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CONSTRUCTION EXECUTIVE
NOVEMBER 2018
DEPARTMENTS
8 Industry Insider
10 In Brief
12 Construction Markets
16 Safety
20 Technology
96 Business Development
100 Legal
102 Community Outreach
104 Viewpoints
FEATURES
37
Special Section:
COVER STORY 16th Annual
24
Contractors’ Guide to
AIRPORT PLANS Surety Bonding
Manhattan Construction
TAKE FLIGHT
A best practices checklist for busy
contractors, a legislative roundup, the
power of arbitration, insights on the
talent war and more.
American airports have nearly $100 billion in capital needs through
2021 for terminal building, airfield capacity, reconstruction and
surface access.
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construction-executive
6
“I thought you’d always stick by my side...”
EDITORIAL
T
Associated Builders and Contractors
editor@constructionexec.com
his month’s election could significantly impact the Michael D. Bellaman, Publisher and
nation’s infrastructure plans for the foreseeable ABC President/CEO
future. At the beginning of the year, the White Lauren Pinch, Editor-in-Chief
Joanna Masterson, Senior Editor
House issued guidelines for a robust investment Maggie Murphy, Digital Editor
in, and a transformational approach to, enhancing
U.S. highways, bridges, tunnels, railways and water DESIGN AND PRODUCTION
The YGS Group
supplies. Will Congress now take on this challenge? (717) 505-9701
While this debate moves forward, turn to page 24 for Mike Vucic, Senior Art Director
a look at what is propelling aviation construction and
ADVERTISING
how airport authorities and contractors are advancing delivery and building MagazineXperts LLC
methods while capitalizing on technology. In the words of one experienced (973) 383-0888
contractor, the tight-knit dberry@magazinexperts.com
Donald R. Berry, National Sales Manager
community of aviation con-
I’m always struction, firms only get repeat
business by doing a great job
REPRINTS
reprints@magazinexperts.com
Michael D. Bellaman
Publisher
8
INBRIEF N.J. Law Expands
P3s; Includes
Prevailing
Wage and PLA
Requirements
GOVERNMENT ENTITIES IN
New Jersey that enter into public-private
partnerships to help finance public
construction projects are now required
to utilize a project labor agreement and
pay state prevailing wages, among other
requirements. Previously, P3s were only
available to state and county colleges,
but did not contain prevailing wage or
PLA mandates.
The new law, Senate Bill 865, allows
the state and its subdivisions, including
counties, municipalities and school
districts, to enter into agreements with
private funding sources provided they
follow the additional mandates, such as
abiding by the state’s prevailing wage
law and utilizing a union-only PLA for
construction of the project.
10
INDUSTRY EVENTS
Prevailing Wage
CALENDAR
Repeal Leads to
Lower School Nov. 13-15
Construction Costs Procore Groundbreak
Austin, Texas
in West Virginia
FOLLOWING THE FULL repeal of West
Virginia’s prevailing wage law in 2016, a study
conducted by the University of Kentucky Center
for Business and Economic Research (CBER)
5½
Number of hours per week that
Nov. 14-16
Greenbuild International Conference
and Expo
found that total costs for public school construc- respondents spend hunting
tion in the Mountain State declined by more Chicago
down project data
than 7 percent. Additionally, the CBER found
no evidence that prevailing wage repeal had
any negative impacts on the safety or quality of
construction. Jan. 22-25
As noted in the study, public school construc- Poor Communication World of Concrete
tion costs in West Virginia were slowly rising
between 2008 and 2016, and then began to
and Project Data Las Vegas
reverse when the repeal took effect. Meanwhile, Carry $31 Billion
surrounding states’ public school construction
Price Tag
costs continued to rise. Feb. 4-7
According to the West Virginia Chapter of RESEARCH RECENTLY CON- Association of Equipment Distributors
Associated Builders and Contractors, these DUCTED by PlanGrid and FMI Corporation Summit
findings indicate taxpayers have saved, and will determined time spent on non-optimal Orlando, Florida
continue to save, roughly $1 million on each new activities such as fixing mistakes, looking for
elementary school built in the state. project data and managing conflict resolution
accounts for $177.5 billion in labor costs per
year in the U.S. construction industry.
The “Construction Disconnected” study
March 5-8
Work Truck Show
also found that rework caused by miscom-
Indianapolis
munication and inaccurate and inaccessible
information will cost the U.S. construction
industry more than $31 billion this year.
Other key findings include:
• On average, construction workers lose March 24-28
almost two full working days each week ABC Convention
dealing with conflict, solving avoid- Long Beach, California
able issues and searching for project
information.
• Miscommunication and poor project
7%
Decline in West Virginia
data account for 48 percent of all
rework on U.S. construction jobsites.
• More than three-quarters of respon-
public schools construction dents provide mobile devices to their
costs following prevailing project managers and field supervisors,
but less than one-fifth of companies
editor@constructionexec.com
wage repeal
consistently use apps aside from email,
text and phone calls to access project
data and collaborate with project stake-
holders. visit abc.org/newsline.
CONSTRUCTION
MARKETS
I
n late 2017, Holland’s Amster-
ments use predominantly brick and systems. Previously associated most their projects, while architects and
glass for commercial buildings, while commonly with small residential general contractors are drawn in
mixed-use and multifamily projects applications, we see these system by terrazzo’s sustainability,” he says.
use a variety of materials, from brick types increasingly utilized in larger “As a flooring system, terrazzo can
to cement-fiber clapboards and vinyl commercial projects, especially in help contribute to LEED credits.
siding to panelized or non-panelized renovations of older buildings.” Terrazzo becomes an attractive green
cementitious systems. Jonathan Hall, a marketing material due to its recycled content
“A lot of what we do to comply associate with Concord Terrazzo, such as post-consumer recycled
with energy codes involves innova- Charlotte, North Carolina, says glass, porcelain and concrete; low
tive materials that are invisible to terrazzo products are in demand, VOC emissions from epoxy resins;
the end user because they are hidden particularly for LEED projects. and local manufacturing sources.”
within the wall construction or “Terrazzo is considered one of the
behind a roof screen.” world’s first green flooring systems,” Tariff Tumult
As an example, Amenta cites an notes Hall. “Created in the 15th When talking architectural materi-
air vapor water barrier that combines century, Venetian marble workers als, there is an elephant in the room:
12
trade tariffs. It may take some time
to feel the full effects of impending In the short term, steel tariffs
tariffs on the building and construc-
tion industry, though some see clear probably won’t have much
indications already.
“In the short term, the steel impact on the construction industry.
tariffs probably won’t have much
impact on the construction indus-
But in the long term, builders will start
try,” comments Steve Conboy,
chairman and general manager
to look at mass timber as an affordable
of M-Fire Suppression, Inc., alternative.
Carlsbad, California.
“Projects under way or in the
final stages of design will proceed, the capacity to create new growth this year alone,” says Murray Rice,
with builders simply swallowing the timber quickly.” a principal with Richard and Rice
costs or passing them on to buyers. For some raw architectural Construction based in Deerfield
But long term, builders will start to materials, the effects from tariffs are Beach, Florida. “When you add
look at mass timber as an affordable already noticeable. “Lumber is up in the higher cost for steel and
alternative. The lumber tariffs are 10.5 percent since January. Rebar is lumber, the price to build a typical
easier to handle because we have even worse, jumping up 58 percent 2,500-square-foot single-family
13
CONSTRUCTION
MARKETS
products that are competitive with on the hierarchy of technologically Building Technology Guide is a
imported materials. advanced construction methodol- good representative of the overall
“Worldwide manufacturing will ogies—will gain market share well pulse of building materials selection:
always continue, but my hope is that before additive manufacturing does.” “The landscape of building products,
U.S. industry will learn to design a Modular construction in a factory- materials, components and systems
vertical creation-to-production line controlled environment, rather than has increased substantially in recent
within our own county,” he says. on a construction site, provides years. These advancements have
precision and speed, but still relies paved the way for the new design
The Rise of Additive largely on human labor; this allows and construction methods that
Manufacturing production to be easily adjusted, make buildings stronger, safer, more
The prevalence of trade tariffs adapted, modified and corrected. durable and more efficient.”
encourages the use of domestic pro- “I am not aware of any large-scale
duction, and even more self-reliance printers being heavily utilized in a Jim Romeo is a journalist focused on
with materials production that uses factory environment for the purpose technology and business topics. For
methods such as 3D printing. In of creating building units,” Amenta more information, visit jimromeo.net.
14
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Go to usg.com/productivity
safer and healthier jobsite for their Compliance Partnership. includes some of the elements of
employees. Companies that sign a “The CCP is centered around MOSH’s Voluntary Protection
SPECS agreement become SPECS jobsites; a general contractor Program, a cooperative partnership
partners and receive special incen- can designate a particular jobsite program open to general industry.
tives and assistance from MOSH. as a partnership site, but there “We have taken a lot of things
For example, MOSH agrees to give was no mechanism to recognize that are important in VPP—not
special considerations to SPECS subcontractors at all. And even just compliance, but also employee
members if they act promptly to with CCP, there was no mechanism engagement and training, and
abate any hazards that a MOSH to recognize general contractors as feedback on the real nuts and bolts
inspector may see on a jobsite. an enterprise,” says Frank Trujillo, of how safety programs should
vice president of risk management function to get the results you
Beyond Compliance at Miller & Long Co., Inc. Trujillo want,” Trujillo says. “It’s easy for a
ABC of Metro Washington previously worked in North company to make sure that it’s in
approached the Maryland Carolina, which has an enterprise- compliance and not doing anything
Department of Labor about two based recognition program. illegal. This takes it to that next
16
level, which is talking about how become SPECS partners, they must Diamond status and must provide
you protect your people.” provide a representative who will all their field supervisors with
“We were anxious to do this,” serve as a peer reviewer and help OSHA 30-hour training. Any
says Allen Stump, MOSH VPP mentor other contractors that want general contractor that wants to go
and SPECS coordinator. “It really to improve their safety programs. for the SPECS Level 3 designation
fulfills our mission to assure that “As you add people to the must first have earned recognition
every man and woman in the state process and the pipeline, you are at Level 2.
