Subcontractors news June 2015
1
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 Officers and
Directors Elected at Annual Meeting
4 Grassi & Co.’s Annual Construction Market Outlook
June 2015
STA Officers and Directors Elected at Annual Meeting
11 STA Holds 2015-2016 Annual Membership Meeting By Samantha Sweeney
15 Legislature Considering “Additional Insured” and Indemnity Limitations for Construction Contracts By Henry L. Goldberg
18 Contractual
Application of MWBE Goals Could Cost Contractors Millions By Walter G. Breakell
22 New Members! &
Update Your Company Information!
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”
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STA STA Subcontractors Subcontractors News News
President’s Message June 2015
The 2015-2016 STA Board of Directors and Officers were elected at the STA’s Annual General Membership Meeting on June 17. Congratulations to all of the newly elected Board Members and Officers and best wishes for a productive year ahead. During this meeting, the STA held a procurement seminar featuring several prominent industry professionals and officials from three of New York’s largest construction management firms, Turner Construction, Tishman Construction and Lend Lease. Over 75 guests attended the seminar and the discussion included pre-qualification for bidding subcontractors, D/M/WBE certification, centralized purchasing, and overviews of current and future projects. All three presentations are accessible for downloading on our website’s homepage under the News and Events Section if you would like to learn more. I would like to welcome our newest member, Sales Direction, Division of American Specialties. Don’t forget to save the date for the STA’s Annual Golf Outing coming up on Monday, September 28 at the Village Club of Lake Success. Keep an eye out for the invitation flyer with registration and sponsorship information for this event. Thank you for your continued support of the STA, I look forward to another year of representing our association as your president.
Sincerely, Robert J. Ansbro
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June 2015
STA Officers and Directors Elected at Annual Meeting
The STA has elected its slate of Officers and Directors
The Officers were elected for a period of one (1) year
for the 2015-2016 terms. The Officers and Directors
starting July1, 2015 to June 30, 2016 and the Directors
were elected at the STA’s Annual Meeting on June 17
for a period of three (3 years) from July 1, 2015 to
at the Center for Automotive Education and Training
June 30, 2018.
in Whitestone, New York.
OFFICERS (July 1, 2015 - June 30, 2016)
Robert J. Ansbro
Robert Weiss
Peter Cafiero
John A. Finamore
Joseph Leo
(New York Roofing Company) President
(A.J. McNulty & Co., Inc.) 1st Vice President
(Island Painting) 2nd Vice President
(Jordan Panel Systems) Treasurer
(Atlantic Contracting & Specialties, LLC) Secretary
BOARD OF DIRECTORS (July 1, 2015 - June 30, 2018) Christine Donaldson-Boccia | J.D. Traditional Industries Dan DeVita | Penava Mechanical Corp. James Flynn | Independent Temperature Control Maureen O’Connor | Center Sheet Metal
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STA Subcontractors News
Grassi & Co.’s Annual Construction Market Outlook Survey Continues to Provide Executives with Industry Specific Insight and Trends
Segment Breakdown of Respondents
Grassi & Co.’s Construction Practice recently launched the results of its 2015 Construction Industry Market
0.483
50%
Outlook Survey at the firm’s Construction Industry Symposium, which was held at the 3 West Club on
The 2015 Construction Industry Market Outlook Survey, which featured 58 questions in 12 categories,
38% % of Respondents
Thursday, June 4, 2015.
was completed by more than 100 executives from leading construction companies in the New York
0.31
25% 13%
0.126 0.08
0%
regional area. Designed as a valuable resource that
Construction Management Only
General Civil/Heavy Highway Contractor
identifies best practices, emerging trends and industry
more detailed analysis of the industry’s hot topics,
benchmarks for a cross section of the industry, the
including union vs. non-union, compliance, insurance,
Survey’s results were categorized into the following
technology and risk. Some of the key findings from the
respondent segments:
survey include:
•
•
• •
General Contractors and Construction Managers
they expect their company’s revenue to be higher
General Contractors and Construction Managers
in 2015 than it was in 2014 and 53% expect their
(“GCs and CMs”) with revenue > $100 million
company’s 2015 gross margin percentage to also
Subcontractors / Specialty
increase from 2014.
