and participants in our ASAdvantage affinity program. This growth in the number of member companies and the individuals who have access to our association’s benefits signifies—and continues to confirm—the value our organization provides its members. In 2016-17, ASA also worked to bolster the number of prospects in our database who receive correspondence from ASA, including The Contractor’s Compass and emails announcing new ASA products and education webinars. Communication to the more than 10,600 individuals who are not ASA members is critical, because a) we

generate non-dues revenue from these individuals, and b) we raise awareness about the value and benefits they could be receiving by joining our organization. Under “Education,” you will notice that SUBExcel 2017 enjoyed an increase in the number of registrants over previous years. Of importance, of course, is the revenue generated, but perhaps more importantly, an increase in registrants signifies the value our members place in the in-person networking and education opportunities provided during our annual convention, and confirms we are on the right track with the education offerings and special networking events we plan. ASA fared well in the number of registrants for our education webinars over the course of the year. While education webinars do provide a solid source of non-dues revenue, the variety in the number of registrants tells us more about the topics they are most interested in learning about, and what they are not, and is helpful for our future education planning. Under “Communications,” an upward trend in the number of monthly visits to our Web site, www.asaonline.com, indicates that more and more subcontractors continue to discover what our association has to offer. An upward trend in unique

visitors, likewise, shows an increase in visits from individuals. “Unique visitors,” which Google now simply calls “users,” are counted only once during a selected timeframe, meaning in April 2017 more than 3,000 individuals visited our site, and in June 2017 just under 2,250 individuals visited our site. In other words, one person isn’t visiting our Web site 3,000 times a month, but rather, 3,000 individuals visited our site once during the month. Another indication that subcontractors are looking for opportunities to network through ASA and/or with other ASA members is the growth of our ASA LinkedIn group. In March 2017, ASA surpassed the 5,500 mark in the number of followers we have. Twitter, too, has significantly grown over the past two years—to 2,679 in June 2017 from 1,772 in June 2015. “Tweet impressions,” that is, our potential Twitter audience, has skyrocketed since August 2016 when we began Tweeting much more frequently. In other words, ASA staff now drafts dozens of Tweets each week based on content written for each week’s issue of ASAToday. ASA is now a content generator and information resource for more than 2,600 followers. Facebook, likewise, has seen an increase in followers over the past two years, from just over 550 in June 2015 to about 850 in June 2017.

The numbers of individuals from member companies receiving ASAToday and the President’s Letter also have significantly grown over the past two years. This indicates that our contact lists are cleaner, that fewer individuals are opting out of receiving the newsletters, and that more members are discovering value in the content. In July 2015, ASA cleaned its database to eliminate old, non-working or bad nonmember email addresses. Over the past two years, ASA has focused on building the database back up with new prospects, as mentioned earlier. As you can see in the chart plotting recipients of The Contractor’s Compass over the past two years, the number of recipients is now near 14,000 again. ASA continues to be committed to providing best-in-class customer service to its members and support to its chapters. The progress our association has made this past year, and during the previous couple of years, continues to be astounding, and we are excited to build on this momentum in the coming fiscal year and beyond! Sincerely, Richard Bright ASA Chief Operating Officer

Advocacy Report

Subcontractor Payment Since ASA was founded in 1966, its members have reported that one of their biggest problems is getting paid on time for work properly performed. Thus, ASA continues to make advocacy for payment reform its highest priority. The following is a list of some of ASA’s activities on payment issues. • Conceived and drafted the federal “Small Business Payment for Performance Act” (H.R. 2594), which would allow a contractor to submit a request for equitable adjustment, followed by an invoice for work performed under a government-directed change order. The government must then pay at least 50 percent of the estimated amount of the REA for work performed until it reaches a final agreement with the contractor. The bill also would require the government to provide a status report on each REA with each progress payment, thus providing information for cash flow planning to the contractor. The bill, introduced by Rep. Brian Fitzpatrick (R-Pa.), was approved by the House Small Business Committee by a vote of 21 to 0, on June 13, and is awaiting a vote by the full U.S. House of Representatives. • In collaboration with six other construction associations, called for a freeze to the statutorily-required periodic inflation adjustments to the threshold for the federal Miller Act, which requires federal prime contractors to post payment bonds to assure the payment of their subcontractors and suppliers. Subsequently, Rep. Nydia Velazquez (D-N.Y.) offered an amendment to the National Defense Authorization Act for 2018; the amendment is pending in a House-Senate conference committee. • Conceived and drafted the federal “KnowBefore-You-Bid Construction Transparency Act” (H.R. 2350), which would require federal agencies to post on a Web site information about payment to their prime construction contractors, copies of the prime construction contractors’ payment bonds, and the agency’s policy on reviewing, approving and paying change orders. The bill, introduced by Rep. Don Bacon (R-Neb.), is pending before the House Small Business Committee.