has safe and healthy working con- gaining mentorship resources,” Level 3 is a jobsite designation
ditions. It also gives us a chance to Trujillo notes. for general contractors. Those who
partner not only with the employ- A big part of the evaluation is a achieve a Level 3 SPECS rating can
ers, but also with the employees.” site visit to ensure that the com- avoid MOSH programmed inspec-
Stump says there are four ele- pany is properly implementing its tions for up to two years; this is an
ments that build comprehensive safety program. The reviewers inter- umbrella that covers all of the sub-
safety and health programs: lead- view supervisors and workers onsite contractors working on their site.
ership commitment, employee to ensure they are knowledgeable Level 3 partners also can receive
engagement from the bottom up about and follow safety procedures. onsite assistance from MOSH.
as well as the top down, hazard Once the peer reviewers are satisfied
analysis and prevention control, that the company really does have New Insights Into Safety
and safety training. an exceptional safety program, they No applicant for SPECS fails its
recommend to the state that the review. If the ABC peer reviewers
The Application Process SPECS application be approved. determine that a company still
Contractors and subcontractors MOSH then conducts its own has some safety practices that
are eligible for the SPECS program review and site inspection. If it need improvement, they suggest
if they are ABC members that are agrees with the recommendation, ways that the applicant can bring
contracted on a Maryland con- the contractor signs a SPECS agree- its safety program to the SPECS
struction project and that meet the ment with MOSH that lasts for level. The application is considered
requirements for gold, platinum one year. The ABC peer group and in process until it is approved by
or diamond designation in ABC’s the state will review each company’s ABC peer reviewers for presenta-
Safety Training Evaluation Process. programs every year, although not tion to MOSH.
To apply for SPECS, contractors to the same extent, to ensure that There is no timetable for an
must provide: the SPECS requirements are still applicant to reach SPECS status.
• a completed SPECS application, being met. Mentorship will continue as long as
which includes OSHA 300 and “One of the best things about necessary to ensure that the com-
300A reports for the past three SPECS is having a peer group pany’s safety goals are reached and
years and any partial for the that can take some of the pressure SPECS integrity is maintained.
current year; off the resources of MOSH and In June, Coakley & Williams
• a copy of their safety and health DLLR,” Trujillo says. Construction, Inc. became the first
plan; Level 1 and Level 2 SPECS des- contractor in the state to achieve
• calculations for DART and total ignations, available to both general the SPECS designation.
CONSTRUCTIONEXEC.COM
recordable cases; contractors and subcontractors, “It was refreshing to have this
• their OSHA establishment are enterprise recognitions that dialog with the state and to have
search; and apply to a company on any jobsite the interactions between them and
• a self-audit checklist. throughout the state. The primary our field personnel,” says Mike
The initial screening of SPECS difference between them is that a O’Quinn, senior project manager at
applications is done through a peer Level 2 SPECS partner must have Coakley & Williams Construction.
review group at the applicant’s local daily pre-task meetings, must have “It’s a 100 percent positive relation-
ABC chapter. Once contractors achieved ABC STEP Platinum or ship, and it fosters a tremendous
17
SAFETY
Scaffold Resource became It will be important going forward any money,” Drexel says. “We are
SPECS’ first subcontractor partner for the four ABC Maryland chap- trying to elevate the construction
in July. Bill Drexel, the compa- ters to remain consistent in their safety of every contractor involved
ny’s director of safety, was one of reviews and recommendations, on Maryland construction sites.”
the peer reviewers for Coakley & Trujillo says. “But we have to
Williams Construction. remember that we’re looking for Reprinted with permission from
“That gave me a window into safety leaders. Nobody is perfect, so E&M Publishers, Building
what was being looked at and how we have to be careful that we don’t Washington magazine, a publication
the program was going to work. So create an impossible standard.” of ABC of Metro Washington.
when they asked for a subcontrac- State regulators are also happy Mary Lou Jay is a Maryland-
tor to volunteer to be the first sub with how the SPECS program is based freelancer writer. For more
through the program, I felt we were taking off. information about SPECS, contact
ready,” Drexel says. “What encourages me is the Jason Roberts, ABC of Metro
The peer review and the MOSH real partnership and trust that Washington education director, at
review served as a gap analysis of we’re developing with ABC and jroberts@abcmetrowashington.org.
18
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ABC members up to
$1,000 business.
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TECHNOLOGY
T
he construction industry
Autodesk
is often characterized as
high risk and low margin.
According to a McKinsey
report, almost 98 percent of
projects incur cost overruns
or delays. Meanwhile, the con-
struction productivity curve has
remained flat when compared to
other industries.
In the last decade, with the
advent of cloud and mobile
technologies, industry leaders
have been focused on digitizing Autodesk’s Project IQ helps project teams find actionable high-risk elements in real time and
construction workflows. This has mitigate risk on a daily basis.
resulted in improved efficiencies,
but also has created an explosion
of new data sources in the con- on jobsites every single day. According to Forbes, 80
struction industry. Project teams The volumes are beyond what is percent of shows that people
are now capturing and document- possible to be manually analyzed. watch on Netflix come from
ing data on mobile devices, site Technology is needed to filter out recommendations by algorithms.
progress is documented via drones the noise and find signals in And when it comes to email,
and sensors are used to create a the data. Microsoft Outlook is helping
connected jobsite. Imagine a smart assistant who cut through the clutter with
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
All of this data is now stored in can sift through thousands of data Focused Inbox. By analyzing who
the cloud and is easily accessible, points, categorize and classify users interact with often, and
but is it being leveraged effectively? them automatically, and bring the content of the actual emails,
Two major challenges arise. critical information to leadership’s Focused Inbox automatically helps
First, experienced construction attention. Artificial intelligence is prioritize and bring to the surface
professionals are needed who can that smart assistant. AI refers to what is most actionable.
decipher this data to learn from the broad field of science con-
it, identify risks and improve cerned with getting computers AI for Risk Management
processes. With 20 percent of the to do tasks that normally would Contractors have to deal with
workforce about to retire in the require human intelligence. a flood of information every
construction industry, a lot of expe- Machine learning is a branch of single day—thousands of issues,
rience and knowledge is being lost AI that involves algorithms that hundreds of RFIs, and numer-
that will be hard to replace. allow computers to learn from ous design changes and schedule
Second, a vast amount of data without being explicitly adjustments. This is where AI
information is being collected programmed. and machine learning can help:
20
Autodesk
AI and machine learning can be applied to subcontractor management for quality and safety analytics.
by providing assistive and predic- change orders, as well as project including whether someone is
tive insights on what is critical outcomes, to build a construction wearing appropriate PPE.
and actionable. knowledge graph and create an This information can then be
Potential applications of AI and engine that understands construc- tagged and prioritized to create
machine learning in construc- tion context. notifications for safety officers,
tion are vast, including project Just this last year, Project IQ superintendents and others who
management and subcontractor was put to work to help leading can act to correct the safety issue.
management, construction site construction companies manage A recent testament to the bene-
monitoring, and predictive analyt- risk through predictive analytics. fits of this technology came from
ics for quality and safety. Several Project IQ can identify projects Jason Timmerman, health and
innovative general contractors are and subcontractors carrying a lot of safety director at Skanska: “By
using this technology to analyze risk, as well as high-risk issues from having an ‘extra pair of eyes that
project data in real time and make a quality and safety perspective, and doesn’t sleep,’ we could better
decisions to manage risk from automatically classify them into identify both positive examples
quality, safety, schedule and cost actionable categories. and areas for improvement that we
perspectives. might otherwise miss.”
Project IQ, which Autodesk AI for Quality and Safety Innovative construction com-
is beta testing with customers, Another application of machine panies already are using machine
CONSTRUCTIONEXEC.COM
helps project teams find action- learning to construction data is learning for quality and safety on
able high-risk elements in real Smartvid.io, which prioritizes their jobsites. “This is not something
time and mitigate risk on a daily visual and audio data accessible that is future-looking,” says Rich
basis. Project IQ has learned for analysis by AI and machine Holbrook, director of construction
from several million historical learning. It can identify indi- operations for Layton Construction.
construction issues and observa- vidual people in photos and “It’s happening today. If you’re not
tions, inspection data, building videos, and analyze the presence on something like this, you’re going
information models, RFIs and or absence of safety protocol, to fall behind.”
21
TECHNOLOGY
AI for Productivity
Autodesk
The power of AI-based solutions
can be best unlocked by breaking
down the data silos that exist in
construction today. One such
example is Triax Technologies,
Inc., which helps project teams
manage their workforce in real
time by leveraging their IoT-
enabled Spot-R system. Spot-R
allows users to view the current
location of workers right in their
2D drawings and 3D models. This
data is now available for machine
learning algorithms to track
productivity and recommend
targeted improvements.
Most machine learning appli-
The location of workers can be viewed in 3D models, and then this data can be leveraged by cations are helping the industry
algorithms to track productivity and recommend improvements.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
22
Imagine a smart assistant who safety inspections are still being
done on paper, the company is
can help during constructability missing out on leveraging that
critical information and making it
reviews and identify problems that available for machine learning algo-
rithms to process and predict risk.
might surface downstream. Make sure to establish stan-
dards and best practices for data
capture. Invest in a data platform
understand and mitigate risk reviews and identify problems that and connected data rather than in
during the construction phase of might surface downstream. AI can point solutions.
a project. As these applications help bring more predictability to
mature, they will be able to pre- projects by identifying potential Manu Venugopal, senior product
dict risk and provide intelligent RFIs and costly changes early in the manager at Autodesk, is an
recommendations much earlier, process itself. architecture, engineering and
such as during preconstruction As a first step, construction construction technology expert and
and even during the design stages. businesses should digitize their thought leader focusing on BIM, data
Imagine a smart assistant who workflows and start documenting and analytics. For more information,
can help during constructability all project data. For example, if visit bim360.autodesk.com.
CONSTRUCTIONEXEC.COM
23
This year marks the completion of the first phase of Tampa
International Airport’s master plan, which focused on decongesting
roads, curbsides and the main terminal. Phase two will include a
17-acre commercial development surrounding the new rental car
facility, and phase three will deliver a new terminal with 16 gates for
domestic and international flights.
AIRPORT PLANS
TAKE FLIGHT
Aging Infrastructure and Rapid Growth in the Aviation Sector Lead to
Improvements and Expansions Across the United States
BY JOANNA MASTERSON
A
irport authorities across the country are master
planning their way through some pretty staggering
growth statistics.
