The Professional Contractor 1Q 2011 by The Warren Group

THE PROFESSIONAL

FIRST Quarter 2011

A Publication of the Associated Subcontractors of Massachusetts, Inc.

Art Work of

Hutchins Takes The Helm

Meet Gilbaneâ&#x20AC;&#x2122;s Newest Director

Teamwork In The Cloud

An Introduction To Collaborative Processing

Tough Times Ahead The Surety Market In 2011

Celebrating at the Biennial Gala

THE PROFESSIONAL

A Publication of the Associated Subcontractors of Massachusetts, Inc.

Below: J.C. Cannistraro’s recently completed project for Sanofi-Aventis is a successful BIM case study (page 12). Below left: Meet Gilbane’s new New England division director, Ryan Hutchins (page 10). Below, right:The latest in member news and completed projects (page 26).

cover story

16 A Biennial Dinner Gala

features

04 PRESIDENT’S VIEW Embracing Change at ASM 06 FINANCIAL When Banks Won’t Lend 08 TECHNOLOGY In Collaborative Processing, Everybody Wins 10 INDUSTRY WHO’S WHO Gilbane Regional Director a Familiar Face 12 PROJECT SPOTLIGHT Where Process Meets Progress: 640 Memorial Drive

departments

ASM celebrated its Biennial Gala at the Museum of Fine Arts with an exclusive viewing of the new Art of the Americas wing, constructed almost entirely by ASM members.

14 INSURANCE Worker’s Compensation Experience Rating May Disqualify You from Projects! 20 LEGAL BRIEFS Mechanic’s Lien Law Amendments 22 TECHNOLOGY 8 Winning Steps to Remodeling Your Financial Systems 24 SURETY The Surety Market – 2011 and Beyond

26 Member News 28 Photo Gallery of ASM Events The Professional Contractor

PRESIDENT’S VIEW

By David G. Cannistraro

Embracing Change at ASM

David G. Cannistraro is executive vice president at J.C. Cannistraro LLC in Watertown. He was elected president of ASM at the association’s Biennial Dinner Gala in April at the Museum of Fine Arts. (See cover story, page 16). He can be reached through ASM at (617) 742-3412 or by email at president@ associatedsubs.com.

hange is neither good nor bad, it simply is. It can be greeted with terror or joy: a tantrum that says ‘I want it the way it was,’ or a dance that says ‘Look, something new.’” So says the character Don Draper in my current favorite TV show, Mad Men. I am not sure our membership would agree with the first part of this philosophy, what with the drastic changes we have seen in the construction industry in the last few years: tens of thousands of workers laid off, revenues way down and profit margins at break-even points or below. But the sentiment still rings true in that we must either embrace change and evolve ourselves and our companies to lead it, else we let the changes roll over us and push us aside into irrelevancy. Here at ASM, we are no different. We must continue to adapt to this new world and help our members thrive. We are not resting on our laurels after seeing our Prompt Pay Act become law; we have already submitted new legislation to set a 5 percent limit on retainage and mandate reasonable measures to have it released timely. We will need your help to get this passed, so stay tuned! We have not been satisfied with having the industry’s best group insurance program – which has returned close to $4 million in dividends to our members since its inception in 2003 – we are now actively pursuing the right to offer an all-new health insurance option for our members. This has the potential to dramatically impact this organization as a whole and all of our members individually.

We have not settled for just having a great website, informative e-newsletter and high quality magazine; we are now on Twitter and have started using other social media sites such as LinkedIn. We are committed to getting the word out in every way possible about the great things this organization has to offer on a daily basis. To that end, we have hired our first-ever marketing and communications manager, so if you haven’t seen or heard about us much in the media, wait a minute, because you soon will! We have not been happy with just giving our members a free legal hotline and a discount at Staples; we have added a 30 percent discount on Lorman seminars and webinars (which I have used personally several times) and a fleet leasing program with Enterprise, available only to ASM members. I have been on the board of directors of ASM for six years, and it is with great excitement that I now take the reins as president for the next two years to help lead this organization to the next level. Although we have been doing more, we have been doing so with less, so I ask all of you to help us by spreading the word to other subcontractors and encouraging them to join us. Our low membership rates are truly the best value in the industry. As we embrace the changes that will continue to come over the next two years, we welcome your thoughts on how ASM should continue to evolve, to better serve the subcontractors of Massachusetts. Please feel free to contact me anytime with your ideas and suggestions. s

The Professional Contractor is published quarterly by

The Associated Subcontractors of Massachusetts, Inc. One Washington Mall | Fifth Floor | Boston, MA 02108 tel 617-742-3412 | fax 617-742-2331 mail@associatedsubs.com | www.associatedsubs.com

Officers

President: President Elect: Vice President: Vice President: Vice President: Treasurer: Past President: Past President:

David G. Cannistraro J.C. Cannistraro, LLC Richard R. Fisher Red Wing Construction Joseph H. Bodio Lan-Tel Communications, Inc. Steven P. Kenney N.B. Kenney Co. Gregory A. Porfido Mark Richey Woodworking & Design, Inc. Russell J. Anderson Southeastern Metal Fabricators, Inc. Sara A. Stafford Stafford Construction Services, Inc. Scott H. Packard Chapman Waterproofing Co.

Directors

First Quarter 2011

The Warren Group Chairman CEO & Publisher President Group Publisher & Editor in Chief

Timothy M. Warren Timothy M. Warren Jr. David B. Lovins Vincent M. Valvo

Finance & Administration Dir. of Operations | Controller

Jeffrey E. Lewis

Editorial Custom Publications Editor Associate Editor

Christina P. O’Neill Cassidy Norton Murphy

Advertising Publishing Division Sales Manager Account Manager Advertising, Marketing & Events Coordinator

George Chateauneuf Mark Schultz Emily Torres

Design & Production Creative Director Senior Graphic Designer Graphic Designer

John Bottini Scott Ellison Ellie Aliabadi

©2011 The Warren Group, Inc. and Associated Subcontractors of Massachusetts, Inc All rights reserved. The Warren Group is a trademark of The Warren Group Inc. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher.

COMPLETE COMMERCIAL/INDUSTRIAL ROOFING SERVICES

Quality starts at the top. Quality. Pride. Craftsmanship. These words are as important to us today as they were when we started almost forty years ago. This dedication that earned us the trust of so many clients. And regardless of the project size or scope, it’s our goal be your “roofer of choice” by

AWARDS • ABC‘S EXCELLENCE IN CONSTRUCTION AWARD • METAL ROOFING CONTRACTOR OF THE YEAR • NATIONAL FINALIST — GOLD CIRCLE AWARD

providing the same high standard of service, commitment to quality, and excellence in workmanship to your roofing project. We offer a full range of services from new installation and reroofing to preventive maintenance and emergency repairs. And of course, we stand behind all our work after the project is done.

A&M Roofing Services, LLC 123 Tewksbury Street, Andover, MA 01810 Phone: 978-475-4500 • Fax: 978-475-8778 Web: www.amroofing.net

FINANCIAL

By William F. Rucci Jr.

When Banks Won’t Lend

Alternative Methods of Financing for Construction Firms

If it’s true that the construction industry is a key part of the engine that powers the U.S. economy, then it only stands to reason that access to financing serves is the motor oil that keeps all the engine parts in good condition and running smoothly.

here are numerous ways to secure financing; methods run from the traditional to the extremely creative. But the one universal challenge that any construction firm faces – at almost any stage of growth – is to find the method (or combination of methods) that fits its own unique set of goals and circumstances at a particular point in time. Factors like company size and maturity, market niche, credit history, potential for growth and local market conditions all inevitably play into the equation. Also important is the cost of borrowing those funds, because rates vary widely from source to source. Traditional bank loans have been the go-to method of financing for hundreds of years, and they remain the first resource that most firms turn to for either a short-term line of credit or a longerterm loan. But while the economy slowly struggles back 6

First Quarter 2011

to life, banks remain in a stubborn mood. A recent survey conducted by Pepperdine University showed that even though banks report an increase in the volume and quality of loan applications, they continue to turn down the vast majority of them (74 percent). To increase your chances of success, it’s best to build a business relationship with a bank well before you need to ask them for funds. Let the bank get to know your business, and get to know you as a credit-worthy customer. If your bank is unwilling to help, borrowing from family and friends is often the easiest way to obtain funds, particularly for start-up entities. Often, the costs of borrowing the money are less than with other methods. But intermingling business with personal relationships has its potential drawbacks, which is why clients who choose this method are advised to set up the transaction in a formal, business-like manner. Give your lenders paperwork that acknowledges their loan and the terms of repayment. Make sure their rate of return is reasonable (this includes loaning funds to yourself). And give lenders an “out clause” that allows them to ask for their money back at any time. Home equity loans and credit card financing are two other methods of self-funding. But they also come with a level of personal risk to the borrower that is often beyond the tolerance of all but the most seasoned entrepreneurs. Another alternative to traditional bank funding is government-sponsored grants or loans that are designed to assist companies with seed capital or to enhance an existing operation. The federal government and most states offer financing geared to growing specific areas of the economy that policymakers believe require nurturing. In most cases, the interest rates are especially favorable if the funding leads to job creation. Unlike a loan, a grant typically does not have to be repaid. However, there is a significant amount of research and paperwork involved. Grant programs can be highly competitive, with specific, detailed formats that need to be followed carefully when applying.

