STA February 2015 Newsletter by Subcontractors Trade Association

SUBCONTRACTORS NEWS February 2015

Bringing New York’s Union Subcontractors Together to Build a Stronger Construction Industry IN THIS ISSUE

2 President’s Message By Robert J. Ansbro

3 STA to Hold 2015

Construction Awards Dinner on May 9 By Samantha Sweeney

7 Scaffold Law Reform: A New Day? By Henry Kita

9 STA Member Spotlight: Firecom, Inc. By Samantha Sweeney

13 When are “Liquidated Damages” Enforceable By Henry L. Goldberg

February 2015

STA 46th Annual Awards Dinner Honorees Announced

19 R&D Tax Credits for

the Construction Industry By Daniel Castellano

If you would like to receive a hard copy of Subcontractors News in the mail each month, please email your full mailing address to ssweeney@stanyc.com with the subject line “Subcontractors News Hard Copy Request”

STA Subcontractors News

PRESIDENTâ&#x20AC;&#x2122;S MESSAGE In this issue, the Subcontractors Trade Association is pleased to announce the honorees of the upcoming 46th Annual Construction Awards Dinner to be held on Saturday, May 9, 2015. The STA is proud to be honoring Milo E. Riverso of STV Group, David Worsley of Silverstein Properties, Scott DeMatteis of DeMatteis Construction Corporation, and Weir Welding. The Annual Construction Awards Dinner is the main fundraiser for our organization and I hope you will make every effort to attend. We will be producing a journal again this year in which members have an opportunity to sponsor the event and advertise their company. The annual Lobby Day of the Lawsuit Reform Alliance of New York was held earlier this month in Albany with over 100 professionals in attendance to advocate for their industries to reform the outdated Scaffold Law. We are excited to begin a new period of potential legislative victories that have been brought forth by a change in leadership in the New York State Assembly. We all know that this law is antiquated and in much need of reform. I encourage our members to reach out to their state legislators and call them to action in our favor. I hope to see you all at the Awards dinner in May and wish all of our members a successful and productive spring season. Sincerely, Robert J. Ansbro

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February 2015

STA to Hold 2015 Construction Awards Dinner on May 9 BY SAMANTHA SWEENEY, SUBCONTRACTORS TRADE ASSOCIATION

David Worsley Silverstein Properties

The Subcontractors Trade Association (STA) is proud to announce that it will be holding its 46th Annual Construction Awards Dinner on Saturday, May 9, 2015 at Glen Island Harbour Club in New Rochelle, New York. The STA will be honoring four distinguished leaders and companies for their accomplishments and contributions to the New York City construction industry.

Silver Shovel Award

The awards will be distributed that Saturday night for excellence and leadership in construction with the Ronald Berger Subcontractor of the Year Award, the Silver Shovel Award, the Michael Mazzucca Lifetime Achievement Award and the Builder of the Year Award. Scott DeMattels DeMattels Construction Corporation Builder of the Year Award

Milo E. Riverso STV Group, Inc Michael Mazzucca Lifetime Achievement Award

Weir Welding

Ronald Berger Subcontractor of the Year Award

This year the Silver Shovel will be awarded to Silverstein Properties, a leading New York real estate development and management firm with over 50 years of serving the city and state. The company was founded by President and Chairman Larry Silverstein. Since its inception in 1957, the company has developed, owned and managed over 35 million square feet of corporate and residential properties in the United States. Their notable projects include The Americas Tower at 1177 Avenue of the Americas, The Four Seasons Downtown New York Hotel, World Trade Center Towers 2, 3 and 4 as well as One World Trade Center. Silverstein Properties has been recognized as one of “The Best Places to Work in New York City” for the past six years by Crain’s New York Business. The Silver Shovel Award will be accepted the night of the dinner by David Worsley, Senior Vice President and Director of Design and Construction for Silverstein Properties. Mr. Worsley has been with Silverstein for 11 years and oversees all continued on page 5