Nashville International Airport (BNA) is on
its fifth consecutive year with about 10 percent growth
in enplanements (i.e., passengers boarding an aircraft).
The FAA’s typical growth rate is 3.5 percent. And it now
boasts 88 percent origin-destination traffic, compared
to only 13 percent of travelers starting and ending their package, a $350 million terminal lobby and interna-
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
trip at the airport back in the late 1980s. tional arrivals facility, will likely be brought to the board
“More than 100 people are moving to Nashville per in November, Ramsey says.
day, and have been doing so for a number of years,” says In Florida, Tampa International Airport (TPA) is put-
Robert Ramsey, chief operating officer of the Metro ting the finishing touches on phase one of a three-phase
Nashville Airport Authority. “It’s a blessing, but it expansion that will allow it to accommodate 34 mil-
comes with its own set of challenges in terms of staying lion passengers annually—roughly double the number
ahead of that passenger demand.” served when the project kicked off in November 2014.
Enter the “BNA Vision” plan—the first major Design-builders including Austin Commercial, Skanska
component of which wraps up this month. JE Dunn and Kimmins Contracting have been busy constructing
is delivering a 2,400-space parking garage with a a 2.6 million-square-foot rental car center, a 1.4-mile
ground transportation center on the first floor to automated people mover and a football field-size main
alleviate curbside congestion. A second parking garage terminal addition, as well as revamping surrounding
and administrative building were awarded to Messer roadways. Ramping up next for phase two will be
Construction in July, and Hensel Phelps broke ground express curbside lanes as well as a 17-acre commercial
on Concourse D work in June. Bids for the largest development around the rental car center.
26
WHAT OWNERS WANT
“We need people who understand what it takes to work in a busy airport environment.
We’ve basically been tasked with rotating the tires while driving down the highway at
75 mph. We need a team that will help keep us out of the ditch.”
- ROBERT RAMSEY, CHIEF OPERATING OFFICER, METRO NASHVILLE AIRPORT AUTHORITY
“We’re facing rapid growth with functional, yet OPTIMISM YIELDS OPPORTUNITIES
aging facilities,” says TPA spokesman Danny Valentine. On a broader scale, American airports have nearly
“Our challenge has been to update our facilities while $100 billion in capital needs through 2021 for terminal
remaining in our existing footprint and accommodating building, airfield capacity, reconstruction and surface
record passenger numbers without sacrificing our high access, according to Airports Council International-
customer service standards.” North America. Yet, on an annual basis, airports only
Mission seemingly accomplished. Via a daily survey, generate about half of what they need to fund infra-
Valentine reports “we never had more than 5 percent structure projects through net income, passenger facility
of passengers indicating they were severely impacted charges, the federal Airport Improvement Program,
by construction.” capital contributions and state grants.
award task order contract. SAI also is reconfiguring an existing schedule—the ability to self-perform and partner with trusted
hydrant fuel system and upgrading airfield pavement to support a subcontractors is crucial to success.
new KC-46A tanker that is scheduled to be assigned to Pease Air “We can self-perform some aspects of airfield work, particu-
National Guard Base in Newington, New Hampshire. larly concrete paving, which gives us better project control and
According to SAI President Bill Halsey, the biggest change maintains our cost competitiveness,” Halsey says. “SAI also has
in the military aviation sector has been improving specification developed relationships with many strong subcontractors that
requirements—leading to a higher quality finished product, help make us technically and cost competitive on civilian and
especially when it comes to concrete pavement. military airport contracts.”
27
Jackson Municipal Airport Authority (2)
Rehabbing terminal roadways and taxiway pavement are two components of the capital improvement program for Jackson-Medgar Wiley Evers
International Airport in Mississippi.
“What I believe sets companies apart when competing for work is their sense of
ownership of the project and understanding the significance for the owner. We also
look for contactors that make good faith efforts to partner with DBE firms to develop
long-term relationships and maximize on mentoring opportunities, which ultimately has
a positive economic impact on the community.”
- DARION WARREN, DIRECTOR OF CAPITAL PROGRAMMING, JACKSON MUNICIPAL AIRPORT AUTHORITY
In July and August, the FAA awarded $1.38 billion for air travel, steady growth in the number of seats per
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
in infrastructure grants to hundreds of airports via the aircraft and airfares rising more slowly than inflation.
third and fourth installments of its $3.18 billion Airport Evidence of this optimism is apparent nationwide.
Improvement Program. And in October, President Last year, voters in Kansas City, Missouri, approved
Trump signed a five-year FAA reauthorization that will a public-private venture to build a billion-dollar, one
keep Airport Improvement Program construction grants million-square-foot airport terminal, which is expected
at $3.35 billion annually and extend new discretionary to be complete in late 2022.
funding to small and medium sized airports. In May, in response to a 5.3 percent annual uptick
Atlanta, Los Angeles, Chicago O’Hare and Dallas/ in passenger load, Denver International Airport broke
Fort Worth are still the busiest airports, but enplane- ground on a $1.5 billion expansion adding 39 new
ments are projected to grow the fastest (among large gates to existing concourses by 2021, resulting in a
hub airports) in Fort Lauderdale, Florida, San Diego, 30 percent increase in gate capacity. The Colorado
Boston and Newark, New Jersey, according to the FAA Department of Transportation also is conducting a
Terminal Area Forecast 2017-2045. For the next 20 study on the feasibility of constructing a hyperloop
years, the FAA anticipates a competitive and profitable transportation system, with initial design concepts
aviation industry characterized by increasing demand placing the first station near the airport.
28
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Moving further west, the San Diego County Regional updating terminal flooring and ticket counters,
Airport Authority is gearing up for phase one of its upgrading the security and access control system,
latest development plan, which could include phased adding wall murals and improving restrooms—all of
construction of a new 30-gate terminal, administrative which will be done by next year.
building, structured parking and airfield paving. RFQs More roadwork will get under way in 2019, and an
for the four procurement packages likely will be released existing public parking garage will be converted into
in 2019 and 2020. a quick turnaround area for rental car service/storage
Activity isn’t contained to big cities. But at smaller that’s adjacent to the existing rental car return area—
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
hubs, the financial pressure is more pronounced as creating a consolidated facility. Construction on this
airports balance spending on things like compliant project should begin in late 2020.
pavement versus vehicle access or aesthetic upgrades.
“In general, the challenge we face is the fund- HOME AWAY FROM HOME
ing necessary to address aging infrastructure and Manhattan Construction Company, which has an
assets, and to make facility improvements that can 80-year history in the aviation sector, sees this as a prime
accommodate passenger increases and potential new time for both vertical and horizontal airport work.
carriers,” says Darion Warren, director of capital “9/11 diverted most funding toward security
programming for the Jackson Municipal Airport enhancements, and then a few years later the econ-
Authority in Mississippi. omy softened, which further inhibited non-critical
With that in mind, a multi-year capital improve- spending on maintenance of airport facilities,” says
ment program is in place for Jackson-Medgar Wiley Paul Dorsey, Manhattan’s vice president of aviation.
Evers International Airport (JAN) that shows a serious “Now, 20 years later, with aging facilities and not
commitment to the future. Current JAN projects enough infrastructure to accommodate a strong
include rehabilitating taxiways and terminal roadways, economy and record enplanements, many airports are
30
BENEFITS BUILT FOR
PREVAILING WAGE
CONTRACTORS
“First and foremost, we’re looking for strong communication. We want to partner with
design-builders that function as a cohesive team. Taking the time to understand our
vision and communicate their design intent is critical to project success. We are an
airport first and a construction site second, so it’s critically important for them to un-
derstand our specific needs and how to work in a facility that is open around the clock
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
every day of the year. Beyond that, we’re looking for transparency and honesty.”
- JEFF SIDDLE, VICE PRESIDENT OF PLANNING AND DEVELOPMENT, TAMPA INTERNATIONAL AIRPORT
challenged to keep up with maintenance and capacity quiet spaces, rocking chairs, live music and pet relief
constraints, which translates to large-scale projects all areas than ever before.”
over the country.” Airports also are working hard to personalize their
Of particular focus is the amount of time passen- spaces by emphasizing local culture, food, art and
gers spend “airside” after passing through security or attractions. For instance, it’s a natural fit for Nashville
during layovers. to carry its Music City identity through BNA, which
“Restaurants are getting bigger and better, lounges already boasts four stages and has a couple more in the
are expanding, and hold rooms are getting more master plan.
sophisticated with improved seating, queuing and “As soon as you step off the plane, we want you to
technology,” Dorsey says. “There are more kid zones, know where you are,” Ramsey says.
32
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822.5 MILLION we’d have to write to cover that risk, we thought progres-
sive design-build would be a more equitable approach.”
Number of passengers enplaned at all U.S. airports in 2016 BNA is using a set of 20 percent complete drawings
as a framework for each package so all the work is cohe-
1.1 BILLION sive. Most packages have a six-month design window
before turning loose on groundwork.
Projected number of passengers enplaned at large hub airports
in 2045 “We can’t spend two years in design, six months in
procurement and then move on to construction. At the
4.8% growth rate we’re experiencing, that would crush us,”
Ramsey says.
Forecasted increase in total enplanements at all U.S. airports in 2018
In preparation for this more collaborative environ-
84.7% ment, BNA built a project management complex where
in-house engineers can co-locate with designers and
Projected uptick in passengers enplaned at medium hub contractors for each major project.
airports by 2045
“I don’t want to receive dozens of emails, so we tell
Sources: Airports Council International-North America, FAA Aerospace Forecast 2018-2038, staff to put down the phone and walk to the trailer
FAA Terminal Forecast 2017-2045
next door and sit down to figure things out. It has
worked out really well having contractors adjacent to
us in terms of speeding up the design and construction
Public art is emphasized in Tampa, where seven new process,” Ramsey says.
works were commissioned during the phase one expan- They’ve also implemented virtual reality workshops
sion. Wellness and sustainability are key components every Friday so operations, maintenance and public
as well, including widespread indoor landscaping and safety personnel can offer input on the drawings they
town square-like space for community events. see, but may not fully understand. Additionally, BNA is
The trend is clear: airports as self-contained cities that merging BIM with its existing GIS technology for easier
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
serve as a home away from home with top-notch retail data management and consolidation, and it’s in the
and restaurants, fitness and wellness centers, native early stages of looking at P3s for a hotel project.
plants in seasonal outdoor spaces, indoor water features “All that is happening within the next year,” Ramsey
and short-term sleeping rooms—not to mention ubiq- says. “It has forced us to evolve into being a more
uitous electrical outlets and excellent WiFi coverage. sophisticated owner.”