Trades(“Subcontractors”) with revenue ≤ $100 •
68% of the executives surveyed reported that
(“GCs and CMs”) with revenue ≤ $100 million
•
81% of all participating companies indicated that
million
they are currently a union contractor, but 23% of
Subcontractors / Specialty Trades
them reported they are considering operating or
(“Subcontractors”) with revenue > $100 million
investing in an “open shop.” •
43% of the executives reported that their
Key Findings from the Survey
company’s CFO / Partner / Owner does assess their
With executives facing a number of challenges and
contractual risk.
opportunities in today’s market, the Survey helps
•
88% of all participating companies use mobile
companies navigate through the complexities of
devices to access information and integrate data
the regional construction market and provides a
from jobsites. continued on page 6
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STASubcontractors SubcontractorsNews News STA
continued from page 4 •
•
•
Compliance and non-union competition are
on the results of Grassi & Co.’s 2015 Construction
cited as top challenges facing New York regional
Industry Market Outlook Survey. Lou Coletti, President
companies.
& CEO of the Building Trades Employers’ Association
73% of the responding firms reported that 51 -
(BTEA), moderated an esteemed panel of industry
100% of their work performed is within New York
executives, including Samara Barend, Senior Vice
City and 89% of the respondents reported that
President, AECOM Capital, Ed Harms, Managing
none of the work they perform is international.
Partner, Island Companies and William Gilbane III,
30% of the participating companies reported that
Senior Vice President, Gilbane Building Company.
none of their work was bonded in 2014 and 66% reported utilizing only 25% or less of their 2014 bonding program. •
93% of the participating companies reported that less than 20% of the work they performed in 2014 was subcontracted to a D/MWBE.
•
Expansion of business offerings and design build were the top strategies for all participating Subcontractor / Specialty Trade companies (“Subcontractors”), while expansion of geographic reach and design build were the top strategies reported amongst all participating General Contractors and Construction Management companies (“GCs and CMs”).
The 2015 Survey was sponsored by the Subcontractors Trade Association (STA) and Building Trades Employers’ Association (BTEA). To review the complete survey
Left to Right: (Panelists) Ed Harms, Island Companies; William Gilbane III, Gilbane Building Company; Samara Barend, AECOM Capital; (Moderator) Louis Coletti, Building Trades Employers’ Association
Some of the highlights of the panel discussion included:
results report, including the industry trends identified, please contact marketing@grassicpas.com.
Design Build. As competition in the market continues to increase and project owners look to obtain more
Grassi & Co.’s 2015 Construction Industry Symposium
value, many companies are considering implementing
The Grassi & Co. Construction Industry Symposium
a design build strategy as a way to differentiate
is an industry-specific event for owners and senior
themselves and increase revenue. However, this
executives within the New York metropolitan region.
strategy is not an easy undertaking as a design build
This exclusive, invitation-only event provides industry
strategy could expose a company to a tremendous
executives with the opportunity to connect with their
amount of risk and expense. “Getting into it before
peers and other industry thought leaders to share
being prepared can be costly and risky,” stated Samara
their knowledge and discuss current market dynamics.
Barend of AECOM Capital. Even if properly prepared, the financial stress associated with this business
The Executive Panel Discussion
strategy could be a major disadvantage for companies.