• Filed a “friend of the court” brief calling on the Supreme Court of Kentucky to reverse a lower court ruling that precluded subcontractors from recovering payment for extra-contractual work under a pay-if-paid clause and permitted the project owner to benefit from valuable extracontractual work provided by subcontractors without payment, known as “unjust enrichment.” ASA is still awaiting a decision. • Worked with the Federal Acquisition Regulatory Council to publish a final rule that prohibits a prime contractor from prohibiting a subcontractor from discussing payment or utilization matters with the contracting officer. The rule took effect on Nov. 1, 2016. • Worked with the FAR Council to implement an ASA-initiated law that requires a federal contractor to notify the contracting officer in writing if the contractor pays a reduced price to a small business subcontractor or if the contractor’s payment to a small business subcontractor is more than 90 days past due. The new rule took effect on Jan. 19, 2017. • Collaborated with 11 other construction and surety associations to call on the FAR Council to “implement an important statutory change regarding the types of assets that individual sureties can pledge to support their surety bonds on federal construction projects.” The FAR Council reported it intended to issue a proposed rule in October 2017. • Continued to work nationwide to be sure that state laws authorizing the use of public-private partnerships include subcontractor payment assurances in the form of payment bonds. ASA staff coached members, lobbyists and staff in chapters in states where such legislation was considered. In addition, ASA staff made direct contact with legislators in states without ASA chapters working to include subcontractor payment assurances in such laws.

ADVOCACY REPORT

• Published a series of white papers designed to help subcontractors understand their payment rights and to negotiate improved payment terms: • White Paper on Project Financing, which provides tips on getting information on project financing and arguments to make to owners and prime contractors. • Strategies for Obtaining Unconditional Payment for Performance, which provides tools to develop strategies for obtaining equitable payment terms. • Negotiating the Payment Clause: A Script, a case study that illustrates through everyday language how to negotiate more equitable payment terms. • Translating Changes and Changed Conditions into Dollars and Time Extensions, which discusses the steps a subcontractor can take to demonstrate causation and quantification of the impact of changes and changed conditions. • White Paper on Progress Payments, which provides tips that a prudent subcontractor can use to protect itself from the potentially devastating effects of late progress payments. • Updated and published three of its so-called 50-state manuals on payment laws, including: • Lien & Bond Claims in the 50 States, which outlines the lien and bond laws in each state and the District of Columbia. • Retainage Laws in the 50 States 2017, which reviews critical factors in retainage laws for public and private work, including the rate permitted, release milestones and any options to provide alternative securities in lieu of retainage • Contingent Payment Clauses in the 50 States, which explains how each state handles pay-if-paid and pay-when-paid clauses. • In coalition with seven other constructionrelated associations called on the Environmental Protection Agency to require state and local governments to require performance and payment bonds on water projects financed by the federal government.

• Worked with the National Association of Credit Management to conduct a survey about their experiences with change orders on federal construction.

Risk Allocation ASA members report that one of their biggest challenges is the contractual allocation of risk they cannot manage, control or sometimes even insure. Here is a list of some of ASA’s advocacy work on risk allocation. • Persuaded the Texas Supreme Court to limit commercial general liability coverage for contractors and manufacturers where a defective component is incorporated into a project, resulting in no physical damage, but nevertheless having to be replaced due to failure to meet specifications or applicable industry standards. ASA had filed several “friend of the court” briefs in U.S. Metals, Incorporated v. Liberty Mutual, Incorporated. • Introduced white papers on risk allocation issues, including: • Consolidated Insurance Programs: Using ASA Tools to Address Costs and Hidden Risks, which reviews wrap-up basics, addresses things to watch out for, and suggests how to prepare for success within the wrap-up arena. • Mastering Negotiations on Surety Bond Requirements, which provides background and negotiating tips whether they’re providing the surety bond or seeking payment protection under the prime contractor’s payment bond. • Published an updated edition of ASA AntiIndemnity Statutes in the 50 States: 2016, which identifies states that have anti-indemnity laws and indicates which states prohibit indemnity for partial fault or sole fault of the indemnified party. The chart also indicates in which states a party is prohibited from requiring a subcontractor to name it as an additional insured, thereby closing the additional insured loophole.