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February 2015

continued from page 3 construction projects for the company, which includes their rebuilding of the World Trade Center. The Michael Mazzucca Lifetime Achievement Award will be given to Milo E. Riverso of STV Group, Inc. Mr. Riverso is currently the Chief Executive Officer and President of STV, one of the nation’s largest planning, design and construction management firms. Mr. Riverso joined STV in 2005 as Senior Vice President and became an Executive Vice President one year later. Under his leadership, the company’s construction management practice tripled in size and expanded its range of services, which resulted in larger and more complex projects being awarded to the firm. In September of 2011, Mr. Riverso was named Chief Executive Officer where he currently oversees STV’s daily operations and overall management of their corporate, technical, financial and administrative activities. Prior to joining STV, he served as the President and Chief Executive Officer of the New York City School Construction Authority (NYC SCA) from 1997 to 2001 and supervised the construction process of 1,199 New York City schools. STV is a prominent leader in providing construction services for over 100 years in fields such as transportation, infrastructure, construction management and engineering. The company was ranked 42nd in Engineering NewsRecord’s Top 500 Design Firm Survey and is 100% employee owned. The 2015 Builder of the Year will be presented to Scott DeMatteis and DeMatteis Construction Corporation. DeMatteis Construction is one of the oldest familyowned construction companies in New York and one of the nation’s largest of its kind. They operate as a full-service enterprise and have experience and capable resources in general contracting, construction management, design-build contracts, and interior construction and renovation. DeMatteis has worked on contracts with many prominent government agencies including the New York City School Construction Authority (NYC SCA), the New York City Department of Sanitation, and the U.S. Department

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of State, among others. As developers, DeMatteis was recently selected by the New York City Educational Construction Fund to develop and construct a “combined occupancy” project under a program reintroduced for the first time in over a decade. This project consists of a 128 luxury co-operative known as Azure and M.S. 114, a 535 seat middle school on the upper east side of Manhattan. Mr. DeMatteis is the third generation to run the company and currently serves as Chairman and Vice President. The DeMatteis Organization was ranked as a Top 25 Real Estate Developer in the United States by Corporate Design and Reality Magazine. The 2015 Ronald Berger Subcontractor of the Year will be awarded to Weir Welding and will be posthumously honoring Charles J. Weir, who served the company as president and co-owner for 17 years until his passing on January 9th, 2015. Weir Welding, who is celebrating their 50th anniversary, is a leader in the production of high-quality structural steel and has steel plants in New Jersey and Pennsylvania. A majority of their work is with general contractors in the public sector and contracting projects with the New York City School Construction Authority (NYC SCA) including the Bronx High School for Law, the Health Science High School in Queens and the Twenty First Academy for Community Leadership in Manhattan. They have also worked on large-scale private and residential jobs including Battery Park City sites 23 and 24, 330 Hudson Street in Manhattan and the Museum of Moving Image in Queens. The STA is proud to recognize Mr. Weir for his dedication to the New York City construction industry for over 40 years and is honored to help continue his legacy by presenting this award on the night of the event to his children Tom and Alison Weir. For more information on tickets, journal advertisements or sponsorship, please contact Samantha Sweeney at the STA office at 212-398-6220 or via email to ssweeney@stanyc.com.

STA Subcontractors News

4 6 T H

A N N U A L

CONSTRUCTION AWARDS DINNER SATURDAY, MAY 9, 2015 7:00PM GLEN ISLAND HARBOUR CLUB Glen Island Park, New Rochelle, New York

CELEBRATE WITH US and Honor the Accomplishments of Our 2015 Industry Leaders SILVER SHOVEL AWARD DAVID WORSLEY Silverstein Properties

BUILDER OF THE YEAR SCOTT DEMATTEIS DeMatteis Construction Corp

RESERVE YOUR SEATS Make your table reservations early. Seats are $500 per person. A table of 12 is $6,000. Business attire.

SPECIAL “THANK YOU” INCENTIVE For every $5,000 or more of solicited journal advertising or dinner reservations, you will receive a free dinner ticket.