In turn, contractors must rise to the occasion by
EMBRACING TECHNOLOGY AND COLLABORATION embracing technology and collaboration.
How aviation construction projects are brought to life is “The aviation industry is a tight-knit community and
advancing as well. AEC firms that offer integrated project successes and failures are pronounced,” Manhattan’s
delivery methods, have sophisticated offsite prefabrica- Dorsey says. “You only get repeat business by doing a
tion operations, invest in technology and can navigate great job the first time and every time after that.”
public-private partnerships are in the sweet spot.
Case in point: The Metro Nashville Airport Authority Joanna Masterson is senior editor of Construction
is utilizing progressive design-build on its Concourse D Executive. For more information, email masterson@abc.org,
expansion. There are five guaranteed maximum prices visit constructionexec.com or follow @ConstructionMag.
34
OC TOB ER 12TH , 10:15 P.M .
A GOOD NIGHT’S
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IN AN
INS TANT,
B IL L L E W IS
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R I SK A N D GOT
THE J O B D O NE
To learn how CNA’s builders and contractors program can help you maximize
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16TH ANNUAL
CONTRACTORS’ GUIDE TO
SURETY
BONDING
PUBLISHED IN
ASSOCIATION WITH:
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16TH ANNUAL SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
CONTRACTORS’
GUIDE TO SURETY
BONDNING
50 Executive Insights
60 The Year in Surety
64 Embrace the Bonding Process and Your
Business Will Thrive
68 How Different Types of Surety Bonds Support
Editors Small Businesses and Specialty Contractors
Lauren Pinch
Joanna Masterson 70 A Surety Best Practices Checklist for
Construction Executive
Busy Contractors
Contributing Editor 74 Legislative Roundup for the Construction Industry
Bryan Surcouf
The Surety & Fidelity 78 As Talent War Hits Construction and Surety
Association of America
Industries, It’s Time to Innovate and Communicate
Advertising and Design
MagazineXperts
82 Surety Program Considerations for Contractor
Ownership Transitions
Production and Design
The YGS Group 84 The P3 Balancing Act: Risk, Financing and Bonding
CONSTRUCTIONEXEC.COM
39
39
Real projects start with
the industry standard
Before they broke ground, Eskew+Dumez+Ripple
ensured the 2016 renovation of the Ace Hotel New
Orleans was protected with AIA contracts.
AIA Contract Documents used: A101-Owner/Contractor-Stipulated Sum, A201-General Conditions,
B101-Owner/Architect, C106-Digital Data Licensing, C401-Architect/Consultant plus associated
administrative G-forms.
I
n 1996, the Surety Association of America, SFAA’s predecessor, set a vision to further enhance
its mission by promoting and preserving the use of surety and fidelity bonds. Historically, the
organization had focused mainly on providing statistical and actuarial materials for its members
and regulators, gradually adding services such as bond form review, advocacy and promotion.
That’s when the talents of Lynn M. Schubert came in. As the first woman to head a
national insurance trade association, Schubert has served as president of SFAA for the past Lynn Schubert
22 years, forever changing the industry for the better. During her dedicated years of leadership,
Schubert transformed the organization to meet the needs of its members in the modern world.
Schubert passionately promoted the industry through the Surety Information Office,
SFAA communications, various publications, federal and state-level advocacy, legal advocacy,
developing strategic partnerships, and testifying before Congress and state legislatures on the
benefits of bonding. She also was a founding member of the International Surety Association, a
confederation of associations from around the world specializing in surety bonds.
In 2018, Schubert was elected to the National Academy of Construction. She is a recipient
of 2017 Trending 40’s Top Association CEOs, the 2015 Martin J. Andrew Award for Lifetime
Achievement from the American Bar Association Fidelity & Surety Law Committee, the
Women Builders Council 2008 Champion Award, and the 2008 Private Sector Leadership
Award of the Jamaica Business Resource Center for work in leading the surety industry in efforts
to assist women and minority contractors to become bondable businesses.
A frequent international lecturer on the topics of fidelity and surety bonds, procurement, and
diversity and inclusion, Schubert received her undergraduate degree in business administration
from East Carolina University and her law degree from the University of Notre Dame.
L
ee Covington assumed the role of SFAA president on Oct. 1. Previously, he served as
general counsel and senior vice president, governmental affairs for the Insured Retirement
Institute, leading its federal and state legislative and regulatory initiatives since 2009.
His focus on insurance law began in 1993 in Little Rock, Arkansas, where he rose to
become the deputy commissioner of the Arkansas Insurance Department. Covington honed
his leadership skills as the director of the Ohio Department of Insurance from 1999 to 2002,
where he served on the National Association of Insurance Commissioners Executive Committee,
and then moved to positions of influence on the national stage in Washington, D.C. Lee Covington
Covington serves on the board of the Griffith Foundation for Insurance Education and is a
member of the editorial review board of the Journal of Insurance Regulation. He began his legal
career as law clerk to U.S. District Judge Jimm L. Hendren.
Welcome, Lee!
CONSTRUCTIONEXEC.COM
Lauren E. Pinch
Editor-in-Chief
41
LEADERS IN SURETY BONDING
COMPANY CONTACT
100 William St.
New York, NY 10038
Michael P. Cifone, SVP, Surety
(770) 485-4461
mcifone@hudsoninsgroup.com
hudsoninsgroup.com
COMPANY HIGHLIGHTS
• Rated A (Excellent) by A.M.
Best, FSC XV
• Licensed in 50 states and
the District of Columbia
• Treasury listing of
$42,838,000
• Regional expertise and
superior client services
• Represented by select
surety agents
H
udson Insurance Company is part of Hudson approach. Our contract underwriters work closely with
Insurance Group, a specialty insurance group that our agency partners to understand our customers’ needs
writes business on an admitted basis through Hudson in order to develop a surety program that supports their
Insurance Company and on a non-admitted basis plans. Our client base consists of general contractors, as
through Hudson Specialty Insurance Company and well as many specialty trade contractors.
Hudson Excess Insurance Company. Hudson offers
a wide range of property and casualty insurance products to COMMERCIAL SURETY
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
corporations, professional firms and individuals. Exceptional customer service and a broad appetite for
Hudson Surety is comprised of an experienced group of both standard and non-standard risks have driven the
underwriters with deep industry knowledge that enables success of Hudson’s transactional commercial surety
us to offer creative, personalized solutions to our clients. business. Our products include all types of license and
We work closely with select agents throughout the United permit bonds, custom bonds, public official bonds, court
States to provide superior service. bonds and miscellaneous commercial bonds.
Hudson Surety provides surety bond products for
standard contract surety, commercial surety and specialty SPECIALTY CONTRACT BONDS
contract surety. We have the expertise to work with all For contractors that may not fit the underwriting
types of contractors and the financial strength to grow criteria of the standard surety market, we offer an
with our valued principals. alternative solution utilizing tools such as collateral
and funds control. We support the bonding needs
CONTRACT SURETY of the contractor until they qualify for our standard
Regional knowledge of the construction marketplace surety program and participate in the SBA Surety Bond
has been an important element of our underwriting Guarantee Program.
42 S PEC IA L A DV ER TI S I NG S EC TI O N
Think again. We’ve spent the past century building a specialty insurance platform
with a vast array of products and superior claims handling. From simple to
complex risks, or quite frankly, anything in between, our specialists can construct
a tailor-made program to fit your needs. If you need something unique, just ask us.
HudsonInsGroup.com
LEADERS IN SURETY BONDING
L
iberty Mutual Surety, a business unit
of Liberty Mutual Insurance, is the
We have the capacity, capabilities second largest surety in the United
States and a leading surety globally.
and professionals to underwrite We are continually expanding our
all types and sizes of contractors global presence by establishing offices
and issuing bonds worldwide. We have the
and corporations. capacity, capabilities and professionals to
underwrite all types and sizes of contractors
and corporations.
As of July 1, 2018, our combined U.S.
Treasury Listing is in excess of $1.7 billion,
which is among the highest in the industry.
With more than 40 U.S. field offices and
dedicated surety staff in 14 countries, we
have the ability to arrange issuance of
bonds and guarantees in more than 40
countries worldwide.
Liberty Mutual underwrites all types
of regional, national, multinational
and global contractors. Our surety
operations provide program capacity for
all size contractors, and for well-capitalized
construction, manufacturing and supply
risks. In collaboration with other Liberty
Mutual units, we also can provide you
with comprehensive property and casualty
coverage, ensuring that all aspects of your
projects are protected.
When you choose Liberty Mutual,
you’ll work with one company to cover
construction risks from start to finish.
Choose a company that you can trust,
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
COMPANY CONTACT
Stacey McCabe
(610) 832-8240
surety@libertymutual.com
libertymutualsurety.com
44 S PEC IA L A DV ER TI S I NG S EC TI O N
You have a passion for
outbuilding the competition.
We have the value-added services to help make it happen.
You’re passionate about being the best. Liberty Mutual Surety shares that passion.
Yes, we have responsive underwriters and industry-leading capacity, but it’s our
value-added services that can really help you grow. Our Professional Advisory
Services and peer benchmarking reports can help you see how you are doing
in relation to other contractors, positioning your company for success
and longevity. Let’s outperform our peers together.
Nationwide : ®
Strength. Stability.
Solutions.
N
ationwide® represents a wealth of experience
in surety and specialty liability insurance
ranging from management liability to cyber
and professional liability. Our surety operation
specializes in both commercial and contract
surety bonds. We pride ourselves on developing a
close working relationship with our agents, brokers and
principals in order to ensure a consistent underwriting
approach to mitigate losses.
Our expertise allows us to be innovative. Our
relationships allow us to understand the needs of your
business. The result: unique surety and insurance
products, and an analytical approach unrivaled by
any other firm. We offer comprehensive surety bond
solutions, including 50-state capacity and a flexible,
multi-tiered rating plan, and we continue to add
products each year.