ADVOCACY REPORT

Human Resources Construction subcontractors know that, in order to be successful, they need a productive workforce. ASA provides input to federal agencies on proposals to regulate employment and educates its members about proposed and new laws and regulations. Here is a list of some of ASA activities on human resource issues. • Worked tirelessly as a part of the Construction Industry Safety Coalition to call for the delay or withdrawal of OSHA’s rule on crystalline silica. This included: • Filing a series of briefs in a lawsuit to block implementation. • Asking Congress to refuse to fund implementation. • Requesting President Trump to direct OSHA to withdraw the rule. • Asking OSHA to delay and reconsider the rule. • Worked with Congress and the Trump Administration to roll back a rule that required federal contractors and subcontractors to disclose and correct serious workforce law violations in order to be eligible for federal contracts and subcontracts. • Worked with Congress and the Trump Administration to roll back an OSHA rule that would have significantly increased an employer’s exposure to recordkeeping errors by clarifying that an employer has a continuing obligation to make and maintain an accurate record of an injury or illness. • Called on OSHA to delay implementation of its electronic reporting rule to give construction employers time to learn the new system. On June 28, OSHA proposed to delay its rule from July 1 to Dec. 1, 2017. • Worked within a coalition of small business groups to successfully have enacted the 21st Century Cures Act, a significant new law that includes a provision that would allow small businesses to provide Health Reimbursement Arrangements to help employees purchase health insurance. • Repeatedly called on the Equal Employment Opportunity Commission to withdraw its proposal to collect pay data through the Employer Information Report (EEO-1),

a longstanding joint information collection of EEOC and the Office of Federal Contract Compliance Programs. The rule eventually was withdrawn. • Called on OSHA to withdraw a series of proposals incorporated in the Agency’s Standards Improvement Project. ASA expressed concern that certain proposed revisions, involving personal protective equipment, hearing loss, excavation, and lockout/tag out would fundamentally alter the scope and requirements of the affected standards and thus are not in keeping with the spirit of the SIP process. • Urged OSHA to ensure that its policy on the use of employee social security numbers is consistent and applied uniformly across all standards. • Provided input to the EEOC on its proposed enforcement guidance, which explained the legal standards applicable to harassment claims under federal employment discrimination laws. • Supported an OSHA proposal to add two quantitative fit-testing protocols to the agency’s Respiratory Protection Standard. • Joined the Construction Industry Suicide Prevention Alliance, an industry-wide effort to explore and provide prevention-based strategies and resources to curb suicide among construction employees. • Educated members about a myriad of new federal regulations governing employeremployee relations, including: • A DOL and Department of Education joint rule to implement the Workforce Innovation and Opportunity Act of 2014, the most significant reform to the public workforce development system in nearly 20 years. • DOL’s so-called “persuader” rule pertaining to reporting requirements under the LaborManagement Reporting and Disclosure Act. • DOL partnerships with states to collaborate on the enforcement of laws and regulations concerning the misclassification of employees as independent contractors. • DOL’s final rule requiring federal contractors and subcontractors to provide paid sick leave to employees who work on or in connection with certain federal contracts. 9

ADVOCACY REPORT

• OSHA requirements regarding employee retaliation and nondiscrimination. OSHA has proposed to rescind the requirements.

• U.S. Citizenship and Immigration Services’ revisions to the Form I-9, Employment Eligibility Verification.

• OSHA’s final rule on walking-working surfaces and personal fall protection for general industry.

• USCIS’s final rule intended to modernize and improve several aspects of certain employment-based nonimmigrant and immigrant visa programs.

• OSHA’s new Recommended Practices for Safety and Health Programs in Construction designed to help industry employers develop programs to keep their workplaces safe. • OSHA’s final rule designed to lower workplace exposure to beryllium. The rule requires additional protections, including personal protective equipment, medical exams, and other medical surveillance and training. • OSHA’s Recommended Practices for AntiRetaliation Programs, a new guidebook that recommends practices for employer anti-retaliation programs covered by the 22 whistleblower laws that OSHA enforces. • A statutorily-required 78 percent increase in OSHA fines. • An Employee Benefits Security Administration final rule that requires plans, plan fiduciaries and insurance providers to comply with additional procedural protections when dealing with disability benefit claimants. • The Employment and Training Administration’s new rule updating equal employment opportunity requirements for registered apprenticeship programs. • An OFCCP rule updating sex discrimination policies for federal and federally-assisted construction for the first time in 40 years. • OFCCP’s expansion of its Mega Construction Project program. • A Pension Benefit Guaranty Corporation reduction of penalties for late payment of premiums, intended to reduce regulatory costs and make it easier for plan sponsors to maintain traditional pension plans. • Updated EEOC enforcement guidance on national origin discrimination to replace its 2002 compliance manual section on that subject. 10