There are a number of creative methods of financing for larger, stable firms, including assetbased financing, receivables financing, and factoring. While each technique comes with its own benefits, drawbacks and costs, what ties them together generally is the use of an existing, tangible asset of the enterprise as collateral for the loan. Supplier or vendor financing is also a creative alternative in certain situations where funds are needed to acquire expensive capital equipment. Manufacturers and leasing companies will almost always offer financing, and at interest rates that are relatively attractive. Perhaps the most difficult financing path for owners to take is working with outside investors. There are many options for accessing funds in this way, but all of them involve giving up some measure of control of the business. We advise owners to tread carefully when considering these types of arrangements. Equity financing may be the simplest of these options. Equity is defined as the value of the enterprise, minus what is owed. An owner can raise funds by selling a portion of this equity, but the buyer will then be a “partner,” and will have partial control of the enterprise. This arrangement can work well between businesses that complement each other. When the full equity of a business is sold, it is

considered a merger in which the enterprise becomes part of the company that purchased it. Individual angel investors provide financing to early-stage companies that demonstrate the potential to offer a better rate of return on the angel’s money than more traditional investments would. These individuals may also offer their experience and contacts to the operation in addition to funding. But expect to give up some control in return, in the form of a board position, a formal consulting role or an ownership stake. The same holds true of a venture capital firm, which is essentially a group of investors who have pooled their funds to finance early-stage, high-risk enterprises with the expectation of a potentially large return on their investment. Of course, the specific goals and circumstances of your construction business will dictate whether any one of the techniques above makes sense. Be sure to seek the guidance of trusted advisors as you consider the options. s Bill Rucci, CPA, MST, is a partner with the Boston area accounting and business advisory firm Rucci, Bardaro & Barrett, where he heads the firm’s Construction Business Services Group. He can be reached at (781) 321-6065 or billr@rb-b.com.

w w

OF BOSTON

w .l ul

LULL’s Telescopic Handlers, with the exclusive TransActionTM boom, roll material loads smoothly into place.

lo fb os to co m

The addition of LULL TELEHANDLERS to Marr’s extensive fleet of aerial platform equipment is just one more way we can help you get the job done right. Learn more about what we can do for you. Contact us in BOSTON‐ ph: 617.269.7200 I fx: 617.269.8604 Springfield MA 413.739.2121 l Providence RI 401.467.3110

A Name You Know. A Dealer Who Knows How.

Marr Scaffolding Company One D Street South Boston MA 02127

The Professional Contractor

TECHNOLOGY

By Herb Brownett

In Collaborative Processing, Everybody Wins

s a subcontractor, are you tired of filling out a different pre-qualification form for every general contractor with essentially the same data? Tired of having your monthly billings and payments held up by document issues? If so, read on! The rapid adoption of collaborative technology in the construction industry is going to make your life easier. In this article, you will learn how and why. Collaborative solutions utilize web-based technology to automate business processes across organizations and across functions. They are delivered in a software as a service model for modest fees and do not require complex implementations or internal IT support. In construction, this means general contractors and subcontractors can utilize the same database and software for processes like pre-qualification and invoicing. Textura is being adopted by many New England general contractors, including two regionally-based national contractors. Chances are you will soon be using one or both of Textura’s innovative solutions with some of your general contractor business partners, if you are not already. This article will explain the technology and how it benefits subcontractors. Pre-Qualification Management (PQM) First, we will focus on Textura Pre-qualification Management (PQM) and how it works. A general contractor sets up pre-qualification requirements in an online network that mirrors or enhances their current practices. This includes information requirements, internal routing of data sets (which manager gets what) and pre-qualification form templates. Once set up, general contractors can search for subcontractors in their own listing or search the entire national network by trade and geography. Targeted subcontractors are sent an email requesting them to pre-qualify with the general contractor. Upon joining the network, subcontractors enter their data one time into a secure, private data Herb Brownett is senior vice president of sales for Textura Corporation. Textura Corporation has been servicing the construction industry since 2004 with over 70,000 users across the country. Brownett can be reached at (484) 574-5974 or Herb.Brownett@texturacorp.com.

First Quarter 2011

library (which only the subcontractor can access or see). When the email invitation to pre-qualify with a specific general contractor is received, the subcontractor can meet the requirements by simply clicking to automatically populate the general contractor’s required forms from the data in their library. This form can then be submitted to the general contractor electronically. The subcontractor can also use the Textura system to automatically complete pre-qualification forms for general contractors who are not using the Textura system. Forms for “non-network” (or off-system) general contractors are readily available in an industry-wide GC data library available to every Subcontractor. These forms can be printed and mailed to the general contractor or simply emailed. Once the form is received by a general contractor on the Textura system, the subcontractor’s pre-qualification data is routed to the appropriate decisionmaker, who will review the data submitted and assign a proprietary rating by data set, as well as determine an overall rating and contract limit. These ratings are now visible to decision-makers with a few mouse clicks. The update process is also automated. Each data set is assigned a start date and update time frame by the general contractor: for example, financial information every six months, starting Dec. 31; insurance information every 12 months, starting March 31; and so on. This triggers automatic reminder emails to the subcontractor. Once the subcontractor updates their data, the applicable manager at the general contractor automatically is notified by email and can review and re-rate the data. For subcontractors, the benefits of pre-qualification management software include: •• Enter data once to pre-qualify with all GCs (whether on Textura or not), including: electronic or paper submissions; expiration tracking and notification; automated update capability; and private pre-qualification data library. •• Substantial efficiencies, including prequalifing with a GC in minutes rather than hours, and reducing the time to prepare pre-qualification forms to 15-20 minutes. •• Market your organization to GCs and owners

around the country. •• Enjoy better communication with your general contractor regarding your pre-qualification status. •• Have a real-time view of your compliance status and receive automated reminders when your qualification documents are about to expire. Construction Payment Management (CPM) Textura’s invoicing and electronic payment solution, Construction Payment Management (CPM), sends an email to all participants to initiate the monthly billing/draw process. Subcontractors can click on links within the email to view their schedule of values. They enter requested payment amounts and electronically sign the requests. Properly completed, AIA 702/703’s and/or custom documents, as well as a properly completed lien release, are emailed to the general contractor for review. Upon approval, the system can automatically generate the general contractor’s pay application. The owner, lender or architect can electronically review the application online if they are on the system, or the application can be printed and mailed. The system enables the general contractor to disburse funds electronically through the ACH system. Subcontractors usually have available funds in their accounts within 24 hours.