The event kicked off with a dynamic panel discussion
“The costs to pursue projects can be exorbitant,” added continued on page 8
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STASubcontractors SubcontractorsNews News STA
continued from page 6 Samara. As such, companies looking to implement design build need to have a detailed understanding of the pros and cons associated with the implementation and operation of such a strategy in order to take the necessary steps to reduce the financial burden and risk exposure inherent in design build. Insurance. Expenses for New York regional construction companies continue to increase, especially with regards to insurance. As such, companies are exploring a variety of ways to offset these expense increases. For instance,
(Left) Steven Bongiorno, Bryan Hogan and Domenick Ruttura, Ruttura & Sons Construction
companies are focusing more on overall safety on job sites and implementing policies and procedures to reduce the number of accidents and keep insurance expenses down. Additional efforts with regards to improving efficiency and financial stability could also assist in counteracting restrictions in the market and reducing a company’s insurance expenditures. D/MWBE Requirements and Challenges. As state requirements continue to increase with regards to D/MWBEs, construction companies are feeling the pressures of remaining compliant. In fact, many executives question if these state issued requirements are realistic for most construction companies in the area. Ed Harms, of Island companies, agrees and states, “The dynamic is essentially where requirements continue to increase to an unattainable level.” Meeting these requirements is even more challenging as the
Hank Kita, Subcontractors Trade Association, reads the results from the Construction Industry Market Outlook Survey.
An Exclusive Q&A and Closing Reception The symposium continued with an exclusive keynote Q&A with New York Giant, Tiki Barber and Sports Broadcasting Legend, Al Trautwig. Tiki and Al had a candid and entertaining discussion on teamwork and winning in sports as well as in business.
difficulty in identifying qualified D/MWBE companies in the area is also increasing. Almost half (43%) of all survey respondents indicated that the state provided qualified D/MWBEs are not valuable as the entities are neither professional nor have skills to complete projects. Given this, companies need to adopt a robust due diligence approach in order to reduce their overall exposure to risk. Ed Harms advises, “Kick the tires, check the references, go to the facility, see the equipment and meet the people.”
Left to Right: (Keynote Speakers) Tiki Barber, Thuzio, New York Giants and Al Tautwig, MSG
The night concluded with a cocktail reception on the terrace of the 3 West Club.
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June 2015 ADVERTISEMENT
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STA Subcontractors News
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June 2015
STA Subcontractors News
STA Holds 2015-2016 Annual Membership Meeting BY: Samantha Sweeney, STA
On Wednesday, June 17, the STA held its Annual General
Fifth Avenue, Manhattan West Northeast Office Tower,
Membership Meeting for the 2015-2016 year at the Center
287 Park Avenue South and projects with DDC’s Build-
for Automotive Education and Training. Over 75 guests
it-Back Program. For further information on Tishman’s
attended to network and hear presentations from three
pre-qualification
of New York City’s top Construction Management Firms.
Johnson
at
process,
please
Kristen.Johnson@aecom.com
www.prequalifications.aecom.com. Prior to the seminar, STA Nominations Committee Chair
contact Mr.
or
Kristen go
to
Konovitch’s
entire presentation is available on the STA website here.
Arthur Rubinstein presented the slate of new STA Officers and Board of Directors. Without any objections to the
Mr. Frank Yozzo, Procurement Manager at Turner
nominations, the officers and new Board of Directors were
Construction,
elected. Please see page 3 for the full list of continuing and
Centralized Purchasing and what the company looks for
new STA Officers and Board of Directors.
when attaining subcontractors for jobs. The procurement
spoke
to
the
audience
of
Turner’s
and purchasing agents go through the subs’ experience Mr. Jonathan Konovitch, Building Construction Compliance
in construction, looking specifically for individuals with a
Officer at Tishman Construction Corporation, opened
variety of expertise and knowledge. The bid book given
the program with a presentation on pre-qualification
out to companies prior to bidding consists of the invitation
and vetting for subcontractors bidding on new projects
to bid, Turner 3A pages (scope of the work), document list
at Tishman. Subcontractors must complete a pre-
with schedule and site logistics plan, project manual and
qualification questionnaire and paperwork, and D/M/WBE
the unit prices. Once the bid is submitted, the agents ask
subcontractors must complete this questionnaire along
themselves “Is this the right sub for the job?”, “Is this the
with a certification check and field vetting. The
right scope of work included?” and “Is it the right price?”