Federal Acquisition As the largest construction owner in the world, the federal government often is looked at as a model for best practices. Thus, ASA constantly works to be sure that the federal government considers the impact of its purchasing practices on construction subcontractors. In addition to the payment, risk allocation and human resource issues addressed above, below is a report on some of ASA activities to improve the way the federal government manages it construction portfolio. • Worked with the ASA/AGC-founded Construction Industry Procurement Coalition to develop consensus legislation to reform the way the federal government purchases and manages construction. The CIPC-supported bill would prohibit federal agencies from using reverse auctions for awarding contracts for federal construction and design services; provide for a six-year federal statute of repose; and more. • Worked with the FAR Council to publish a final rule that 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 rule took effect on Nov. 1, 2016. • Called on the Small Business Administration to expeditiously implement a proposed rule to make it easier for the surety industry to help small businesses obtain surety bonds by raising the percentage of the guarantee under its Preferred Surety Bond Guarantee Program and increasing the threshold for streamlined reporting. The rule took effect on Sept. 20, 2017. • Provided input to the FAR Council on a proposed FAR amendment to raise the dollar threshold requirement for the audit of prime contract settlement proposals and subcontract settlements from $100,000 to $750,000.

ADVOCACY REPORT

• Educated members about numerous new regulations that impact them when they do business with the federal government. This included: • A FAR rule that revises the equal opportunity clause to prohibit contractors from discharging, or in any manner discriminating against any employee or applicant for employment because the employee or applicant inquired about, discussed or disclosed the compensation of the employee or applicant or another employee or applicant. • A FAR rule that prohibits the federal government from entering into a contract with any corporation having a delinquent federal tax liability or a felony conviction under any federal law, unless the agency has considered suspension or debarment of the corporation and has made a determination that this further action is not necessary to protect the interests of the government. • A FAR rule that implemented the U.S. Department of Labor’s Veterans’ Employment and Training Services that replaced the VETS-100 and VETS-100A, federal Contractor Veterans’ Employment Report forms with the VETS-4212, Federal Contractor Veterans’ Employment Report form. • A FAR rule that revised the allowable cost limit relative to the compensation of contractor and subcontractor employees. • A FAR rule that implemented regulatory changes made by the SBA that provide for authority to award sole source contracts to economically disadvantaged women-owned small business concerns and to womenowned small business concerns under the Women-Owned Small Business Program. • A FAR rule that implemented a government wide policy on the consolidation and bundling of contracts, as required the Small Business Jobs Act of 2010. • A FAR rule redesignating the terminology for unique identification of entities receiving federal awards. • A FAR rule that prohibits a federal agency from contracting with an entity that requires employees or subcontractors to sign an

internal confidentiality agreement that restricts such employees or subcontractors from lawfully reporting waste, fraud or abuse to the federal government. • A FAR rule to raise the simplified acquisition threshold for special emergency procurement authority from $300,000 to $750,000. • A FAR rule to disallow costs incurred by a contractor in connection with a Congressional investigation or inquiry. • A FAR rule to implement clarifications made by the Small Business Administration regarding the 8(a) program. • A FAR rule to establish uniform use of line items in federal procurement. • An SBA mentor-protégé program rule, which allows businesses both to assist and learn from others to enhance their capabilities to compete for federal contracts. • An SBA rule that gives federal prime contractors credit toward their subcontracting plan goals for awards made to small businesses at any tier under federal contracts. The new rule also gives prime contractors also have more oversight responsibilities for their subcontractors’ small business subcontracting plan compliance.