The system also tracks document compliance (signed subcontract, insurance certificate, bonds, etc.) with automatic reminders to subcontractors. For subcontractors, the benefits of construction payment management (CPM) software include: •• Less risk of payment delay and faster payment. •• Automated completion of correct project documents and real-time tracking of your compliance status – you always see your status as the general contractor sees it, so you can proactively address any issues. •• Direct electronic payment from the GC or owner to your account, resulting in faster payment by one to two weeks. •• Saves time through online invoice entry, and lien wavers submitted with invoice but held in escrow until the GC’s payment is confirmed. •• Automated email reminders for each action. •• Lowers costs by eliminating travel, courier fees, overnight delivery costs. •• On-line document storage. •• Improved GC and subcontractor relationships. Textura Collaborative Solutions offers advantages for all parties on a construction project. When people are able to focus on business issues and not paper chasing, contractual risks are averted and money flows on schedule. Everybody wins! s

The Professional Contractor

INDUSTRY WHO’S WHO

By Linda Goodspeed

It’s About Winning Jobs Wisely Gilbane’s Ryan Hutchins Knows the Territory

he new head of Gilbane’s New England division is no stranger to the region, or the company. Ryan Hutchins, senior vice president and New England district manager, has spent his entire career at the $4 billion construction management company, beginning as a co-op student from Wentworth in 1997. He joined the company full time the following year, and has spent the last five years managing the Massachusetts district office. He was named head of the New England region in October 2010. “We’ve certainly been through some tough times,” Hutchins noted. “But over the last three to four months, there’s been an increase in activity for specific markets.” One of those markets is western Massachusetts, where Gilbane has won more than $600 million in new projects since September 2010. “We think there will be slow but steady growth for 2011 in anticipation that by 2012, ’13, we’ll be back to where we were five years ago,” Hutchins said. Sectors driving the recovery are multi-family housing, life sciences, higher education and health care. As the economy gathers steam, Hutchins said Gilbane does not want to win every job, “just the Linda Goodspeed is a freelance writer.

First Quarter 2011

ones we can sustain with our existing workforce and add employees cautiously.” Since the start of the downturn, Gilbane has reduced its workforce about 10 percent to 2,300 (350 in New England). But the company also used the recession to make some key hires. “One of the great things about a company our size is that we can hire somebody even though we may not have the right project for that person today. We can hire in anticipation of things to come,” he said. The company has several projects in the pipeline, including a new patient tower for Lowell General Hospital, a new psychiatric hospital in Worcester, a new recreation facility for Worcester Polytechnic Institute, and eight K-12 school projects. Despite Gilbane’s success in winning bids, Hutchins said competition remains high and fees low, making the use of technology more important than ever. “All of our projects starting in 2011 will be done utilizing Building Information Modeling (BIM) technology,” Hutchins said. “It’s the way the whole industry is going. You’re either on board or you’re not, and if you’re not, you will be left behind.” BIM is a collaborative tool used to finish and coordinate the design of a building’s systems and components so they can be pre-fabricated, saving time and money while enhancing quality. Gilbane used BIM to build the recent $100 million-Genzyme biological research center in Framingham. “We drove out several percent in costs on the job by using BIM,” Hutchins said. “A small handful of firms are leading the pack with the use of BIM. We’re one of them.” Likewise, Hutchins said Gilbane will continue to lead the industry in the use of Integrated Project Delivery (IPD) practices. “IPD is taking a concept that’s been integral to our philosophy and formalizing it,” Hutchins said. “We see collaboration as the way successful buildings are built. All of our projects are built using a collaborative process that brings everyone to the table talking through issues. It has allowed us to deliver jobs faster.” While many companies use IPD practices, it is a formalized, contractual process that is likely to become more widespread.

One Company

“We’ve done four or five contractual projects certainly not to the levels before the downturn. the last few years using IPD,” Hutchins said. “More But there is some work out there and there will RFPs are coming out with IPD requirements.” be more. Now is the time to focus on relationship Noting that there have been some subcontracbuilding.” At Gilbane, teamwork is one of our core values. In fact, it drives everything we do. tor defaults during the downturn, Hutchins adSubs who want work Gilbanewe’ve needcreated to go a new And because teamwork is builttointo all ofwith our processes, vised subs to price jobs to continue to be profitable, through a stringent pre-qualification process that initiative this year that’s taking collaboration to new levels. Fittingly, we call this and “we will continue to evaluate bids to make sure can “One be found at www.ibidpro.com. movement Company.” that the bid makes sense for the scope of work.” “To our partners through these tough times, We’ve spread our roots and grown beyond New England to more than 30 locations “Because of the downturn, I think there’s been thank you,” Hutchins said. “We know we’re only as nationwide, and each of our teams has developed an independent spirit in their local some underbidding,” Hutchins said. “Everybody good asthose our teams subs who for us. Ifzest it for wasn’t for markets. Each of has anwork entrepreneurial serving their Gilbane clients, needs to be patient. The work will be coming, be here.” which isthem, one ofwe the probably keys to our wouldn’t continued success. We applaud that s spirit of service, and we want to demonstrate our support. How can we provide that support? By equipping all of our employees with innovative solutions created by their fellow Gilbane peers across the country through our One Company initiative. Our primary goal for One Company is to provide added value and outstanding service to our clients. To that end, we’ll be making it possible for the entire family of Gilbane locations to share best practices and lessons learned. Through One Company, we’ll tap our most knowledgeable experts and strongest team members to share their best lessons with our project teams. And we’ll integrate Gilbane’s market-focused centers of excellence and comprehensive consulting services into more of our projects. Then, we’ll watch our clients reap the substantial benefits. To date, our efforts to leverage Gilbane’s significant expertise have been remarkably successful and our clients have raved about the results. Want to learn more? Visit us online at www.gilbaneco.com to see some examples of our One Company strategy in action. Like every winning team, we’ve found that there is always room to improve and become stronger…smarter…better. And we’re committed to being the One Company you’ll need for your next project. Photo: (C) CLEMENTS-HOWCROFT, Boston

Mark Richey Woodworking crafts and installs high-end architectural millwork for corporate, institutional, Thomas F. Gilbane, Jr. retail, restaurant, and residential clients. Our reputation Chairman and CEO is founded on peak performance and keen attention to client satisfaction. ii

www.markrichey.com The Professional Contractor

PROJECT SPOTLIGHT By Tom Palange

Where Process Meets Progress Construction Technology at Work at 640 Memorial Drive

project at 640 Memorial Drive in Cambridge. Owner MIT Investment Management Company is set to welcome its high-profile first tenant in April, and this complex project is already a case-study on successful BIM execution.

hile Sanofi-Aventis was dominating headlines this winter, construction on a new laboratory and office facility was well underway for the pharmaceutical giant’s newest local office. Watertown-based J.C. Cannistraro, LLC, is the mechanical and fire protection trade contractor on this core and shell Tom Palange oversees all marketing and public relations functions for J.C. Cannistraro, LLC, located in Watertown. He can be reached at (617) 926-0092 or tpalange@ cannistraro.com.

The 640 Memorial Drive story begins with project planning. Coordination, the construction schedule, the prefabrication process, on-site rigging and the overall safety of field personnel are all contingent on the development of a practical project workflow. At Cannistraro, the construction process begins in the office, not in the field. Involving the field foreman early is an essential part of this process. His insight and field expertise ensures constructability, attention to detail, and a logistical team approach. When preconstruction ends and final, construction-ready models are approved, piping components are spooled from the model to the automatic welding equipment at Cannistraro’s fabrication facility. Utilizing prefabrication undoubtedly improves the efficiency of a project, and also makes for a safer job site. At 640 Memorial Drive, over 1,000 piping assemblies were modeled, prefabricated and shipped for just in time delivery to the job site. In fact, 90 percent of Cannistraro’s scope was prefabricated off-site.

Chiller Installation at 640 Memorial Drive By Kathleen Fyfe

As is often the case in a restoration project, the installation of new equipment into an existing structure can require inventiveness and a clever use of resources, and 640 Memorial Drive was no exception. Four chillers, weighing approximately 25,000 pounds each, were to be installed at 640 Memorial Drive through a street‐level opening that allowed for less than two inches of clearance. Marr Rigging Company, Inc. was contracted by J.C. Cannistraro to turn out a workable installation plan for the chillers and other major equipment that was efficient, safe and practical. The chillers presented a particular challenge and a number of options were considered by Leo Manning and Mike Baia of Marr Rigging Company, together with Roy Reed of J.C. Cannistraro. After a series of planning meetings, the team elected to roll the chillers into the building 12

First Quarter 2011

on one‐inch steel rods. Once inside, the chillers were jacked onto neoprene dollies and were rolled onto a custom‐designed steel ramp system (see photo at right). They were carefully lowered down to the basement level by grip hoist. The course of action taken to install the chillers was highly successful. Advancements in technology have improved many aspects of the construction process. However, there remain many instances where there can be no substitute for good, solid engineering and basic, tried and true construction methods. The crossroads where the old methods and new technology intersect, promises to be an exciting one for construction professionals in the future. Kathleen Fyfe is marketing director for The Marr Companies, located in South Boston. She can be reached at (617) 269-7200 or kathyfyfe@marrcompanies.com.