When you work with us, you know you are
working with a strong and stable carrier. Nationwide
is a Fortune 100 company that the U.S. Treasury
listed and approved with a T-listing in excess of $1.1
billion1, and it is one of the largest in the industry.
Add to that an A.M. Best Rating of A+ (Superior),
FSC XV2 and an S&P A+ rating3, and you can be sure
you’re working with one of the most financially stable
companies in the industry.
Nationwide and the Nationwide N and Eagle are service marks of
Nationwide Mutual Insurance Company. ©2018 Nationwide.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
1. Nationwide Mutual Insurance Company, July 2018, https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570_a-z.htm#N 2. Affirmed July 2017 3. Affirmed July 2017
46 S PEC IA L A DV ER TI S I NG S EC TI O N
Strength.
Stability.
Solutions.
Essential to projects —
and partnerships.
T-LISTING
A+ A.M. BEST
IN EXCESS OF
$1.1 A+
STANDARD &
RATED POOR’S
BILLION
O
ld Republic Surety’s ultimate trained to provide—your success will
goal is your success. We’ve never be determined by a computer
COMPANY CONTACT
been in the surety industry program with Old Republic Surety
long enough to know that as your surety partner. 445 S. Moorland Rd., Ste. 200
it’s the human element of Brookfield, WI 53005
underwriting that you need, STANDARD BOND PROGRAMS Alan P. Pavlic
not an algorithm or machine. Our Need help setting up a standard bond (262) 754-8095
relationships aim for successful, program? Having a standard bond appavlic@orsurety.com
profitable outcomes for both program in place offers contractors
orsurety.com
our appointed agents and their a more nimble approach to bidding
contractor clients. Our president on projects and turning them into
COMPANY HIGHLIGHTS
can visit with you on a jobsite, profitable outcomes. Prequalification
and our business development can give a contractor the opportunity • A.M. Best rating of “A”
and marketing departments can to expedite the bond portion of the • Licensed in all 50 states
willingly share strategies to help bid process. • Writing surety bonds since 1923
you grow. That’s in addition to the Understanding the bonding • Subsidiary of Old Republic
incredible underwriting talent we process is an essential element of a International
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
48 S PEC IA L A DV ER TI S I NG S EC TI O N
Conquer your Challenges
RESPONSIVE Guide your Growth
RELIABLE See your Success
RESPECTED Some of your toughest challenges are ahead. We’re a surety
partner that will be with you from start to finish - even through
the tough stuff. Let’s do this!
www.orsurety.com
The Executive Insights series is
compiled by Donald Berry, national
SPECIAL SECTION: sales manager for Construction
CONTRACTORS’ GUIDE TO SURETY BONDING Executive. For more information on
participating in a future Q&A, email
dberry@constructionexec.com.
Executive Insights
How can a construction company mitigate risk when getting ready What top qualities should a
to apply for a surety bond? construction company look for in a
surety bond producer?
edge of the risks and their plan to Vigorously renegotiate onerous business operations and to the
manage these risks. A long-range contract terms and conditions. surety bonding process;
plan provides a good starting Secure insurance coverage for • can access multiple surety
point for the contractor to address a particular project exposure in companies to more effectively
issues related to growth initiatives, addition to simply purchasing choose the company and the
succession planning, training and required insurance. Confirm that underwriter that best fits their
mentoring, and equipment and adequate project financing has been surety needs; and
financing needs. secured. Negotiate extensions to • finds value in building the
The daily risks associated with labor agreements where the absence relationship between the
onerous contract terms, labor of such could give rise to work contractor and the underwriter.
shortages, subcontractor defaults stoppages. Require bonds from An agent demonstrating these
and equipment failures are best critical subcontractors and suppli- traits will be most effective in
mitigated by a contractor with the ers. Research the litigation history presenting a contractor to a surety
proper management team operating of your customers. underwriter in the most favorable
with a practical long-range plan. manner.
50
Can’t fit your contractor’s bond
into an express program?
Executive Insights
What clauses should bond producers and construction companies be on the lookout for in contracts?
52
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The Travelers Indemnity Company in the U.S. and other countries. CP-8953 New 8-16
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Executive Insights
What clauses should bond How should a construction Why is it important for contractors
producers and construction company prepare for its first to choose a law firm experienced
companies be on the lookout for in meeting with a surety bond in surety bonding?
contracts? producer?
CARL G. CASTELLANO ROBERT E. SHAW MICHAEL C. ZISA
VICE PRESIDENT, CONTRACT SURETY PRESIDENT PARTNER
Philadelphia Insurance Companies Skillings Shaw & Associates Peckar & Abramson
Cardinal rule The first meeting When a contractor
No. 1: Read the is about the bond selects a law firm to
contract and asso- producer and defend or prosecute
ciated documents. contractor learn- a claim against a
Clauses, such as ing more about performance or
those outlined each other’s goals, payment bond, it is
below, will be businesses and essential to select a
favorable for one party but not history, as well as identifying steps firm that not only understands the
favorable for others. Beware of: to meet the contractor’s business complexities of construction law
• Sole discretion to default/ surety goals. but also has a true understanding
terminate Bring all information, statements of the legal and practical issues
• Cross default language and reports, such as financial state- affecting sureties.
• Consequential damages in ments, résumés of key employees, I regularly see well-seasoned
general and especially if trade references, recommendations construction lawyers who miss
unspecified and uncapped and other pertinent documents significant opportunities for their
• Indemnity, particularly those in requested by the bond producer. clients because they do not under-
which the indemnitor assumes The producer will explain for stand or appreciate the intricacies
obligation for damages caused whom he or she works, how surety of surety law.
by indemnitee. companies underwrite bonds, how They do not understand the
• Unreasonable liquidated bond rates work, how to request terms of the performance or pay-
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
damages a bond, the importance of a good ment bond and how those terms
• Pay if paid clauses, where accountant, why bond under- impact the contractor’s and surety’s
enforceable writers care about construction right and obligations, which can
• Long-term warranties, which accounting and bank support, the result in costly consequences.
continue to be the obligation general surety marketplace, and
of the contractor instead of a how producers can coach contrac-
manufacturer tors to attain higher levels of surety
• Expanding coverage to such capacity.
areas as personal injuries and He or she will explain how bonds
copyright infringements are underwritten based on char-
• If the project is bonded, clauses acter (of the contractor), capacity
that could cause greater loss to (the expertise and experience of a
a surety contractor to handle a project) and
capital (the financial strength of the
contractor and its indemnitors).
54
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SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Executive Insights
How are surety bond companies keeping up with increased demand within the construction industry?
Best-in-class sureties are regularly requirements of owners and lenders tion market yielding better profit
investing in their platforms to in the new public-private partner- margins has allowed sureties to
enhance real-time access to informa- ship models. extend more credit than they once
tion and timely decision-making. Lastly, more established sure- would for a given balance sheet.
With a growing and changing ties are going above and beyond Underwriters are becoming more
market, face-to-face interaction is as the extension of surety credit by adept to get past the numbers to
important as ever. A surety needs to providing legal review to help avoid underwrite individual projects that
be available to its clients to clearly onerous contract terms, providing create a stretch. Overall, an unprec-
understand their needs as well as benchmarking tools for clients, and edented amount of surety capacity
their strategy to address risk. sharing their claims team insights is available to accommodate the
Finally, there is no substitute for on best practices. growing demand. An open and
working hard and smart. Demands proactive approach to communica-
are great on contractors, requiring tion with your surety is the key to
heavy investments of time and accessing it.
pursuit costs.
56
BE
PHLY SURETY BONDING
SURE
Every project needs design, balance, and support. To bring projects the surety support they need,
turn to Philadelphia Insurance Companies. PHLY has recognized expertise in contract and commercial
surety bonds, from performance and payment bonds to subdivision, service contract, license and
permit, court, probate, and more. PHLY’s value is measured by the strength of relationships with its
partners. When you’re ready to move your project forward, you need to be sure. Be PHLYSure.
All coverages issued by Philadelphia Indemnity Insurance Company. Philadelphia Insurance Companies is the marketing name for the insurance company subsidiaries of the Philadelphia Consolidated Holding Corp., a
Member of the Tokio Marine Group. Coverage(s) described may not be available in all states and are subject to Underwriting and certain coverage(s) may be provided by a surplus lines insurer. Surplus lines insurers do
not generally participate in state guaranty funds and insureds are therefore not protected by such funds.| © 2018 Philadelphia Consolidating Holding Corp., All Rights Reserved.
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Executive Insights
What advice do you have for How should alternative Are you ready for revenue
contractors considering making a dispute resolution provisions recognition?
claim on a surety bond? be approached upfront in
construction contracts?
MICHAEL BOMBA MICHAEL A. MARRA JACK CALLAHAN
DIRECTOR AND COUNSEL, VICE PRESIDENT, CONSTRUCTION PARTNER - CONSTRUCTION
CONTRACT DOCUMENTS & RISK DIVISION INDUSTRY LEADER
MANAGEMENT American Arbitration CohnReznick
AIA Contract Association The new revenue
Documents Construction firms recognition stan-
A payment bond and their lawyers dard is now due for
is separate from carefully evaluate implementation.
the contractor’s the business terms Despite the long
agreement for the in their contracts, lead time and
project and it often includes sepa- but they often reflexively insert delays, we find the construction
rate obligations the contractor must a boilerplate arbitration clause. industry is generally not ready.
satisfy when a contractor is consid- This oversight may jeopardize the Construction CFOs must have
ering making a claim. Accordingly, inherent benefits of arbitration their game plan in place or risk the
a contractor should be aware of the and could result in a more expen- consequences of last-minute issues
terms of the bond at the outset of sive, disruptive and inefficient that may be costly, time-consuming
the project and thereafter be careful proceeding. and will pull much-needed
to ensure that it satisfies all the Arbitration is a creature of resources from other areas within
conditions in the bond. A failure contract, enabling the parties to their organization.
to meet all the required conditions tailor the process to fit their needs As you prepare for this year’s
could result in the surety not being and bypass litigation procedures. If financial statement audit, meet
obligated to make a payment. you do not take advantage of this with your accountants to discuss
Particular attention should be critical distinction, you may be the five-step process that needs to
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
given to the bond’s notice require- relegated to a more cumbersome be put in place. It’s important to be
ments. If a contractor fails to and costly proceeding. certain that you are in a position
provide notice to the surety of a It is vital to give upfront con- to gather the information needed
claim on the bond within the time sideration to the details of the to make legal, accounting and
period required, the contractor procedures most suitable to any engineering judgements required
could lose its right to payment. likely disputes under a contract and to properly support your financial
Additionally, many payment not simply hope for the best once statement assumptions.
bonds require the contractor to hostilities have arisen. Parties to a Review your accounting software
provide adequate supporting contract should evaluate their spe- systems to assure that you have the
information in order for the surety cific project and potential disputes capabilities to assemble the required
to consider the claim as proper. to determine if a simple arbitration financial information. Have you
Failure to do so also could put the clause found in most industry form addressed key issues, including
contractor’s claim at risk, or at the documents is sufficient for their software, job tracking, contract
very least delay any payment being project or if further customization analysis, point-in-time testing and
made by surety. is needed. others?