SUPPORT OUR AWARDS JOURNAL The 46th Annual Construction Awards Dinner Journal will be exclusively offered electronically. Ads should be emailed to Samantha at ssweeney@stanyc.com. PLATINUM PAGE: $1,250 GOLD PAGE: $800 FULL COLOR: $600 Journal advertisement dimensions are 10” x 7.5”

FEATURED POSITION $2,750 WEIR WELDING

RONALD BERGER SUBCONTRACTOR OF THE YEAR WEIR WELDING

MICHAEL MAZZUCCA LIFETIME ACHIEVEMENT AWARD MILO E. RIVERSO STV Group, Inc. EVENT CONTACT Call Samantha Sweeney at 212.398.6220 or email her at ssweeney@stanyc.com.

Featured ads will be placed in preferred positions and run more frequently in the electronic journal. Feature advertisers will also have their logos positioned within the ad journal in addition to their advertisement.

JOURNAL DEADLINE IS APRIL 22, 2015 Ads will be displayed on the evening of the dinner. The journal will also be available on the STA website following the event.

CLICK HERE FOR FULL INVITATION

February 2015

Scaffold Law Reform: A New Day? BY HANK KITA, STA EXECUTIVE DIRECTOR

With the recent resignation of Sheldon Sliver as Speaker of the New York State Assembly, there is renewed hope that the long-awaited reform of the New York State Scaffold Law may be in the offing. Employed by a firm of trial lawyers, Silver had for at least the past twenty years been the single most serious obstacle to changing any part of this law. The new Assembly Speaker, Carl Heastie from the Bronx, has not yet indicated what his official stance might be on this archaic and fundamentally unfair law, but there is anticipation that he will be open to reform of this legislation. I had a chance to attend the third annual Lobby Day of the Lawsuit Reform Alliance of New York, held on February 10 in Albany. I was part of a contingent of over 100 advocates from various industries and professions which lobbied the Assembly, Senate and Administration to reform the unfair Scaffold Law. Unique in the United States, the Scaffold Law holds contractors and owners absolutely liable in lawsuits for gravity-related injuries, no matter what the circumstances. Those proponents of Scaffold Law Reform in attendance asked the various legislators and their staffs to change the law to a “comparative negligence” standard, where the conduct of the employee is considered when apportioning liability, just as it is the case in every other state. The seven legislators and their staffs I visited on Lobby Day seemed open to considering some reform to the Scaffold Law. During my previous two lobby day visits, there was either indifference or outright opposition to Scaffold Law Reform by the legislators. The uncertainty of the position of new Assembly Speaker Heastie on this legislation gives

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one pause as to whether there is any true chance for reform for this year. The person who is probably the most important in the Scaffold Law reform equation is Governor Cuomo. Without the Governor, there will be no reform of this law. Governor Cuomo has yet to weigh in this year on his position on Scaffold Law Reform. Last year he withheld his full support of the reform efforts, essentially saying that the Trial Lawyer Lobby had succeeded in squelching any chance of changing the law for the 2014 legislative session. It will take a signal of willingness from Speaker Heastie and a major push from Governor Cuomo to get the ball rolling if there is any chance for reform. It is anticipated that the State Senate, led by Senate President Dean Skelos, would be amenable to changing this law if the Governor and Speaker appear to move in that direction. The time is ripe for reform of the Scaffold Law. It will only be through pressure by the Lawsuit Reform Alliance and other industry groups, such as the STA, that there will be any chance of reform. I urge all STA members to weigh in by writing or calling your state legislators and the Governor’s Office to let them know where you stand on this legislation. It is only with raised voices that we can expect to finally achieve some reform of this archaic and costly law! Look for more information on this matter in upcoming issues of the Subcontractor News as well as advisories from my office requesting action from the members of the STA.

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February 2015

STA Member Spotlight: Firecom, Inc. BY SAMANTHA SWEENEY, SUBCONTRACTORS TRADE ASSOCIATION