With tenant space scheduled to be occupied in a matter of months, the biggest challenge to the 640 Memorial Drive project team was the schedule. From the demolition of existing conditions to the turnover of the new building, the construction phase allowed for just over six months of work. Early collaboration with the project’s general contractor, Turner Construction, and architect, KlingStubbins, gave Cannistraro the opportunity to add its BIM expertise and trade contractor means and methods into the equation. BIM enables careful examination of all of the details required for constructability, thereby allowing the team to prioritize work flows and eliminate inefficiencies on-site. One specific example is the rigging and installation plan used for sequencing the chillers. The logistics involved with safely maneuvering and installing four chillers into the basement required careful pre-task planning and the use of specially-designed rails (see sidebar). In addition to the use of BIM and prefabrication, the 640 Memorial Drive project was another opportunity for Cannistraro to implement lean methods into the construction process. Field personnel utilized total station technology to automatically lay out hanger and sleeve locations in less than half the time it normally takes for hand measurement. Using the “Last Planner” system, Cannistraro took an extended construction schedule and compressed it to daily task plans. This short-interval planning technique helped facilitate the delivery of prefabricated assemblies, manage workloads, increase onsite productivity and provide accurate snapshots of progress at any given point in time.

For years industry experts have forecasted that technology would soon change the way AEC professionals deliver construction projects. The 640 Memorial Drive project illustrates how today’s leading builders grow and adapt to construction technology in order to deliver efficient, practical 21st-century buildings. s

Opposite page: This 3D model for 640 Memorial Drive shows the chilled water return header as it will appear in the field. Above: The chilled water return header is prefabricated and delivered to the site. Below left: Chillers are rigged into the basement mechanical room at 640 Memorial Drive (see sidebar). Below right: Cannistraro foremen use the Total Station Layout system in the field.

The Professional Contractor

Insurance

By Bernard K. Quinlan

Worker’s Compensation Experience Rating May Disqualify You from Projects!

Massachusetts employer whose workers’ compensation premium averages $5,500 annually is subject to two experience rating factors: experience modification and all risk adjustment program (ARAP). These actuarially calculated factors are benchmarks that measure a contractor’s loss history against the experience of other contractors engaged in the same trade(s) and operating in the same state(s). Contractors with better than average experience earn a premium credit, while contractors with worse than average loss history incur a premium penalty. A favorable experience modification indicates that the contractor strives to provide a safe work site.

incurred losses during the experience period, and a 20 percent additional premium is charged by the insurer.

Experience Modification The experience modification is based on a firm’s payroll and losses during a three-year experience period. The experience period does not include the most recent policy period. For example, if an employer’s policy anniversary date is Jan. 1, the experience modification effective Jan. 1, 2011, is based on payroll and losses for the 2009, 2008 and 2007 policies. Thus, a claim that occurred in December 2010 does not affect an employer’s premium on Jan. 1, 2011. The experience modification calculation is more negatively impacted by claim frequency than severity. In fact, claims exceeding $5,000 in value are limited, and only a portion of the actual claim is included in the calculation of the experience modification. The claim data includes paid amounts for both ongoing and closed claims, and reserves for future payments expected on active claims. A 1.00 experience modification is average, and has no impact on a contractor’s premium. A .92 experience modification indicates that the contractor’s loss experience is better than average, and results in an 8 percent premium credit. A 1.20 experience modification indicates that the contractor has

Impacts on a Subcontractor’s Ability to Secure Work A debit experience modification and/or ARAP surcharge will negatively impact a contractor’s ability to be price-competitive. Additionally, general contractors and owners sometimes use experience ratings as a bid qualification! General contractors may exclude subcontractors whose experience modification exceeds some arbitrary benchmark (i.e. 1.00 or 1.10). Given the choice between a subcontractor who demonstrates better than average loss history, and a subcontractor who has earned a debit (greater than 1.00) experience modification, the GC may elect to go with the “safer” subcontractor.

Bernie Quinlan, CPCU, CIC, CRM, is a principal with Sullivan Group in Needham. He can be reached at (781) 5141331 or bquinlan@sullivangroup.com.

First Quarter 2011

ARAP ARAP is calculated in conjunction with an employer’s experience modification and applies only on a surcharge basis. ARAP penalizes claim severity, as opposed to frequency. An ARAP surcharge can range from 1.01 to 1.25 maximum and may compound the impact of the experience modification. That is, a 1.20 experience modification combined with a 1.25 ARAP surcharge results in a 50 percent premium increase (1.20 x 1.25 = 1.50).

What to Do? First and foremost, prevent accidents from happening! Work with your insurance company loss prevention representatives, as well as your own project managers and foremen to provide the safest possible workplace. Work with your insurer and agent to manage claims that do occur. Do not assume that claims are being handled in the most efficient manner. Appropriate medical care with the goal of returning an injured employee to work, even on modified duty, will mitigate the impact of claims on the experience modification and ARAP. Do not assume that the experience rating calculations are calculated correctly! There are many

opportunities for errors in the data submitted by insurance companies to the Workers’ Compensation Rating and Inspection Bureau of Massachusetts (for employers working only in the state) and to the National Council on Compensation Insurance (NCCI) for employers working in multiple states. Therefore, review the experience rating calculations with your agent and consider the following: •• Are payrolls and classifications correct? •• Has all data for the proper experience period been included? •• Is the claim data accurate? •• Have any claims been closed during the six-month period prior to the effective date of the experience modification/ARAP? If so, you may be able to revise the claim value if it works to your benefit. •• Have you worked on wrap-up projects? If so, check the accuracy of payroll/claim data very carefully. •• Is there common ownership with other entities? If so, combining the rating of the entities may be beneficial. •• Has there been a change in ownership accompanied by a change in operations resulting in workers’ compensation reclassification? If so, this might affect the inclusion/ exclusion of prior experience. •• To avoid surprises, ask your agent to forecast upcoming experience modifications/ARAP surcharges.

We know there’s more on your mind than the safety of a building alone. Construction is a business where risk is around every corner. You need an insurance company that understands that. Not just from an insurer’s perspective, but from yours. Acadia. We’re closer to your business. Visit acadiainsurance.com or contact your local independent agent for more information about the ASM Safety Group and Dividend potential.

Maine • Connecticut • New Hampshire • Massachusetts • New York • Vermont

ACAD-0137 ASMAD4.75x4.75.indd 1

Pavilion Views Surface Prep and Leveling as an Art and a Science We provide and install an almost unlimited choice of the best floor coverings but they can be only as good as their sub floor. And that’s where we really shine. We take a craftsman-like approach to the technology of sub floor preparation and utilize the very latest in eco-friendly calcium aluminate and hydro-gel levelers. In addition, we evaluate the moisture content and can apply Treat-Proof™, a colloidal silicate treatment, also ecofriendly, that will create a permanent barrier to prevent moisture and other contaminants from coming to the top. Would you like to learn more? Call us before your next project to find out how you can see our latest presentation on surface preparation and moisture control.

Pavilion Floors 90 Commerce Way Woburn, MA 01801 Ph 781.933.8500 Fx 781.932.8844 E info@pavilionfloors.com www.pavilionfloors.com

A workers’ compensation experience rating not only affects a contractor’s cost of doing business, it may also impact his ability to get business. Pay attention to this important industry benchmark. s

12/16/10 3:53 PM

pavflrs_pc_thirdpg_3-11.indd 1

3/16/11 5:08:54 PM The Professional Contractor 15

Art Work of

Members Celebrating at the Biennial Dinner Gala

On April 5, 2011, over 250 members and guests gathered at the Museum of Fine Arts in Boston for an enchanting evening of tributes, distinguished guests and an exclusive viewing of the all-new Art of the Americas wing. This was the first event to be hosted by a construction organization in the new wing, which was constructed almost entirely by ASM members. The event also honored Edwin Fremder, recipient of the Joseph M. Corwin Lifetime Achievement Award (see story, page 18). A special thank-you to the event’s sponsors, listed on page 19. The evening also introduced ASM’s newly elected board of directors and officers. David G. Cannistraro, vice president of

First Quarter 2011

J.C. Cannistraro of Watertown, was elected as the association’s president, succeeding Sara A. Stafford of Stafford Construction Services. David acknowledged the successes the association achieved under Sara’s leadership and pledged his commitment to strong leadership, increased recognition for the association and continued efforts toward building ASM’s membership. Richard R. Fisher of Red Wing Construction was elected as president-elect, while two new vice presidents were elected, including Joseph H. Bodio of Lan-Tel Communications, Inc. and Steven P. Kenney of N.B. Kenney Co. They will join returning vice president Gregory A. Porfido of Mark Richey Woodworking & Design, Inc. Rounding out the officer slate are Russell J. Anderson, Southeastern Metal Fabricators, Inc., serving as treasurer, and Sara A. Stafford, Stafford Construction Services, Inc. and Scott H. Packard, Chapman Waterproofing, Co., returning as past presidents. In addition, 19 other members will sit on this new board for a two-year term, until the next Biennial Dinner in 2013 (see sidebar, page 19).