Economic and Tax Issues In addition to subcontractor-specific issues, ASA works on tax and general economic issues that impact the construction industry. ASA offers policymakers input on how their proposals impact the ability for construction subcontractors to operate successful businesses. ASA activities included the following: • Repeatedly provided input to the Senate Finance Committee, the House Ways and Means Committee, and the Trump Administration about the need for true tax reform in addition to reduced tax rates. • Collaborated with other associations in calling on Congress to enact legislation to allow small businesses with fewer than 50 employees to offer employer payment plans and HRAs to employees for the payment of premiums or qualified medical expenses. 11

ADVOCACY REPORT

• Educated members about their rights and risks with the emerging use of drones on and around construction sites, including a Federal Aviation Administration a new operational rule for the commercial use of drones. • Educated members about new rules governing commercial drivers’ licenses, including a final rule establishing comprehensive national minimum training standards for entry-level commercial truck operators seeking to obtain a commercial driver’s license or certain endorsements, and another rule requiring passengers in commercial trucks to use seat belts. • Joined nearly 400 other associations in calling on Congress to quickly adopt legislation to reform how the Executive Branch develops, reviews and implements new regulations. • Submitted comments to the Trump Administration listing regulations that should be subject to review, revision or withdrawal. • Joined more than 50 other associations in calling on President Trump to host a White House Conference on Small Business.

Contract Documents ASA members report that one of their most serious challenges is egregious terms in the proprietary documents they are presented by prospective customers. ASA is dedicated to providing its members with the tools to negotiate better subcontracts. • Updated ASA’s model contracts to incorporate improvements made in recent revisions to the ConsensusDocs standard subcontract documents. The documents in the ASA Subcontract Documents Suite include: • ASA Subcontractor Bid Proposal • ASA Wrap-up Insurance Bid Conditions • ASA Subcontract Addendum • ASA Wrap-up Insurance Subcontract Conditions • ASA Short-Form Subcontract Addendum

• Continued to play a leadership role in ConsensusDocs, a coalition of more than 40 construction associations, committed to incorporating best practices and fair risk allocation in contract documents to reduce costly contingencies and adversarial negotiations. • Published a series of white papers that help subcontractors better understand subcontract issues and offer tips that can be incorporated into their business practices. New white papers include: • Glossary of Common Construction Contract Terms, an alphabetical list of terms and acronyms—from AAA to xcu—frequently used in construction contracts and subcontracts and discussions about them, as well as the definition of such terms. • The Prime Contractor Factor, which sets forth a process to help an individual subcontractor develop and implement its own program to evaluate and select contracting partners that will treat it reasonably, fairly and honestly in a subcontractor relationship. • Mastering Subcontract Performance and Scope Requirements, which describes that the danger of bidding a project with vague requirements and ambiguous instructions can only lead to conflicts—or, even worse, costly contract disputes. • Subcontractor Bidding and the Law discusses the bidding process, contract award, bid errors and the legal concept of promissory estoppel. • Involved ASA members in the Association’s program to engage in the development of equitable model subcontract documents and to educate subcontractors and other members of the construction about equitable risk allocation during the meetings of the Task Force on Contract Documents and the Attorneys’ Council.

ADVOCACY REPORT

• Solicited nominations for and prepared and published articles concerning ASA’s Subcontractors Are Prey (SAP) Awards, tonguein-cheek awards recognizing achievements in the use of predatory contract language in the construction industry. • Continued to publish in ASAToday a series of weekly articles on contract changes and claims providing tips for the management of changes and changed conditions and how to realize full adjustment to the contract price or contract time. • Continued to publish a series of contract and management education articles in ASAToday.

General Advocacy ASA represents subcontractors in a variety of forums during which it seeks to present the unique perspective of its members before both public policymakers and industry leaders. In addition, ASA educates its members about emerging trends and how they can get involved in the advocacy process. Below is a list of just some of these activities. • Met with the officers of the Associated General Contractors of America to discuss top industry and public policy issues, including workforce development, ConsensusDocs, change order reform, OSHA’s rule on crystalline silica, and the evolving use of technology in construction. • Continued to monitor federal and state legislative and regulatory activities that impact subcontractors. Alerted members and chapters to trends and opportunities for action. • Involved ASA members in the Association’s public policy activities through meetings of the Task Force on Government Advocacy and the Task Force on the Subcontractors Legal Defense Fund. • Hosted a “Spirits and Spirits” tour as a fundraiser for the ASA-Political Action Committee, in conjunction with SUBExcel 2017.

• Helped ASA members learn to recognize and validate different points of view during a workshop titled “Desperately Seeking Objectivity” during SUBExcel 2017. • Continued to represent construction subcontractors on the board of directors of the Small Business Legislative Council, including serving as chair of an SBLC task force on federal regulations. • Conducted a voter registration campaign targeting ASA members and their employees. • Published “Questions for Candidates for State Office 2016” and “Questions for Candidates for Federal Office 2016,” designed to give ASA members tools to educate candidates about subcontractor issues. • Continued to represent construction subcontractors on the board of directors of the American Institute of Constructors Constructor Certification Commission. • Continued to represent ASA and subcontractor interests on the National Construction Dispute Resolution Board of the American Arbitration Association. • Continued to represent ASA on the advisory council of the American Jobs for American Heroes, a nonprofit entity seeking to place veterans in private sector jobs. • Made a presentation to the Board of Directors of the Association of Wall and Ceiling Industries International on the outlook for the 2016 election and how the results would impact construction subcontractors and suppliers. • Provided assistance to the National Association of Surety Bond Producers is assessing how the construction industry views the surety industry product and its value. • Conducted a series of free webinar briefs on ASA’s government advocacy work on behalf of its members.