Longtime STA member Firecom, Inc. is one of the leading life-safety systems, fire alarm and voice communication installation contractors in the New York City metropolitan area, specializing in high-rise buildings. They developed one of the first integrated life safety systems in the U.S —namely the Life-Safety Net 2000 (LSN 2000). The LSN 2000 is a fully integrated, digital system for fire protection, communications, HVAC control and security that can also act as a platform for mass communication and is Ethernet and BACnet compatible. Since they began in the late 1960s, Firecom has grown steadily and consists of divisions of once-competing acquired companies, including Casey Systems, a topranked distributor of Edward Systems Technologies and one of the leading manufacturers of fire alarms. The company employs over 200 professionals, with 110 of those employees being field technicians. They also have teams who oversee projects in Chicago, Florida and California, including their work at the Staples Center in Los Angeles. Firecom is currently headed by Howard Kogen, Chief Executive Officer and Head of Sales and Marketing, who has been with the company for over 30 years. They are a part of Local Union 3, H Division, in New York. Firecom’s slate of projects is impressive. They are the sole contractor of the life-safety system installation of One World Trade Center, the Transportation Hub, including the entire retail section of over 150 stores, as well as World Trade Center Towers 2, 3 and 4. In the private sector, the company has worked on over 30 hotels including The St. Regis, The Penninsula, and The Plaza Hotel. Other notable projects include the AOL Time Warner Center at Columbus Circle, United Nations Email Feedback to the STA Office

Building #2, 230 Park Avenue, 150 East 58th Street and The Seagrams Building. Firecom works with some of the most prominent developers and construction management firms in New York such as Brookfield Properties, Silverstein Construction, Rudin Management Company and Reznick. They also work with premier general contractors like Tishman, Turner, Lend Lease, and Plaza Construction, among many others. The company has been an STA member for over 20 years and Guy Vande Vaarst, who started at Firecom in the fall of 2014, has been a member of the STA Board of Directors for over 15 years. Both Kogen and Vande Vaarst noted the STA as a learning tool and invaluable educational resource. “Interaction with STA membership has given us insight with regard to what’s happening in the industry,” said Vande Vaarst. “We’re able to have discussions with other members, particularly in the electrical field, to get a feel as to what’s happening in the industry, and the different trends and new technology that may be out there.” They also noted the STA’s endless fight for subcontractor rights. “The STA has certainly taken on a more active role in legislation and with the various government agencies,” said Kogen. “They’ve always been a leader in fighting for the rights of the subcontractors within New York, working with the School Construction Authority, the Department of Buildings, the Fire Department, and many others. They influence the way subcontractors are treated and it has helped our industry immensely.” For more information on Firecom, please visit their website at www.firecominc.com.

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February 2015

When Are “Liquidated Damages” Enforceable BY HENRY L. GOLDBERG, MANAGING PARTNER, GOLDBERG & CONNOLLY & STA LEGAL COUNSEL

It is common for parties to insert provisions in construction contracts that govern the issue of damages. However, if courts determine that a provision is a “penalty,” rather than a fair calculation of possible downstream damages, then such a provision will not be enforced in New York. In a recent decision, a New York court was called upon to decide whether a provision in a rider to an American Institute of Architects (AIA) agreement constituted an estimate of actual damages that might be incurred or was an unenforceable “penalty.” Underlying Facts A general contractor entered into an agreement to perform roofing and façade construction for a cooperative corporation (the “Owner”). A rider to the AIA contract between the parties included a provision stating: Project must be completed within four calendar months (120 days) of the start date. If the work is not fully completed within that period, then a penalty equaling Two Hundred Fifty Dollars ($250) per calendar day will be imposed upon the contractor by the owner until final completion is attained. While the per diem liquidated damages of $250/day is hardly shocking as compared to many others much higher that we have seen, particularly in heavy/highway construction, the measure of “reasonableness” must be assessed in each particular circumstance. The damage to the public and the government, for

example, for a major bridge or tunnel project not being opened on time certainly could far exceed delay damages caused to a residential co-op project. The construction company in this case commenced an action against the Owner for non-payment and the Owner subsequently filed a counterclaim seeking $45,500 in damages per the aforementioned provision of the rider. The Owner in this case asserted that the construction company missed the contract completion date by 302 days. The plaintiff contractor asserted that the provision in the rider was a penalty and was unenforceable on public policy grounds. Plaintiff further argued that the Owner failed to demonstrate such damages were due to plaintiff’s delay of the project and that the amount of compensation sought by the Owner was grossly disproportionate to whatever actual damages the Owner may have sustained. The court addressed the distinction between unenforceable penalties and fully enforceable liquidated damage provisions. It held that “to constitute a penalty, the stipulated sum must be disproportionate to the injury or the damages flowing from the breach must be readily ascertainable.” Penalties, as the court affirmed, are not enforceable because they are contrary to public policy in a breach of contract action and are punitive in nature. In this instance, the court observed that normally continued on page 15