1 2

3 4 5 6 7 8 9 10

Having a good time – ENE Systems and friends. New president Dave Cannistraro arrives at the MFA with his wife, Dira, and guests. Board member Mike Kosiver, second from left, and guests. Edwin J. Fremder, Esq., receives the Joseph M. Corwin LifetimeAchievement Award, presented by Dave Cannistraro. PHCC Delegation – Hugh Kelleher, John Cannistraro and his wife, with new ASM board member Nancy Shine. The Lynches from Enterprise Equipment and Guarraccinos from JM Electrical take time out for the camera. Gallery stroll – ASM members view the masterpieces on display in the new Art of the Americas galleries. Andy Baer Jazz Quartet entertains at the reception. ASM vice president Greg Porfido and Mark Richey of Mark Richey Woodworking & Design. Board members Joe Bodio and Frank Smith with member Carli Wigdor, center, and guests.

The Professional Contractor

Edwin J. Fremder, Esq. Receives Distinguished Joseph M. Corwin Lifetime Achievement Award

ith a law degree from Case Western Reserve, Ed Fremder moved to Boston in 1977 and joined the law firm of Corwin & Corwin. Knowing nothing about construction at the start, he quickly became one of the most respected construction lawyers in the state. Over the course of 33 years, he has represented subcontractors in hundreds of cases, in and out of court, winning good outcomes through his characteristic preparation, persistence and passion. For more than half that time, he has also served as counsel to the Associated Subcontractors of Massachusetts, following in the footsteps of the firm’s founders, Joe and Sally Corwin. As counsel he advised ASM leaders on a broad range of legal issues, and represented ASM on Beacon Hill. Over the years, he testified at hundreds of legislative hearings, wrote countless letters in support or opposition to legislative proposals, and worked with board and staff to formulate ASM’s legislative strategy. In the process he helped ASM earn a reputation for reliability and credibility among legislators, contractors and ASM members alike. Ed was instrumental in helping ASM defeat bills to repeal the filed sub bid law, and played a key role in crafting the landmark Construction Reform Law of 2004. He also helped lay the groundwork for ASM’s crowning achievement – the 2010 Prompt Pay law. In retrospect, Ed proudly reflects on his role as counsel not as a job, but as an honor. Throughout the years, he has remained committed to the philosophy set by Joe and Sally Corwin over 50 years ago, that the firm and the association exist to protect the rights of subcontractors – from the little guys to the big players. He echoes the sentiment of Sally Corwin, who firmly believed, “there is never a time when you don’t have time” to address the issues faced by subcontractors. To Ed, representing ASM was like having 300 additional clients; it was about fighting the battle for them every day, and not letting them down. And he never has. In recognition of his years of service, ASM is proud to present Ed Fremder with the prestigious Joseph M. Corwin Lifetime Achievement Award. This award was created in honor of its first recipient, who has often been called the father of construction law in Massachusetts. Awarded only six times in 16 years, it is presented to individuals who have shown leadership and dedication to the Associated Subcontractors of Massachusetts and the subcontracting industry.

4 1 2 3

First Quarter 2011

Changing of the guard – new president Dave Cannistraro expresses appreciation to outgoing president Sara Stafford. ASM’s new vice president, Steve Kenney, with award recipient Ed Fremder and wife Linda Corwin. A formal portrait of Kenneth Castellucci & Associates, which did all the stonework for the new wing, and all of the old wings, as well. New board member Nancy Salter, center, with her team from Frontline.

Newly-Elected ASM Board of Directors, Serving Through 2013 Officers David G. Cannistraro J.C. Cannistraro, LLC President Richard R. Fisher Red Wing Construction President Elect Joseph H. Bodio Lan-Tel Communications, Inc. Vice President Steven P. Kenney N.B. Kenney Co. Vice President Gregory A. Porfido Mark Richey Woodworking & Design, Inc. Vice President Russell J. Anderson Southeastern Metal Fabricators, Inc. Treasurer Sara A. Stafford Stafford Constructions Services, Inc. Past President Scott H. Packard Chapman Waterproofing Co. Past President Directors George A. Allen, Sr. Archer Corporation Steven T. Amanti E. Amanti & Sons, Inc. Clement P. Clare Xcel Fire Protection, Inc. R. Lindsay Drisko ENE Systems, Inc. Roger A. Fuller R & R Window Contractors, Inc.

William M. Gillespie Robert W. Irvine & Sons, Inc. Wayne J. Griffin Wayne J. Griffin Electric, Inc. Robert B. Hutchison The Cheviot Corporation Dana E. Johnston, Jr. Fall River Electrical Associates Co., Inc. Michael S. Kosiver Lockheed Window Corp. William J. (Mac) Lynch William F. Lynch Co., Inc. Susan Mailman Coghlin Electrical Contractors Erik S. Maseng Viking Controls, Inc. James B. Miller Salem Glass Company Louis J. Sannella McGladrey & Pullen LLP Nancy H. Salter Frontline, Inc. Ann T. (Nancy) Shine JF Shine Mechanical, Inc. Frank J. Smith Eastern Insurance Construction Division Lee C. Sullivan A & A Window Products Inc. Carolyn M. Francisco, Counsel Corwin & Corwin LLP Monica Lawton, CEO ASM

Biennial Sponsors The Copley J.C. Cannistraro, LLC Acadia Insurance Company and Berkley Surety Cross Insurance Wakefield Stafford Construction Services The Sargent Corwin & Corwin LLP The Homer The Cheviot Corp. Eastern Insurance Enterprise Equipment Co. The Cassatt DiTullio Insurance Agency Inc. JM Electrical Co., Inc. LAN-TEL Communications Lemoi Erectors, Inc. McGladrey & Pullen, LLP Sullivan Group William F. Lynch Co. Viking Controls The Hopper J.F. Shine Mechanical N.B. Kenney Co. NECA/National Electrical Contractors Association, Greater Boston Chapter Plumbing, Heating, Cooling Contractors Association of Greater Boston Salem Glass Company Southeastern Metal Fabricators The Wyeth Delaney & Associates ENE Systems, Inc. M.L. McDonald Sales Co. The Professional Contractor

LEGAL BRIEFS

By John M. Curran

Mechanic’s Lien Law Amendments New Lien Rights for Design Professionals

he Massachusetts mechanic’s lien statute, M.G.L. c.254, has long provided payment security to contractors, subcontractors, suppliers and laborers who furnish labor and/or materials to private construction projects in Massachusetts. Historically, design professionals rendering services to these very same construction projects were not afforded any lien rights under the statute. However, on Jan, 5, Gov. Deval Patrick signed and approved c.424 of the Acts of 2010 amending the lien law and extending mechanic’s lien coverage to design professionals and those who provide professional services to design John Curran is a partner at Corwin & Corwin LLP, one of the oldest law firms in New England, dedicated solely to construction law, and counsel to ASM since 1950. He can be reached at (617) 742-3420 or jcurran@corwinlaw.com.

professionals. This amendment goes into effect on July 1, 2011. Design professionals are defined by the statute as an architect, professional engineer, licensed site professional or land surveyor who is licensed or registered as such in the commonwealth. Corporations and partnerships practicing these design professions are similarly included in the statutory definition. In the traditional construction delivery method where the contractor and design professional both independently work directly for the owner, lien protection is now available to design professionals provided they have a written contract with the project owner or the owner’s representative on a private construction project. Similarly, persons who furnish professional services to or under the supervision or control of such a design professional are entitled to a mechanic’s lien. (The statute defines “professional services”