BY THE NUMBERS â&#x20AC;&#x201D; EDUCATION REPORT

By the Numbers

BY THE NUMBERS â&#x20AC;&#x201D; MEMBERSHIP REPORT

INDIVIDUAL MEMBERS

PROSPECTIVE MEMBERS

4,721

10,674

as of June 2017

Up 16.5% since Nov 2015

as of June 2017

Up 9.9% since Nov 2015

11,000

10,000

9,000

8,000

7,000

6,000

5,000

4,000

BY THE NUMBERS — EDUCATION REPORT

SUBEXCEL REGISTRATION

2017

145

Up 19.9% since 2014

2015

2016

132

2014

121

WEBINAR REGISTRANTS August 2014 – June 2017 June 2017 Killer Contract Clauses

May 2017 Technology and Transparency

7 29

May 2017 Prompt Payment/When to Suspend Work April 2017 Popular Benefits

REGISTRANTS FOR WEBINARS (Aug 2014–Jun 2017)

April 2017 Incentive Compensation

March 2017 OSHA Silica

103 19

February 2017 Cost Coding January 2017 OSHA Transgender Bathroom Requirements

26 54

December 2016 Election Update 37

November 2016 Change Orders October 2016 Cash Management

The Top Five

OSHA Silica Rule— Applications for Subcontractors

DOL Overtime Rule

U.S. Election Outcome & Potential Impact

OSHA Illness/Injury Data Collection Requirements

The Subcontractor’s Guide to a Fair Lien Waiver Process

# #

October 2016 OSHA Illness/Injury Data Collection Requirements

September 2016 Subcontract Doc Suite

16 56

August 2016 DOL Overtime Rule 14

August 2016 Sleeper Clauses

June 2016 Driving Project Success: Keys to Improving Productivity 7

May 2016 Online Identity May 2016 Wage and Hour Regulations

27 34

April 2016 Payment Dance February 2016 Negotiating Retainage

26 13

January 2016 Pay Trends

December 2015 Employment Law Changes November 2015 Adopting Technology

36 14

October 2015 Cash Management

September 2015 Fair Lien Waiver Process 15

June 2015 Terminating Employees

May 2015 Cash Flow April 2015 Negotiating Strategies

February 2015 Mechanic's Liens

21 28

January 2015 Negotiating Retainage December 2014 Election Update

7 25

November 2014 Incentive Compensation 4

October 2014 Value of Technology and Data Mgmt for Construction September 2014 Bid More Competitively

August 2014 Choosing the Right Customers

34 0

100

120

BY THE NUMBERS â&#x20AC;&#x201D; COMMUNICATIONS REPORT

MONTHLY WEBSITE VISITS June 2016

14,248

Avg. 12,672/month since Jun 2015

as of June 2017

UNIQUE WEBSITE VISITS

2,201

Avg. 2,324/month since Jun 2015

as of June 2017

BY THE NUMBERS â&#x20AC;&#x201D; COMMUNICATIONS REPORT

TWITTER FOLLOWERS

2,679 Up 51%

since June 2015

as of June 2017

TWEET IMPRESSIONS

June 2015

June 2016

June 2017

FACEBOOK FOLLOWERS

849 Up 50% since June 2015

as of June 2017

LINKEDin FOLLOWERS

5,549 Up 22% since Dec 2015

as of June 2017

BY THE NUMBERS — COMMUNICATIONS REPORT

RECIPIENTS OF ASA PUBLICATIONS June 2015 – June 2017 14,500

13,750

13,500

12,750

The Contractor’s Compass

Down 2.8%

12,500

4,750

President’s Letter

Up 9.3% 4,500

4,250

ASAToday

Up 10.3% 4,000

JUN ‘17

JUN ‘16

DEC ‘15

JUN ‘15

3,750

Financial Report

American Subcontractors

Association, Inc. and Affiliates Consolidated Financial Statements and

Independent Auditor's Report Years Ended June 30, 2016 and 2015

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