questionnaire
consists
of
general
company
and
organization information (including principals, officers
Turner’s current market activity has seen a majority of work
and union information), licensing information (all trade
in healthcare, academic and high-end residential projects.
and professional licenses; if a license has ever been
Mr. Yozzo mentioned the key early trades for capacity
revoked) and work experience (current projects, all projects
starting the second quarter of 2016. Included in the key
completed within the past three years, and any failures to
early trades are excavation and foundation, structural
complete a contract.) All pre-qualified subcontractors will
steel, exterior wall, superstructure concrete and MEP. Their
receive an annual email notice that their pre-qualification
upcoming work includes NYU Coles, MoMA Expansion,
is up for renewal.
Barnard College and 1271 Avenue of the Americas. For Mr. Yozzo’s entire presentation, please click here.
Current and upcoming Tishman projects include 520
Mr. Steven Sommer, Senior Vice President at Lend Lease
continued on page 13
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STA Subcontractors News
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June 2015
STA Subcontractors News
continued from page 11 Construction gave an overview of Lend Lease’s work in
Corp. for attending our meeting with their colleagues and
New York City. One of the top contractors in New York
speaking with attendees about procurement policies and
and the top residential contractor in the New York tri-state
their upcoming work. The STA would also like to thank
area, Lend Lease currently has 467 employees and has $5.2
WDF, Inc. for their sponsorship of this General Membership
billion construction under management. The company
Meeting.
was involved in major construction projects such as the building of One57 57th Street, the Fulton Center and the
Look out for more information on the next STA General
National 9/22 Memorial & Museum. For Mr. Sommer’s
Membership Meeting that will take place in early fall.
entire presentation, including a list of New York City operational leadership, please click here.
Thank you to all of the guests of the June 17 General Membership Meeting for their continued support of the
In addition to Mr. Konovitch, Mr. Yozzo and Mr. Sommer, the STA would like to thank Mr. Mike Perinchief of Turner Construction and Mr. Allan Paull of Tishman Construction
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Subcontractors Trade Association!
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STA Subcontractors News
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June 2015
Legislature Considering “Additional Insured” and Indemnity Limitations for Construction Contracts BY: Henry L. Goldberg, Managing Partner, Goldberg & Connolly & STA Legal Counsel
As the Legislative Session comes to a close this year,
The second bill, re-introduced this year as S. 32
I would like to note the two bills that had been
and A. 4267, places further limits on the scope of
championed by the STA (and others) that would limit
indemnification clauses in construction contracts.
the “cram down” of additional insured and indemnity
While the NYS General Obligations Law already
requirements to downstream parties in construction
precludes, as indicated, indemnification of a party
contracts. These are particularly important pieces
for its own negligence, indemnification clauses in
of legislation for the subcontracting community
construction contracts are often so broadly written as
legislative agenda. They could result in much needed
to require a contractor to indemnify upstream parties
insurance cost relief and more manageable risk
(i.e., owner, GC, CM or first tier subcontractors) for
exposure, in the already tight construction insurance
losses caused by literally any other party working on
market in New York.
the project. This bill would limit the scope of such indemnity to include only losses resulting from, in
The first bill, introduced as S. 2925 in the Senate, and
whole or in part, your own acts, or those of your
A. 4259 in the Assembly, would limit the “additional
agents, employees, subcontractors or vendors. Thus,
insured” requirements in construction contracts.
you would only be responsible for the losses caused by
There already is a statutory prohibition against
those parties over which you have some meaningful
indemnifying a party for its own negligence, and
level of control.
thus, an indemnification provision that requires you to indemnify another party for their negligence is
G & C Commentary:
void and unenforceable. Similar to legislation passed
As the 2015 legislative session, hardly to be noted
in several other states, however, the proposed bill
for its productivity, comes to a close, it is clear that
would make void and unenforceable any provision in a
this legislative reform will not be achieved this year.