58
305.722.2663 | nielsonbonds.com
Miami | Orlando | Tampa | Palm Beach | Pensacola | Atlanta | Savannah | Charlotte | Asheville NIELSON, HOOVER & COMPANY
We get your business.
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
S
ince 1998, the surety Big Contractors Do Fail for the company began due to
industry has protected more The collapse of the U.K. con- losing money on big contracts and
than $9 trillion in contract struction giant Carillion PLC sent running up massive amounts of
and commercial surety shockwaves through the global debt to offset its losses. Industry
exposure, including $600 markets and prompted an imme- analysts argue that Carillion
billion in 2017 alone. The diate reminder that big contractors overreached and took on too many
direct premium written increased can fail. risky and unprofitable contracts,
from $5.9 billion to $6.2 billion in As a multinational construction while it reportedly faced payment
2017. The industry premium has company and facilities manage- delays from contracts in the Middle
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
more than doubled during the past ment provider, Carillion PLC East that have now been disputed.
two decades—up from $2.9 billion employed 43,000 individuals In 2017, Carillion issued three
in 1998. worldwide and held approximately profit warnings within a span of
Approximately $25 billion in 450 governmental contracts across about five months and had to write
losses were paid out, and another the U.K. ministries of education, off more than £1 billion ($1.4
$50 billion in loss adjustment, justice, defense and transportation. billion) from the value of some of its
underwriting and general expenses The company held operations in contracts. In January 2018, the con-
were incurred since 1998. The Canada, the Middle East and the struction giant folded under more
continuing low loss ratio signals Caribbean, and was a large con- than £1.5 billion ($2.1 billion) in
that the adherence to underwriting struction services provider for the outstanding debts, which left U.K.
criteria and prequalification, along Canadian government. taxpayers, and as many as 30,000
with a greater emphasis placed In 2016, Carillion boasted £5.2 subcontractors and suppliers, to
on efficiency regarding expenses, billion ($7.3 billion) in sales and a bear the cost of this insolvency. In
remain strong factors in the indus- market capitalization of nearly £1 Canada, four of Carillion’s compa-
try’s growth. billion ($1.4 billion). The trouble nies were granted protection from
60
A leader in the Surety
industry for over
130 years, offering
the kind of capacity,
stability and service
you can count on.
Chubb. Insured.
SM
www.chubb.com
©2018 Chubb. Coverages underwritten by one or more subsidiary companies. Not all
coverages available in all jurisdictions. Chubb®, its logo, Not just coverage. Craftsmanship.SM
and all its translations, and Chubb. Insured.SM are protected trademarks of Chubb.
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
letter of credit may provide finan- Surety bonds from licensed surety States understand the importance
cial compensation to a state or local companies remain the smartest risk that surety bonds play in the transfer
government if a contractor defaults, management tool for the construc- and management of construction
but in a small amount. It almost tion industry. risk. As a result, surety bonds have
never accounts for 100 percent of been required for more than a cen-
the project costs. Public-private Partnerships tury to assure contract performance
The biggest issue with using P3s are the collaboration of public and payment for the nation’s public
letters of credit or similar tools is entities and private enterprise to infrastructure projects.
that no one is responsible for com- design, finance, construct, oper- The Surety & Fidelity
pleting the contract (and paying ate and/or maintain many types Association of America has gath-
subcontractors and workers) in the of public infrastructure projects. ered data from its member surety
case of default. By contrast, sureties Sectors that have traditionally companies that have underwritten
enable the hiring of replacement and successfully employed the surety bonds on P3s in the United
contractors (or re-rebidding of the P3 project model include trans- States. A non-exhaustive list
contract) and assume responsibility portation, water and wastewater includes more than $15.87 billion
62
in bonded P3 projects during the
last five years alone.
The decision to require surety
bonds is often dictated by legisla-
tive mandate; however, individual
risk management also impacts
bonding strategy. For instance, the
state of Virginia does not currently P3s Secured With Surety Bonds in the
have a P3 law that requires bond-
ing, yet the recently awarded $984
Past Five Years
million “Transform 66” P3 project • $815 million State Highway 288 toll lane expansion and interchange upgrades
to improve I-66 into an inter- in Harris County, Texas
modal/multi-modal corridor was • $899 million Rapid Bridge Replacement program, replacing 558 structurally
bonded, as was $2.1 billion in P3 deficient bridges throughout Pennsylvania
tunnel upgrade projects in the cites • $648 million I-77 express toll lanes project in North Carolina
of Portsmouth and Norfolk. • $803 million U.S. 181 Harbor Bridge Replacement between the Nueces Bay
Absent legislative authority, Causeway and State Highway 286 in Texas
state and local governments may • $540 million, 142-mile San Antonio Waters System - Vista Ridge regional
not ordinarily have the power to supply project in Texas
encumber public property with a • $916 million South Mountain Freeway (Loop 202) project in Arizona
private partner’s lease or license, or • $2 billion Purple Line (light rail) in Maryland
to commit public funds to repay a • $763 million, 2,510-foot twin tower Ohio River Bridges project at East End
private partner. Moreover, existing Crossing in Indiana
procurement codes typically address • $430 million Portsmouth Bypass in Ohio
public works projects that involve • $834 million Northwest Corridor express lanes expansion project to I-75/I-575
contracts directly between a public in Georgia
entity and a contractor improving • $2.32 billion I-4 reconstruction project in central Florida
property. Investors also prefer to • $1.3 billion University of California, Merced 2020 campus expansion project
have clear legal authority to enter • $513 million Long Beach Civic Center development project in California
into a P3.
Given these factors, states with
an interest in obtaining private
investment for infrastructure
Other Large P3 Projects Secured With
projects have been moving to enact Surety Bonds During the Past 15 Years
P3 laws in recent years. As the P3 • $903 million Claude “Bud” Lewis Carlsbad Seawater Desalination Plant in San
market evolves, the legislatures are Diego County, California, the largest and most advanced desalination facility in
recognizing the value of bonding to the nation
secure these P3 projects. In the last • $362 million Presidio Parkway Doyle Drive Concession in San Francisco
five years, 20 states have enacted • $1.64 billion Eagle P3 FasTracks Light Rail project in Denver
CONSTRUCTIONEXEC.COM
P3 laws and all of them include a • $1.814 billion I-595 Corridor roadway improvements in Broward County,
bonding component. Florida
• $914 million Miami Port Tunnel Project, expanding access between the Port
Bryan Surcouf is communications and mainland Florida
manager and Devin Girardi is • $2.047 billion North Tarrant Express Highway construction project (segments
a surety analyst at The Surety & 1 and 2), expanding road and bridge capacity in and around the Dallas-Fort
Fidelity Association of America. For Worth area of Texas
more information, visit surety.org.
63
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CONTRACTORS’ GUIDE TO SURETY BONDING
W
ith bonding being time and resources. This is driven projects by weeding out unqualified
integral to public and by the surety’s need to thoroughly competitors that might otherwise
commercial construc- vet a contractor’s qualifications land contracts at unreasonably low
tion projects, the before extending surety credit. prices. In performing this valuable
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
ability to obtain bonds After all, the surety is generally an screening function, sureties serve as
is the lifeblood of many unsecured creditor, holding only a an ally for well-run, well-financed
construction firms. Yet, when they signed promise from the construc- construction companies that qualify
hear the word “bond,” contractors tion firm and, often, its owners for bonding support.
may grimace or, worse, elect to personally, to protect it from loss Further, once approved for
pass on an otherwise attractive in the event of a contract default. bonding, a contractor enhances its
revenue opportunity by avoiding And bond premiums average only a negotiating position by demonstrat-
projects that require bonding. fraction of bonded liability, leaving ing to prospective project owners
They have heard rumors of, or little room to pay claims before a and others that it is stable and has
may have experienced firsthand, surety finds itself unprofitable. been thoroughly prequalified, car-
an underwriting process that can The flipside of that coin is that rying the surety’s seal of approval.
seem arduous and intrusive. the ability to obtain bonds dramat-
The fact is, establishing and ically increases the potential of a Finding the Right Partner
maintaining a bonding relationship contractor to grow and earn higher The key to successfully navigat-
requires a significant investment of profit margins on construction ing the bonding process is to first
64
Surety
Based on the findings of this underwriter to approve a request avoiding or agonizing through
review, the agent will determine for bonding. One of the most it—contractors will be rewarded
which surety company is best suited important services they can provide with a business that is robust, and
to meet the needs of the contractor to a contractor is to push back, ask they will come to recognize their
and prepare a formal submission to questions and even decline bond- surety agent and underwriter as
the surety. ing in cases where they perceive an vital members of their advisory
The agent will work with the unusually high level of risk (such team.
surety company underwriter to as onerous contract provisions) or
establish single project and aggregate a poor fit between the contractor’s Danny McNally is surety manager
work program limits, which provide experience or resources and the for the Southeast region of FCCI
a responsible framework for the con- project for which bonding is being Insurance Group, Lawrenceville,
tractor to operate within based on requested. Agents and underwrit- Georgia. For more information, call
experience and other factors, includ- ers can provide an independent (800) 226-3224, ext. 5231, email
ing financial and human resources as perspective, helping mitigate risk, dmcnally@fcci-group.com or visit
well as available equipment. avoid potential pitfalls and ensure fcci-group.com.