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February 2015

continued from page 13 a liquidated damages provision in a contract is enforceable as a matter of law and is not necessarily an unenforceable penalty, provided: (1) liquidated damages provision provides for a reasonable measure of anticipated probable harm, and (2) that damages flowing from an alleged breach were, at the time the parties entered into the agreement, difficult to calculate or ascertain. Applying this two-part standard to the facts presented, the court held that the attempted liquidated damages provision in the rider was not an enforceable contract clause because the per diem calculation was grossly disproportionate to actual losses. It also noted, as an aside, that the provision expressly provided the term, “penalty.” While this is not determinative in the view of the well accepted two-part standard, it does appear to reflect the intent of the parties. In any event, the court found that the provision was not enforceable. Nevertheless, the Owner could still recover actual damages for delay if it could prove the actual damages flowing from said delays. The court ruled, however, that in this case the Owner failed to offer any evidence of actual damages in its counterclaim, simply relying on the liquidated damages provision in the agreement. G&C Commentary Generally, “liquidated damages” provisions are enforceable if they reflect a reasonable measure of anticipated damages and the calculation of damages are difficult to otherwise calculate. The provision need not use the word “penalty” to be unenforceable. If the damages provided in the liquidated damages provision are not a reasonable estimate or the calculation of damages would not be particularly burdensome, courts will not enforce such provision. The time to address the fairness of a liquidated damages contract provision, of course, is during precontract negotiations. It is not difficult to detect a clearly unreasonable per diem charge.

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Frankly, in our experience, it is surprising how infrequently liquidated damage provisions are challenged either because they are patently inaccurate estimates or because actual damages could otherwise be readily calculated. This case demonstrates that, where appropriate, such a challenge can be successfully made. As this case also demonstrates, the unenforceability of a liquidated damages provision can also be raised in subsequent litigation as a defense to the provision’s attempted enforcement. This will not fully protect you if you are otherwise liable for a breach of contract and have caused actual damages. Nevertheless, it might protect you from having to accept a wholly unfair, formulaic calculation of damages, amounting to a penalty, that poor, or absent, pre-contract negotiations failed to avoid. As always, your first line of risk management defense is at the contract formation stage. Henry L. Goldberg may be contacted by email, hlgoldberg@goldbergconnolly.com or by telephone, 516-764-2800. Jeffrey I. Scott, an associate with Goldberg & Connolly, assisted in the preparation of this article. ©Goldberg & Connolly 2015 This article has been prepared for informational purposes only. It is not a substitute for legal advice addressed to particular circumstances. You should not take or refrain from taking any legal action based upon the information contained herein without first seeking professional, individualized counsel based upon your own circumstances. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

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February 2015

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February 2015

R & D Tax Credits for the Construction Industry BY DANIEL A. CASTELLANO, CPA, MANAGING PARTNER, CASTELLANO, KORENBERG & CO., CPA’S, P.C. Many small to midsize construction companies don’t realize the Federal Research & Development tax credit (“R&D”) is available to them. This credit can assist in growth by providing capital through tax savings. The development of unique functional and energyefficient designs allows contractors to take advantage of these credits. This incentive had been extended recently and many feel that this credit will become permanent sometime in the near future. Qualified R&D expenses are generally for the following: 1. New Product Development 2. Incremental Product Development 3. New Process Development 4. Incremental Process Development The credit is comprised of three types of qualified research expenditures: 1. Internal wages paid to employees for qualified services 2. Contracts research expenses 3. Supplies used and consumed in the R&D process To qualify for the credit, the taxpayer must pass four tests: 1. The activity must rely on a hard science such as engineering, biological or physical science. 2. The activity must relate to the development of new or improved functionality, performance or quality features of a structure or component of a structure.