construction contract that would require a contractor
However, it will no doubt be taken up again next
to provide “additional insured” coverage for another
year with significant industry support. Meanwhile,
party for their own negligence. Stated differently, if
for now you should seek, to the extent possible,
you cannot be required to indemnify another party
language in the insurance and indemnity provisions
for their own negligence, you similarly should not be
of your construction contracts to include these same
required to provide them with insurance coverage for
limitations. Overly broad indemnification clauses
their own negligence.
are epidemic in both public and private construction continued on page 16
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STA Subcontractors News
continued from page 15 agreements, with no reasonable justification for
Henry L. Goldberg may be contacted by email,
such utilization other than the relative negotiating
hlgoldberg@goldbergconnolly.com or by telephone,
positions of the parties. It is because of this disparity
516-764-2800.
in
bargaining
positions
among
subcontractors,
general contractors and construction managers, that
This article has been prepared for informational
this legislation is so important.
purposes only. It is not a substitute for legal advice addressed to particular circumstances. You should
You should currently seek to manage these risks through
not take or refrain from taking any legal action based
the contract negotiation process. Hopefully, in the near
upon the information contained herein without
future, the NYS Legislature will make the critical need
first seeking professional, individualized counsel
for such negotiations academic by providing these
based upon your own circumstances. The hiring of a
important protections as a matter of law.
lawyer is an important decision that should not be based solely upon advertisements. Before you decide,
If you, or your insurance professional, would like a
ask us to send you written information about our
copy of these legislative bills, please feel free to
qualifications and experience.
contact me or the STA office directly. Š Goldberg & Connolly 2015
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June 2015
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STA Subcontractors News
Contractual Application of MWBE Goals Could Cost Contractors Millions BY: Walter G. Breakell, NESCA Legal Counsel
This article appeared in the June 2015 issue of the
work
when
non-M/WBE
firms
were
actually
Northeast Subcontractors Association Newsletter
performing the work. Perini settled with the Federal
(NESCA) and is reprinted with their permission
Government for $9.5 million, and the two responsible executives were indicted. It was believed that was the
The legal subject this month is to bring to the
end of the penalties to be incurred.
memberships’ attention that a contract is subject to being declared void and unenforceable, with an
Subsequent to the convictions of the executives,
obligation to repay earned contract funds, should it
the State moved to amend its answer in the Court
be deemed the contract was illegally entered into or
of Claims to assert an equitable claim of recoupment
illegally performed.
and recovery of the entire $150 million dollar contract value since the statute of limitations to
In the Court of Claims case of Tutor Perini A/K/A Perini
void the contract for illegal fraud had expired.
Corporation — vs- State of New York- the State of New
The State argued that at the time the contract was
York sought to amend its answer after litigation had
entered into: 1) Perini certified it would use specific
been pending to assert allegations of fraud in both
M/WBE subcontractors; 2) That at the time of the
the inducement and performance of the contract.
certifications, Perini had no intention of utilizing the
The State sought to recover the entire contract sum
services of the identified subcontractors; and 3) The
paid the contractor of $150 million dollars.
State was induced into entering into the contract based upon those false & fraudulent representations.
The dispute arose out of a contract with DOT for reconstruction of 3.2 kilometers of highway and 14
The State’s claim for fraud in the performance of the
bridges on Interstate 495 in Douglaston, New York.
contract involved conduct outside the contract which
The contract included a Minority and Women’s
was intended to defeat a purpose of the contract.
Business Enterprises subcontract requirement.