66
When you have a solid foundation of experience by your side,
there’s nowhere to go but up.
www.cnasurety.com
One or more of the CNA companies provide the products and/or services described. The information is intended to present a general overview for illustrative purposes only. It is not intended to constitute a binding
contract. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states
and may be subject to change without notice. Use of the term “partnership” and/or “partner” should not be construed to represent a legally binding partnership. “CNA” is a registered trademark of CNA Financial
Corporation. Certain CNA Financial Corporation subsidiaries use the “CNA” trademark in connection with insurance underwriting and claims activities. Copyright © 2018 CNA. All rights reserved. SU5349C
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
BY DON SMITH
T
he type of surety bond Set-asides and or limited to small businesses that
with the greatest impact Performance Bonds participate in SBA contracting
on small contractors and The U.S. Small Business assistance programs.
their business goals is a Administration can limit com- Sole source set-aside contracts
contract bond. petition for certain contracts are not competitively bid. This
Contract bonds can via small business set-asides. usually happens where only a
be further broken down into Competitive set-aside projects are single business can fulfill the
public and private sector con- typically less than $150,000 and requirements of a contract. Some
struction bonds. can be open to any small business set-asides are for small businesses
68
in certain categories, such as 2017 Public Construction Spending:
8(a) Business Development,
HUBZone, Women-owned Small
Business and Service-disabled
Veteran-owned.
$279.8 BILLION +
Federal and state governments 2017 Private Construction Spending:
$950.8 BILLION =
have regulations that require a
performance and payment bond
for each contract exceeding a cer-
tain specified amount called the
bond threshold.
$1.23 TRILLION
For federal (Miller Act) proj-
ects, the threshold amount is
$150,000. For state (little Miller
Act) projects, the threshold varies Total Construction Put in Place
from state to state but is typically
less than $100,000. These rela-
tively low thresholds result in
a large amount of federal and agencies that receive financial and regulations regarding the
state construction projects to assistance from the U.S. DOT. required contractor license.
be bonded. At the state level, the Maryland This type of bond does not
These projects are generally General Assembly enacted leg- help generate revenue for small
competitively bid, and the islation in 1978 to create an contractors similar to the required
lowest qualified bidder receives MBE program that requires state contract bonds for public work,
the contract award. When small agencies to make every effort but without these licenses, the
contractors get qualified with an to achieve an overall goal of 29 contractor cannot legally perform
acceptable surety, they can enter percent MBE participation on the the work in the jurisdiction of the
their bid and compete for public total dollar amount of all procure- local government that is requiring
sector construction work. ment contracts. the compliance bond.
Federal and state governments Finally, small contractors
also frequently have regulations Licensing and Lien Bonds sometimes require miscellaneous
that require a certain percentage In the private sector, there is no bonds, such as a release of lien
of work to be performed by cer- requirement for the use of contract bond. A release of lien bond
tain contractor groups that meet bonds on construction projects. allows a discharge of a lien filed
specified requirements. Some of Yet, many private owners choose on real estate.
these specified groups include to require contract bonds on their This type of bond is not often
women and minority business projects to protect their interests needed, but it can be very import-
enterprises and disadvantaged in the event of contractor failure. ant to the contractors involved
business enterprises. Another type of surety bond because it can allow them to
CONSTRUCTIONEXEC.COM
For example, the United States that small contractors are required continue to work on the job while
Department of Transportation to have are license and permit the dispute is being resolved.
established a DBE program bonds, also known as compliance
through the Safe, Accountable, bonds. These bonds are required Don Smith is a bond manager
Flexible, Efficient Transportation by most states and some local for Liberty Mutual. For more
Act that provides opportunities governments and guarantee that information, email surety@
and increases participation for a contractor will comply with the libertymutual.com or visit
state and local transportation state and local government rules libertymutualsurety.com.
69
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T
oday’s global economy operational performance. to prioritize and invest some of
contains increasing levels John Alberici, chairman of their valuable time in their surety
of uncertainty, where Alberici Construction Company, relationships.
even best-in-class con- once said, “The price of gasoline The following list outlines some
struction companies can has nothing to do with whether things to do (and not do) that can
be impacted by changes you’re a good driver or not.” That assist in maintaining stable, ade-
in the surety marketplace unre- sentiment argues for construction quate surety capacity to support a
lated to their own financial and CEOs, CFOs, COOs and owners business plan.
DO: DON’T:
• Communicate. Anticipate the questions a surety may ask. • Sit on bad news. Experienced surety underwriters can deal
with bad news, but a surprise can put support on hold.
• Seek the surety’s input when finalizing a business plan, • Forego the broader perspective underwriters may have for
particularly if it involves pursuits in new markets or sectors. what has worked and what has not worked in other compara-
ble construction company business plans.
• Outline the core elements of the company’s culture that • Presume that the surety only underwrites financial results and
will attract and retain the highest quality talent. Regularly projections. Underwriters look at the whole picture of how a
review and update the firm’s continuity plan. contractor’s management team plans for and executes on its
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
objectives.
• Utilize the surety’s claim department staff as a second set • Bypass the surety’s claim team as a resource. Their time and
of eyes on contract terms or pending disputes. expertise are part of what surety premiums pay for.
• Ensure the broker has communicated an active backup • Allow a disruption to the surety program from events beyond
plan in case changes outside of the firm’s control affect its the firm’s control that may impact the surety’s ability to be
current surety program. responsive to the company’s needs.
• Maintain a general knowledge of the factors that are driving • Ignore that macro conditions in the surety industry factor into
conditions in the surety marketplace. strategic decision-making for the surety, just as construction
industry conditions do for contractors.
• Ask the surety about its business plan, financial results and • Disregard that surety relationships are a two-way street. The
changes in risk appetite. Develop relationships with both business plan and objectives depend on stable, responsive
local decision-makers and those in the home office. support and the relationships that underpin it.
70
ARE YOU
READY?
You have a vision. And every decision…
every project…can get you closer.
The advisory, assurance, and tax professionals at
CohnReznick work to understand your objectives
through all stages of planning to completion.
We help you manage cash flow, capital and
bonding requirements, and job site integrity.
Our multidisciplinary teams deliver diverse
technical expertise and deep industry experience
to all types of contractors including public-private
partnerships. So, you can move ahead with insight
and confidence.
Contact:
Jack A. Callahan
CPA, Partner - Construction Industry Leader
Jack.Callahan@cohnreznick.com
732.380.8685
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
DO: DON’T:
• Understand how the broker is communicating with the • Assume the company is being presented to underwriters in
surety. the manner it would like, or be reticent in asking to review
one of the broker’s submissions on the company.
• Work with the surety broker to develop an analysis of the • Forget that the WIP schedule is the only forward view financial
WIP schedules provided to the underwriter. information provided to the surety. It can be used to maximize
the support the underwriter offers.
• Understand the credit model components the surety uses to • Pass up an opportunity to improve the reporting of projections
determine the pricing and level of surety support extended and results to emphasize the factors critical to the surety’s
to the firm. analysis of the firm.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
• Have an objective method for determining the value the • Be satisfied with transactional and service excellence. If the
surety broker is delivering to the team. Employ it on a broker is not assisting both the top and bottom lines, then he
regular cycle. or she is costing the company money.
Surety credit is the most efficient Surety support is an outcome to provide and expand its sup-
source of contingent capital a con- of a contractor’s good business port based on credo (and not just
tractor can use in its business. The performance, but it is achieved numbers), a contractor will wield a
word credit has its roots in the Latin by treating the surety as a part- competitive advantage.
words “credo” and “creditus,” which ner with a vested interest in the
mean to believe and to trust. Creditus company’s success along the way. Michael Anderson is senior vice
is earned through proactive commu- The time involved to do this can president of American Global
nication and delivering on promises be managed efficiently. With the LLC. For more information, visit
(by all parties). backing of a stable surety, willing americanglobal.com.
72
WHAT IF?
YOUR COMPANY’S SURETY BROKER
WAS A STRATEGIC BUSINESS PARTNER
NOT JUST A TRANSACTIONAL
REPRESENTATIVE.
BUSINESS INSURANCE EMPLOYEE HEALTH & BENEFITS SURETY BONDING PRIVATE CLIENT SERVICES
Copyright © 2018 Marsh & McLennan Company. All rights reserved.
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
C
ongress is seeing the mid-
term elections through
without a significant new
infrastructure spending
bill in play. However, the
current House and Senate
conference on the transportation
appropriations for fiscal year 2019
indicates that Congress will reject
the president’s recommendation
to significantly cut discretionary
spending for transportation, which
instead is headed for another boost
next year.
Both the House and Senate
bills provide $46 billion for the
Highway Trust Fund, which is a $1
billion increase over FY 2018. Each
chamber wants to provide addi-
tional spending for highway and
BUILD grants, previously known Regulations on Requests for an Gathering information on federal
as TIGER grants. The conference Equitable Adjustment (REAs) agency practices is a good first step
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
committee just needs to agree on when a change order is issued. to address compliance with FAR
the amounts. The FAR requires the agencies to rules on change orders.
respond to REAs in “the shortest
Federal Change Orders practicable time.” Federal Bond Thresholds
Congress enacted H.R. 4754 If the agency does not have a Congress failed to pass H.R. 4486,
to address the slow approval of policy or information on its past which would have exempted the
change orders and the resulting practices regarding REAs, then it Miller Act bond thresholds from
lack of timely payments to con- must start collecting that informa- the required indexing for infla-
tractors. The new law requires that tion for a three-year period. The tion for all federal acquisition
for every solicitation for a contract agency must collect data on whether thresholds. The bill passed the
to be awarded to a small business, it responded to a REA within 30, House but stalled in the Senate.
the prospective bidders must be 60, 90, 180 or 360 days from receipt The Miller Act bond threshold
provided with the federal agency’s of the REA, or whether the agency is scheduled to be reviewed in
policies or practices for compli- responds to REAs after the comple- 2020 and could be increased from
ance with the Federal Acquisition tion of the contract. $150,000 to $200,000.
74
Ask your surety agent about the
common sense power of Merchants’ quill.