Determined and Proud The Rashi School Dedham, MA Photo Credit: Robert Umenhofer

We are determined to do our best, on every aspect of every job, and take pride in the results. This commitment to quality is what drives the Griffin team as we continually work to earn our clients’ recognition and respect. Corporate Headquarters: 116 Hopping Brook Road Holliston, MA 01746 (508) 429-8830 Regional Offices: Charlotte, NC Raleigh, NC Duluth, GA Pelham, AL

MA Lic A8999

First Quarter 2011

www.waynejgriffinelectric.com

to include: programming; planning; surveying; site investigation; analysis; assessment; design; preparation of drawings and specifications; and construction administrative services.) Such professional service providers may file liens as long as: they have written subcontracts with design professionals who, themselves, are entitled to a lien; and their engagement has been approved in writing by the owner or an authorized representative. In the design-build context, design professionals working with or for a contractor or subcontractor are entitled to a lien provided such â&#x20AC;&#x153;professional servicesâ&#x20AC;? were rendered pursuant to a written contract. Like contractors, subcontractors and suppliers, all design professionals and professional service providers must strictly comply with the timing and procedural requirements for filing and enforcing a lien. The only meaningful distinction between the contractor/subcontractor/ supplier lien and the design professional lien is the order in which competing valid liens are satisfied on a traditionally-delivered project where the design professional and contractor each work directly and independently for the owner. The recent amendments do not disturb the long-standing rule that all contractor, subcontractor and supplier lien claimants, regardless of the order in which their liens are filed, share on a pro rata basis should there be a sale of the property and the proceeds from the sale are insufficient to satisfy all the liens in full. As amended, the statute specifically provides that the liens of design professionals on traditionally-delivered projects shall be paid only after payment in full of the claims of other lien creditors. Therefore, in the event of a sale of the property and competing liens, the design professionalâ&#x20AC;&#x2122;s lien on a traditionally-delivered project takes a back seat to that of the contractor, subcontractor and supplier and is only satisfied if the other non-design professional liens have been paid in full. On a design-build project, a design professional working for a contractor or a subcontractor is entitled to be included in the pro rata distribution amongst the contractors, subcontractors and suppliers and does not have to wait until all other liens are satisfied in full. s

The Professional Contractor

Technology

By Chris Goguen and Gail Severt

8 Winning Steps to Remodeling Your Financial Systems

rriving at the conclusion that your financial software needs to be updated brings mixed emotions. Changing financial application software can be inconvenient and time consuming – not to mention costly. However, in the long run, it is in the best interest of your organization to move to a platform that is technologically up to date and provides a 360-degree view of your business. Newer systems offer faster and easier access to data, which will improve your response time to problems. Decreasing the redundancy of data collection, streamlining processes and reducing the transfer of paper

Avoid major deviations from the original software architecture. Modifications will cost you money now, as well as each time you upgrade the system. will improve productivity and increase efficiency. The centralized process of transactions in one system will allow for real-time view of information. We live in a complex world – your software should support this new paradigm. The following eight steps outline what you need to do in order to prepare for a system upgrade: 1. Get consensus. Confirm that all of the departments that would be disrupted by the new system implementation are in agreement that the change is a good idea. If they are not on board with the project, there is a high probability that the project will fail. Chris Goguen is a director at McGladrey, and Gail Severt is a consultant for McGladrey in Boston. Goguen can be reached at chris.goguen@mcgladrey.com and Severt can be reached at gail.severt@mcgladrey.com, or contact McGladrey at (617) 912-9000.

First Quarter 2011

2. Clean house. Take the time to sift through all reports that are processed each month, quarter or year to determine their usefulness. Next, take a look at your routine. Do some of your processes follow a certain pattern due to limitations within the current system? Are they outdated? Take an aerial view of your processes to determine their relevance. Lastly, sort through the master files and mark vendors, customers or items that are obsolete – you don’t want to bring outdated data into your new system. 3. Design. Now that you have buy-in from the employees who will be using the new system and you have cleaned up your monthly, quarterly and yearly reports, you can decide what it is you want from your new system. You can also decide which of your existing list reports, data inquiries and processes should be included in the new system. Take this time to recognize that technology has grown exponentially since you implemented your current application. What new software features should you take advantage of? What features are missing from your current software that you would like to see in your new software? In addition, create a list of those features that are nice to have, but you can live without. Even if you decide not to implement those features in phase one of the project, you should be aware of future needs so that the new design can accommodate them. 4. Research. Before you contact a software vendor, you should do some homework. What systems are other companies in your industry using? What systems are available? The internet is a good place to begin your exploration. There are software packages that cater to specific industries such as construction, non-profit, or process manufacturing. However, there are other applications known as enterprise resource planning (ERP) software solutions which address the core functions of a business. These types of systems are heavily weighted to the finance end of the house such as general ledger, accounts payable, accounts receivable and cash management. Many ERP applications also have a strong secondary function in areas such as project accounting or manufacturing. The choice you make depends on the specific needs of your company. In addition to

researching the application options, carefully evaluate the service providers available. It is important to choose a service provider who can help you at all phases of the implementation and effectively guide your organization through strategic challenges. 5. Blueprint. Outline and document your requirements and processes. The structure of any implementation is determined by the processes and data required by your company. You gathered information during the design phase of the project; it is important to record those discussions in writing. The documentation process can have a significant impact on the outcome of the implementation. New software will magnify the quality of your processes. Good processes are made better, and bad processes are made worse. If you forgo the cost of creating the blueprints and decide to improvise, you will end up with a poorly constructed software application. 6. Interview. Once you have decided on software applications that appear to fit your business requirements, invite the software vendors in for an interview and demonstration. Share the information that you accumulated in your design phase. A good salesperson will take this information and create a demonstration tailored to your company. Focus on the functionality of the software but also the competency of the consulting practice. It is the SullGroupTPC 1/29/09 3:49 PM Page 1 consultant’s job to understand your needs and to

ensure that they are factored into the design of the implementation. You are looking for a consultant who will listen and give you options around the best course of action. At this point, you have selected the software and the consulting team. Here are a few additional suggestions to ensure a positive outcome: 7. Stay involved. It is imperative that you stay involved with the project through implementation. Someone within your organization should take ownership of the installation. As the point person, he or she should understand the system set-up, transaction flow, data structure and reporting capabilities as well as coordinate the needs of all of the departments affected by the implementation. A department may make a request that conflicts with the needs of another department. Funneling requests through this central person will minimize these conflicts. 8. Budget. You will spend more than you budgeted for if you a) don’t have enough resources to assist with the implementation; b) are swayed by incremental additions; or c) are unprepared. Be sure to allocate the appropriate time and resources to the project. Schedule the implementation

Insurance Relationships:

continued on page 29

BUILT TO LAST

Risk Management • Employee Benefits • Property & Casualty Insurance • Bonding • Financial Services

Many of our clients in the commercial building industry have been with us for decades... Risk Management...more than just Insurance.

Work with an Owner.

Sullivan Group professionals will assist your company with contractual risk transfer, selection of appropriate deductible and retention levels, claims management, and loss control.

Our 20 18 principals directly service the risk management and insurance needs of our clients.

Access to Markets. Sullivan Group enjoys strong relationships with all of the major underwriters servicing the construction industry.

1.800.649.1553

•

www.sullivangroup.com

One Chestnut Place • Worcester, MA • 01608-2804 • 508-791-2241 72 River Park • Needham Heights, MA • 02494-2631 • 781-449-8323

The Professional Contractor

SURETY By Jeff Hendricks, Paul Healy and Tony Pirri

The Surety Market – 2011 and Beyond Seeing the road ahead is easy. Navigating the conditions is a challenge!

n today’s market, more project opportunities require subcontractors to provide a bond, but many subcontractors do not have access to a surety facility. For those who do have access, we expect the market conditions to deteriorate in the near future, which may impact their ability to bid jobs. This article provides an overview of the surety market and suggests some steps to help subcontractors better position their businesses to ensure the availability of bonding. Forecasting the state of the surety market is not difficult when one understands the conditions which affect surety companies, including the overall state of the global economy, the construction economy, the political climate, the insurance companies’ performance and specific surety line results.