In this case it was alleged that Perini conspired with certain M/WBE contractors to falsify records
Perini brought claims for additional compensation
(for a 5% fee) substantiating their performance of
in the NYS Court of Claims. While those claims were
a “commercially useful function” when, in fact, the
pending, two executives of Perini were indicted for
work was performed by others.
fraud in connection with reporting on utilization forms that certain M/WBE firms were performing
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In essence, the State alleged as a counterclaim that
June 2015
Perini never intended to satisfy the contract’s M/WBE
his own wrong, or to found any claim on his own
goals and conspired with others to deceive the State
iniquity or to acquire property by his own crime. The
as to its M/WBE compliance by using non-certified M/
law applicable to public contracts permits rescission
WBE firms to perform the work without the knowledge
and the return of all monies paid so as to protect the
or approval of NYSDOT.
public fisc.
The court held where the State or municipality is
The context of this case involved application of
induced to enter a contract on account of fraud, no
the contractual M/WBE goals, but could be made
recovery may be had by the contractor and the State
applicable, under the right circumstances, in other
may recover all amounts paid under the contract.
contractual contexts. The important principle for NESCA’s membership to be aware of is that if you
It further held that contracts, although legal in their
are found to have participated in any conduct which
inducement and capable of being performed in a legal
may be construed as contractually illegal, you may be
manner, but which have been performed in an illegal
subject to forfeiture of all the funds previously paid
manner will not be enforced. The court referenced a
under the contract in addition to any criminal penalties
deep seated rule of law that “no one shall be permitted
to which you may be exposed.
to profit by his own fraud, or to take advantage of
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STA Subcontractors News
SAVE THE DATE
20
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GOLF
OUTING
MONDAY SEPT 28 2015
VILLAGE CLUB OF LAKE SUCCESS 318 LAKEVILLE ROAD GREAT NECK, NY 11020
FOR MORE INFORMATION, PLEASE CONTACT THE STA AT 212.398.6220
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STA Subcontractors News
The STA Welcomes its Newest Member! The Subcontractors Trade Association is proud to welcome its newest member Sales Direction, Division of American Specialties!
Sales Direction, Division of American Specialties Division 10 Specialties 441 Saw Mill River Road Yonkers, NY 10701 914-476-1593 pcelentano@specialtiesdirect.com Contact: Philip Celentano
Update Your Company Information! Has your company moved offices, changed leadership or have an updated email address? Let the STA know of any company changes to ensure you will continue to receive newsletters, event invites and other mailings! To check your current company listing, please go to http://stanyc.com/pages/directory.html Complete the form below with any company information updates and email to info@stanyc.com or send via fax to 212-398-6224. Company: Principal Name: Address: City, State, Zip: Tel:
Fax:
Mobile:
Email: info@stayc.com T: 212-398-6220 F: 212-398-6224 1430 Broadway, #1106, New York, NY 10018
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June 2015
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STA Subcontractors News
Subcontractors Trade Association 1430 Broadway Suite 1106 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.
Joseph Leo Secretary Atlantic Contracting & Specialties, LLC
Christine Boccia JD Traditional Industries Dan J. DeVita Penava Mechanical Corp.
Gloria Kemper Recon Construction Corp. Randy Rifelli United Iron, Inc. Guy VandeVaarst Firecom Inc. John Villafane Eldor Electric
John Dierks Dierks Heating Company, Inc
Alan Nathanson (Honorary) Forsythe Plumbing & Heating Corp.
Andrew Drazic ATJ Electrical
STA Annual Golf Outing
Brent Fleisher Environet Systems
Village Club of Lake Success
Arthur Rubinstein Skyline Steel Corp.
John A. Finamore Treasurer Jordan Panel Systems
Board of Directors Joseph Azara Jr. C.D.E. Air Conditioning
Craig Gilston Gilston Electrical Contracting
Jerry Liss A. Liss & Co. Inc.
Lawrence Roman WDF, Inc.
Peter Cafiero 2nd Vice President Island Painting
Scott Rives Woodworks Construction Co, Inc.
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.
Sandra Milad Gibson Milad Contracting Corporation
Upcoming Events Monday, September 28, 2015
O U R M I S S I O N S TAT E M E N T trengthen New York’s construction industry each member firms to increase business opportunities dvocate to preserve subcontractors’ rights
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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
www.grassicpas.com