3. Technological uncertainty must exist at the outset of the activity. 4. A process of experimentation must be conducted to eliminate the technological uncertainty. Architecture and engineering firms frequently invest substantial time, money, and resources in advancing and improving building designs and processes. Construction contractors have their architectural and engineering employees conduct activities which are often overlooked as R&D activities. When these employees develop and design new innovative construction techniques, their activities most likely qualify for the R&D tax credit. Qualifying initiatives and activities generally fall within 5 categories: 1. Architectural 2. Civil Engineering 3. Environmental Engineering 4. Structural Engineering 5. Construction Services The key to obtaining the R&D credit is distinguishing between qualified and non-qualified research activity and expenses. Calculating the R&D tax credit The calculation of the research credit has been made easier since 2007. Taxpayers now can elect the Alternative Simplified Credit which equals approximately 9% of the qualified research continued on page 21

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February 2015

continued from page 19 expenditures for the current taxable year that exceeds 50% of the average qualified research expenditures for the three taxable years preceding the current tax year.

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Daniel A. Castellano, CPA is the Managing Partner at Castellano, Korenberg & Company. Mr. Castellano specializes in profit planning and tax planning for closely-held construction companies. He also possesses practical experience in surety and banking credit enhancement, mergers and acquisitions and financial negotiations. Mr. Castellano has authored numerous articles and is a frequent lecturer of construction accounting and taxation to bonding companies and banks.

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ARTICLES INCLUDED HEREIN DO NOT CONSTITUTE AN OPINION AND ARE NOT INTENDED OR WRITTEN TO BE USED, AND THEY CAN NOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER. This publication is designed to present matters of general interest relating to accounting, taxation and business management. Articles were written by the tax department of Castellano, Korenberg & Co., CPA’s, P.C. Please consult your CK & CO adviser before taking any specific actions. @ Castellano, Korenberg & Co., CPA’s, P.C.

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February 2015 Subcontractors Trade Association 1430 Broadway Suite 1600 New York, NY 10018 T: 212.398.6220 F: 212.398.6224 e-mail: info@stanyc.com website: www.stanyc.com

Hank Kita Executive Director Subcontractors Trade Association Henry Goldberg Legal Counsel Goldberg & Connolly Active Past Presidents Greg S. Fricke, Jr. Leonard Powers, Inc.

Officers Robert J. Ansbro President The New York Roofing Company Robert Weiss 1st Vice President A.J. McNulty & Co. Inc.

John A. Finamore Treasurer Jordan Panel Systems Joseph Leo Secretary Atlantic Contracting & Specialties, LLC

Board of Directors Joseph Azara Jr. C.D.E. Air Conditioning Christine Boccia JD Traditional Industries Dan J. DeVita Penava Mechanical Corp.

Jerry Liss A. Liss & Co. Inc.

John Dierks Dierks Heating Company, Inc

Alan Nathanson (Honorary) Forsythe Plumbing & Heating Corp.

Andrew Drazic ATJ Electrical

Lawrence Roman WDF, Inc.

Peter Cafiero 2nd Vice President Island Painting

Scott Rives Woodworks Construction Co, Inc.

Brent Fleisher Environet Systems

Arthur Rubinstein Skyline Steel Corp.

James Flynn Independent Temperature Control

Robert Samela A.C. Associates

Patrick Gallagher BP Mechanical Corp.

Gary Segal (Honorary) Five Star Electric Corp.

Stephen Gianotti Arcadia Electrical Co., Inc.

Lawrence Weiss A.J. McNulty & Co., Inc.

Craig Gilston Gilston Electrical Contracting Gloria Kemper Recon Construction Corp. Randy Rifelli United Iron, Inc. Guy VandeVaarst Firecom Inc. John Villafane Eldor Electric Upcoming Events Board of Directors Meeting Wednesday, March 10 5:30 PM General Membership Meeting Meet the Agencies Wednesday, March 25 8:00 AM – 10:30 AM Steelcase WorkLife Center 4 Columbus Circle, New York, NY 10019

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For more than 30 years, Grassi & Co.’s Construction Practice has been assisting contractors, engineers, suppliers and distributors minimize their tax liability, uncover potential savings, and build a successful future. Manhattan 212-661-6166

Long Island

516-256-3500