First Quarter 2011

Economy The market for jobs, consumer confidence, real estate and private investment has been constrained over the last two years. The most optimistic view is that 2011 will be flat. There are still concerns about a stalled economy involving slow job growth and a long workout of mortgage problems. Private sector investment has not gained the hoped-for momentum from the government stimulus spending and the much-hyped “shovel-ready” projects. We do not see the leading indicators of projects in the pipelines suggesting a robust market recovery anytime soon. At best, there is a flat market for public construction, while private spending will remain soft with a few encouraging pockets (e.g., health care and education), but with the continued drag of residential.

Protection starts here

Public spending is expected to decline in 2012 as public fiscal restraint takes hold. The recent elections shifted political sentiment toward less public financial intervention. The value of put-in-place construction, according to the U.S. Census Bureau in 2006, was $1.2 trillion. The current estimate for 2010 is $802 billion, down $400 billion. Residential has led the way down from $647 billion in 2006 to the current estimate of $229 billion, a drop of 64 percent. Over that same period, public spending has actually increased from $255 billion to $320 billion, up $65 billion. Federal construction spending increased from $16.5 billion in 2006 to just over $30 billion in late 2010. This is a reflection of government stimulus spending, and is evident in several surety companies reporting growth in their top line in 2010, as virtually all public jobs are bonded by law. Construction unemployment, however, primarily impacted by what has happened in the residential sector, remains stubborn at 18.8 percent,

and here.

DeSanctis Insurance Agency

Serving the Bonding and Insurance needs of the N.E. construction industry for over 35 years. Ad a m De Sa n c t i s Gre g o r y Ju w a Ja m e s A xo n Mi c h a e l Ca rn e y Wi l d e r Pa rk s Mi c h a e l Gi l b e r t Br y a n Ju w a Da v i d B o u t i e t t e Pa u l Pa t a l a n o Dick Caruso DeSanctis Insurance Agency, Inc. 36 Cummings Park Woburn, MA 01801 (781) 935-8480 www.desanctisins.com

continued on page 30

ASM Membership

What’s in it for you?

Who we are The Associated Subcontractors of Massachusetts (ASM) is a non-proﬁt trade association representing subcontractors, suppliers and service providers across the Commonwealth. Established in 1950, we are the only organization that addresses the business objectives of all subcontractors, including union and open-shop. We provide the best legislative advocacy, legal resources, education, networking and news and information to our more than 400 members.

How we add Value • Be the first to learn about important legal and legislative policies that impact your business – and benefit from one of the most effective lobbying teams on Beacon Hill. • Attend top-rated seminars addressing industry related trends, changes and regulations.

Associated Subcontractors of Massachusetts, Inc.

One Washington Mall, 5th ﬂoor Boston, MA 02108 (617) 742-3412 | www.associatedsubs.com

• Receive important information and news delivered to you in a variety of formats. • Get noticed with complimentary promotional opportunities in The Professional Contractor. • Reputation – ASM has rapidly earned a reputation for “getting things done” within the subcontractor, general contractor and legislative circles.

Become a Leader – Join Today Be part of the most recognizable and respected subcontractor organization in the Commonwealth and enjoy the many beneﬁts that membership has to oﬀer. Feel the pride of being part of an organization dedicated to subcontractors and their businesses. The Professional Contractor

Member News Archer Corporation (Malden) is pleased to announce that company founder, principal and treasurer George Allen will be the recipient of the Volpe-Eagan Construction Safety Award presented by The Construction Institute (TCI). Archer Corporation, known for providing quality interior construction services, combines “new world technology” with “old world craftsmanship” and works for some of the most prestigious owners in the area. Allen has overseen his company’s exemplary safety program for 40 years and holds several OSHA instructor certifications. He is also trustee of the Boston Carpenters Apprenticeship & Training Fund (BCATF) and is an avid promoter of safety training programs for all Boston-area carpenter apprentices and journeypersons. Allen also serves on the ASM board of directors. The Volpe-Eagan Safety Awards are conferred in honor of Patrick Volpe and Edward F. Eagan, both pioneers in promoting health and safety in the construction industry.

DePaoli Mosaic Company (Randolph) is pleased to announce that, under the leadership of Leslie Morgan Carrio, the company has been certified by the Commonwealth of Massachusetts’ Supplier Diversity Office (formerly SOMWBA) as a WBE/DBE Terrazzo and Seamless Flooring contractor. DePaoli Mosaic Company has been installing Terrazzo throughout New England since 1890.

Eastern Insurance Group, LLC (Natick) announced the appointment of Peter K. Brockway, ARM, CIC, as senior vice president. Brockway joins Eastern Insurance after spending 35 years working at Liberty Mutual, where he was a senior account executive in its national sales department and was a member of Liberty’s Hall of Fame. “Eastern Insurance is excited to welcome Peter to our team,” said Hope Aldrich, president and CEO of Eastern Insurance. “Peter brings a wealth of experience to Eastern Insurance from working in a variety of insurance fields for many years.”

Longden Company, Inc. (Hudson) recently completed the installation of 2,500 square feet of Tate raised access flooring for Genzyme’s tiered lecture hall in Cambridge. The underfloor cavity was used for cable management and as a plenum, distributing supply air through the perforated fascia plate. While access floors have been traditionally used in data centers, server rooms and general office areas, they also have use in non-traditional spaces such as auditoriums, classrooms and libraries. Longden has completed similar tiered flooring projects for Wellington Management and Dartmouth College, and is constructing tiered flooring at North Shore Community College and Harvard University.

McGladrey (Boston) announced that seven nonprofits were presented with over $70,000 from the 2010 McGladrey Culinary Challenge for Charity. The Culinary Challenge, hosted in December, paired seven charitable organizations with renowned Boston-area chefs and media personalities as celebrity sous chefs. It was attended by more than 700 guests and executive leaders of the seven charities. Each of the participating nonprofits received $8,800 from the McGladrey Foundation. As first place winner of the Culinary Challenge, Morgan Memorial Goodwill Industries received an additional $7,500 and as second place winner, The Genesis Fund received an additional $2,500.

United Solutions Inc. (Marlborough) has hired Douglas Lewanda to fortify its commitment to provide software solutions for construction, property management and service businesses throughout New England. Lewanda will provide training and customization services for Sage Timberline Office software, an integrated suite of products used to manage all financial and project management functions of a construction company. Lewanda has a background providing CFO/controller and consulting services to small construction businesses across the Northeast. 26

First Quarter 2011

Pavilion Floors (Woburn) recently announced that it was the recipient of the Best in Class Safety Award from the DanaFarber Cancer Institute in Boston. Pavilion received the award for its stellar safety record when working with Walsh Brothers, Inc. on the Yawkey Center for Cancer Care. This 275,000 square foot project rises 14 stories on the Dana-Farber campus and greatly expands their patient care capabilities. The award recognizes Pavilion’s commitment to safety and environmental issues.

Floors installed by Pavilion at the Yawkey Center for Cancer Care.

Left: The Vermont Department of Public Safety’s new forensic laboratory. Right: The new five-story residence hall at Salem State University.

Wayne J. Griffin Electric, Inc. (Holliston) is proud to have worked on the recently completed Orange Hall at Salem State University. The new five-story residence hall includes a dining facility and kitchen, several common area lounges, fitness, laundry, game and conference rooms, as well as graduate and faculty apartments. Griffin Electric was responsible for installing the entire electrical distribution system, which included installation of lighting controls that utilized daylight harvesting and dimming systems to assist in the achievement of LEED Gold certification. In Waterbury, VT, the Griffin team provided all power, fire alarm, lighting and security systems for the Vermont Department of Public Safety’s new forensics laboratory, a 31,500-square foot, three-story structure which opened last fall.

Left: Workers atop the Statehouse. Right: Everett High School.

Greenwood Industries Inc. (Millbury) recently completed the entire re-roofing of the Massachusetts Statehouse (left) – a two-year project completed under budget and sooner than expected. For years, water leaking through the roof was collected in buckets. Now, thanks to new copper sheathing and specialty PVC roofing, the roof is watertight, the Statehouse is dry, and the buckets have been put away. The Statehouse project topped off a successful year that earned the company its fourth appearance on Inc. magazine’s list of 5,000 fastest-growing private companies. Founded in 1992 and now under the leadership of Douglas Klein, the company has worked on many high-profile projects and has been named by Firestone as a master contractor for 2011. Other recent projects include Everett High School (right) and GTech in Providence. s

The Professional Contractor

Photo Gallery – ASM Events Projects in the Pipeline, Jan. 20 1 Panelists for the program: From left, Michael

Lambert and Michael McKimmey of Division of Capital Asset Management (DCAM); John Jumpe of Mass. School Building Authority (MSBA); Edward Adelman of Mass. State College Building Authority (MSCBA); and Brenda McKenzie of the Boston Redevelopment Authority. 2 ASM members at a Jan. 20 seminar listen as panelists review billions of dollars in public and private work on the horizon.

ASM Safety Roundtable, Feb. 15 3 Eric Stalmon of Marr Scaffolding reviews

new OSHA crane and derrick rules. 4 Jean Manoli of the Mass. Division of Occupational Safety alerts members to changes and new enforcement initiatives at OSHA. 5 Members listen intently, reflecting the seriousness of the issues under discussion.

Economic Outlook Dinner Meeting, Feb. 9 6 Members reconnect and recharge. 7 Speaker Mark Vitner of Wells Fargo shares

his economic forecast for 2011, locally and nationwide. 8 Attendees listen for clues to an economic rebound.

“Public Bidding 101” seminar, March 2 9 Attorneys Joe Pisarri and Charles Ahern of

Corwin & Corwin cover the basics of public bidding and traps for the unwary. 10 Attendees get a crash course in public bidding.

THE PROFESSIONAL

A Publication of the Associated Subcontractors of Massachusetts, Inc.

First Quarter 2011

8 Winning Steps continued from 23

so that it does not conflict with any major events like year-end, the busy part of the sales season, or other major initiatives. The project should be a priority for those involved, as well as for management. As for the incremental costs, evaluate the purpose and return of the expenditure. It might be worthwhile to expend a little extra money to implement imbedded workflow and alerts – in the long run it will save time and money. However, avoid major deviations from the original software architecture. Modifications will cost you money now, as well as each time you upgrade the system. The new system will offer the ability to collect all kinds of data about different types of transactions. Remember, this comes with a cost; someone has to input the information correctly for the data to have meaning. Lastly, being unprepared can set a project back and escalate costs. Business processes and needs should be vetted well before the selection of the software. It is costly to make major changes in design after implementation has commenced. If an update to your company’s financial software is carried out correctly, the result can be an exceptional return on investment. It is important to keep these valuable steps in mind when you remodel your financial system. New, advanced and updated systems can provide quick and easy access to essential data, streamlined processes and be a substantial business decision for a growing organization. Always keep in mind the preparation, research and design work that must be performed – your company’s data is the core of your business operations. s

Do You and Your Accounting Firm Have the Same Goals? Your accounting firm should be working with you to build a sustainable, successful business. They should understand the unique nature of the construction industry and how to plan for uncertain market trends. You should feel comfortable that they are large enough to handle anything that relates to the financial health of your business, but small enough to deliver great service. We are Rucci, Bardaro & Barrett, PC, the right size accounting firm for construction businesses that need much more than bookkeeping and a lot less than an army of consultants. To find out if we are the right size for your construction business, call us at 781-321-6065, or go to our website at www.rb-b.com.

Certified Public Accountants and Business Advisors

THE RIGHT SIZE ACCOUNTING FIRM

A MEMBER OF RUSSELL BEDFORD INTERNATIONAL WITH AFFILIATED OFFICES WORLDWIDE

MEMBER OF THE

FORUM OF FIRMS

Reach general contractors, subcontractors, builders, developers, building owners, designers, engineers, suppliers, and other major players in the commercial, industrial, and residential areas. Attract new customers through The Professional Contractor. CALL NOW to reserve advertising space call 617.896.5344 or e-mail custompubs@thewarrengroup.com

The Professional Contractor

The Surety Market continued from 27

down only slightly from 19.4 percent a year ago, according to the Bureau of Labor Statistics. The Markets Surety is an important niche business within the largest U.S. property and casualty insurance companies. The surety top line has been around $5 billion the last few years, as compared to the overall P&C insurance industry top line of approximately $420 billion, which comparatively equates to a little more than 1 percent. While small from a top line perspective, it has been highly profitable over the last several years, with low loss ratios (premium/loss payments). The top 10 surety companies write 65 percent of the industry premiums, so it is a fairly concentrated market. We predict losses ratios will increase in late 2011 and into 2012/13, with a tripling of the loss ratio from the current high teens to the mid-50s as a distinct possibility over the next few years. Surety losses are the result of contractor default, and unsurprisingly, the industry expects default rates to be highest among smaller contractors and specialty trades. Greater underwriting scrutiny will focus on contractors with shorter duration backlogs who may have been forced to consider lower margin work or work in new territories or sectors; for example, subcontractors who focused solely on private and/or residential projects and are now competing for public work as well. Underwriting and Capacity Surety companies are focused on contractual terms governing liabilities. They are also very focused on subcontractor exposures, pre-qualification and risk management of the default risk. Many are requiring subcontractors to secure bonding or have other techniques deployed, such as joint checks, retainage and other traditional tools. Financing of private jobs is also receiving extra scrutiny. There is plenty of capacity. Reinsurers have also had good experience, and reinsurance is readily available. In the last surety hard market of the early 2000s there was a call for co-surety after capacity exceeded $250 million. Now several markets are willing to extend credit capacity of $750 million or more alone, and explore co-surety capacity in the $2 to $3 billion range. We have also seen risk appetite grow among the largest surety companies. New capacity is Willis is a leader in the construction broker industry with more than 60 offices in North America, offering expertise to the construction industry locally, nationally and globally. Contact Jeff Hendricks at jeff.hendricks@willis.com or (617) 351-7575; Paul Healy at paul.healy@willis.com or (860) 841-4427; and Tony Pirri at anthony.pirri@willis.com or (617) 351-7578.

First Quarter 2011

entering the market in 2011. The key is positioning your company to grow (and survive in some cases) in order to compete for needed surety capacity. A Few Survival Tips •• Over-communicate with your underwriters and brokers. •• Be realistic about revenue and margin opportunity, and manage overhead. •• Carefully approach new markets, including Federal work and other states or sectors. •• Do not get backed into accepting work too cheap or terms too onerous – a bad job has a long life and high cost. •• Work with professionals – brokers, bankers, CPAs, lawyers and sureties – this is not a market for the inexperienced. •• Be open to acquisition opportunities – now may be a good time to capitalize on advancement of long term goals. Managing Down the Road Inevitably, surety losses will increase. It is also quite normal, based on prior economic cycles, for surety losses to lag behind the worst economic points by three to four years. It takes time for aggressive bids (has anyone heard someone say “their bid was below our costs?”) to turn into losing jobs and impact cash flow, balance sheets and income statements. The growth years in the mid-2000s provided the opportunity for many balance sheets to build strong reserves. It will take some time before losses eat away at the equity and draw sureties into the picture. It is also clear that revenue opportunities with acceptable margins will be fewer. Organizations need to adjust structure and strategy accordingly. Net income, which bolsters balance sheets, will be considerably less compared to the recent years of “record” reporting. This does not mean that good organizations, which plan accordingly, will not survive and come out stronger. We also expect to see acquisition opportunities, since those with short-term goals will not want to wait for the market to properly rebound, and those with capital and longer-term horizons will see chances to get into good businesses and markets. Large multinational firms have been quite active in the U.S. market, looking at acquisitions and positioning for possible growth in the public-private partnership model, which is more common outside of the U.S. Subcontracting companies today would be well advised to work closely with their surety advisers to manage the current market and be well positioned for future opportunities. s

General Contractors · Trade Contractors · Homebuilders · Specialty Contractors · Surety

BUILDING

CONSTRUCTION DIVISION

A RISK PLAN THAT’S RIGHT FOR YOU.

Your business is unique. Before creating an insurance solution for you, we work hard to understand your needs. As one of the largest independent insurance agencies in New England, we have unrivaled access to regional and national carriers. This enables us to design the most competitive and comprehensive insurance program for you. You get insurance that’s right for your business, and only your business.

insurance Eastern Insurance Group LLC is a wholly owned subsidiary of Eastern Bank.

8 0 0 -3 3 3 -72 3 4 w w w. e a s t e r n i n s u r a n c e . c o m

Mazonson LLC Helping You Build Your Future Proud Sponsor ASM / Acadia Insurance Program

Mazonson LLC

MANAGING RISK. EMPOWERING GROWTH.

701 Edgewater Drive, Suite 230 Wakefield, MA 01880-6236 800.531.5211 www.mazonson.com