Merchants Bonding Company™ (Mutual), Merchants National Bonding, Inc. & affiliated companies | 6700 Westown Parkway, West Des Moines, IA 50266
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
a memorandum of understand- and a payment bond that comply 0.5 percent for unknown or fore-
ing to work together under an with the Little Miller Act. seeable defects that may become
executive order that President Missouri expanded its exist- known in the first year after
Trump issued in 2017 and to ing P3 law for the Highways and substantial completion; 2.5 per-
reach environmental and other Transportation Commission to allow cent for incomplete, incorrect or
permitting decisions within a political subdivisions to use P3s and missing deliverables; 150 percent
goal of two years. A single agency to allow the commission to use P3s of the reasonable cost to complete
would take the lead and set the for stormwater facilities and systems. or correct incomplete or defective
time frame for major projects that Delaware and Vermont enacted work items; and an amount for the
require an environmental impact laws to enable the use of P3s. reasonable value of claims and any
statement. The MOU is intended Delaware’s new law allows county costs, expenses and attorneys’ fees
to create best practices for agency and municipal governments to incurred as a result of the claims
cooperation and does not give enter into P3s for public lands if permitted in the construction
project sponsors any new recourse through a lease, concession contract for the person seeking the
or remedies. agreement, easement or license payment of retainage.
76
In Vermont, a new law prohibits $250,000 was rejected as way to construction manager at-risk
a contracting entity or contractor cut costs in the state budget. method for any kind of infra-
from withholding as retainage any Vermont considered a proposal structure project, including, but
amount due and owing for mate- from its state transportation not limited to, buildings, utility
rials delivered to the construction agency raising its bond threshold improvements associated with
project and that are covered by a to $1 million so small contrac- buildings, flood control and
manufacturer’s warranty or graded tors could participate in paving underground utility improve-
to meet industry standards, or projects under Indefinite Delivery ments, and bridges (but excluding
both. The new law applies to public Indefinite Quantity contracts. roads). The project cost must
and private construction. After discussion in the legislature exceed $1 million. Existing law
raised the possibility of unpaid requires the construction manager
State Bond Thresholds suppliers and unqualified con- at-risk to possess or obtain suffi-
Rhode Island and Vermont also tractors, the agency withdrew cient bonding for the construction
considered, but did not make the recommendation in favor of services portion of the project.
significant increases to, the state further study of the issues.
bond threshold. In Rhode Island, Lenore Marema is vice president of
legislation that would have allowed Construction Manager At-risk government affairs for The Surety &
payment and performance bonds A new law in California now Fidelity Association of America. For
to be waived for projects up to authorizes counties to use the more information, visit surety.org.
C O U N S E L T O T H E C O N S T R U C T I O N I N D U S T R Y
NEW YORK, NY • RIVER EDGE, NJ • MIAMI, FL • WASHINGTON, D.C. • LOS ANGELES, CA
OAKLAND, CA • CHICAGO, IL • AUSTIN, TX • DALLAS, TX • HOUSTON, TX
W W W. P E C K L AW. C O M
77
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
I
t’s all over the headlines: The con-
struction industry is booming, but
qualified labor is in short supply.
The message that needs to be
For those in the surety industry, conveyed is that construction
the ripple effects from construc-
tion growth come with the same and surety careers offer steady
rewards and challenges. While these
industries are growing, unemploy- employment, high wages and plenty of
ment is at all-time lows and talent is
at a premium.
room for career advancement.
Specifically, construction employ-
ment has reached the highest levels have been looking to fill an average has amplified the need with teams
since the beginning of the recession of nearly 225,000 construction that are already lean and doing more
in 2008, and the surety industry is jobs each month, according to the with less. Forbes calls it “an insatiable
battling with every other financial Bureau of Labor Statistics. appetite for fully baked candidates”
services opportunity for the best The 2018 Insurance Industry (i.e., employees who have imme-
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
candidates. Filling the skills gaps as Employment and Hiring Outlook diately transferrable skills and can
baby boomers head into retirement Survey expects more than 13,000 hit the ground running). The talent
and adopting new, updated recruit- jobs will open before the year is out. pool for candidates like these is
ing practices to attract talent are The Surety & Fidelity Association of small and usually expensive.
among the top challenges for leaders America reports that property and One of the big problems for
in both industries. casualty insurance, which includes construction and surety is that
surety, will see more than 400,000 the extraordinary opportunities
The Talent War Up Close retirements during the next five years. and benefits of these careers aren’t
In August, construction added In general, short-term solutions common knowledge. Jobs within the
23,000 jobs and, according to an to the talent war have included construction industry simply aren’t
industry survey, would have added companies recruiting professionals attractive to millennials, who have
more if enough people were avail- to move from job to job, trading been groomed to work elsewhere.
able to fill the positions. Through one company for another for gains And, a career in surety has often
the first quarter of 2018, employers in salary or position. The growth been one that college graduates luck
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SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
management strategies include the to job shadow and experience • Updating job descriptions and
following: a day in the life. Specifically employment advertising with a
• Enhancing campus recruiting in construction, there are also marketing spin to tell a better
and expanded internship initiatives that target parents and story about the roles, long-term
programs. teachers to make them aware of benefits and transferrable skills
• Improving diversity, which is employment opportunities. the position will entail and the
important for more successful • Rethinking traditional work lifestyle possibilities that come
recruiting and retention. environments. Focus on a great with these career choices.
Companies with diverse culture with open collaborative
workforces have a proven space, technology for remote Larry Taylor is president of
competitive advantage with offices to work together, Merchants Bonding Company
greater measures in productivity, flexibility to balance work hours and chair of the Surety & Fidelity
engagement and service. and home life, and opportunities Association of America Board of
• Creating more mentorships for employees to stay healthy and Directors. For more information,
and avenues for young people give back to the community. visit merchantsbonding.com.
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CONTRACTORS’ GUIDE TO SURETY BONDING
Surety Program
Considerations for
Contractor Ownership
Transitions
BY DAN PANEK
T
oday, most contractors are
facing the reality that a
significant percentage of
their management teams
will hit retirement age
during the next five to 10
years. After years of dedicating their
time, energy and resources toward
building a successful operation, the
principals of construction firms
must deal with the challenge of per-
petuating their company. Who will
carry on their legacy, and what’s the
best way to structure the transition
of ownership?
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
Transition Options Selling the company outright Both potentially address perpetu-
It seems that fewer contractors may seem like a logical choice, ation of an organization; however,
have children or other family but there is still the challenge of their structures can vary greatly, as
members interested in going into finding a suitable buyer willing to can their impact on the company’s
the business. At the same time, pay the right price. Nor does this balance sheet. This, in turn, can
owners typically want to benefit option guarantee that the com- have unforeseen consequences on
from the equity that they’ve built pany will continue to operate in its the contractor’s surety credit.
up in their business. current form and with its employ- Private equity investment
Some may simply wind down the ees protected. involves the contractor being
operation: complete the remaining During the past few years, two purchased by an investment man-
work, sell the equipment and walk ownership transition options agement company. Private equity
away with the proceeds. However, have gained increased attention: firms raise the necessary funding
for most, this option won’t generate employee stock ownership plans through outside investors, and the
a sufficient return. and private equity investment. acquisition is often structured as
82
a leveraged buyout. The existing by outside investors or through and possibly result in additional
executive team typically remains the departing shareholders. This debt needed for the transaction.
involved in running the day-to-day liability can heavily leverage the With both ESOPs and private
operations, with investor oversight company and negatively impact equity investments, the compensa-
and ultimate control. its tangible-equity position, push- tion paid to departing shareholders
The firm uses its financing, ing what was previously a very can include warrants or “earn outs”
strategic planning and manage- strongly capitalized company into that vest at a future date. The value
ment resources to help improve a weak equity position. of this deferred compensation is
performance and returns. Once this Any excess cash in the com- based on annual share price eval-
objective has been achieved, inves- pany is usually contributed to the uations. The company remains
tors often will look to capture a transaction, significantly reducing responsible for absorbing the result-
return on their investment through working capital. This new debt ing deferred compensation, which
a sale of the company. generally will need to be serviced can be substantial if third-party
An ESOP is a vehicle by which regardless of whether the contractor valuations result in the share price
a firm’s workforce gains an owner- is profitable. outpacing earnings. Any deferred
ship interest in the company. The The extent to which the trans- compensation needs to be struc-
company sets up a trust fund into action is funded by shareholder tured so that meaningful financial
which it contributes shares or cash or “friendly debt” may give the con- targets must be hit before the target
to buy existing shares. A contrac- tractor the ability to mitigate the price can be paid out.
tor can then reward employees financial impact some in the sure- Transitioning ownership of an
with stock ownership through ty’s eyes. Flexible payment terms organization is never an easy deci-
various means. can be established in the event that sion. Often, the impact on surety
When participating employ- earnings do not keep pace. The credit is the last thing considered
ees retire or otherwise leave the notes can be subordinated to the when structuring ESOPs and pri-
company, their shares are bought surety, allowing it to consider all or vate equity investments. Important
back at market value. An outside a portion of the debt as equity. transactions such as these should be
valuation must be done annually to The formulas used to annually vetted with the surety before it is
determine the shares’ market price. value company shares can be too late in the process.
A benefit of an ESOP is that aggressive, sometimes increasing If the proposed structure
ownership and control stay within the share price as much as 50 restricts the ability to continue
the organization. ESOPs can help percent in any given year. These with the same surety program,
preserve the company culture and outside valuations are based on the return assumptions to justify
encourage employees to focus on how the company itself performs, the transaction could be dramat-
the organization’s performance. but also include other factors ically altered. Surety firms should
such as market comparisons with be seen as partners and can be
Surety Challenges economic data and valuations of valuable consultants. Establishing
ESOPs and private equity invest- publicly traded companies. expectations early on as to what
ments give the departing owners The result can be an inflated the balance sheet should look
a built-in market to sell their share price even in years where like post-transaction can prevent
CONSTRUCTIONEXEC.COM
shares. With that said, both meth- a contractor generates minimal difficult discussions later regarding
ods can create challenges from a profits or retained-earning growth. bonding limitations.
surety perspective. These annual, accelerated share
The debt required to finance price increases can significantly Dan Panek is regional AVP/
both transactions appears on increase the eventual repurchase underwriting director for CNA
the contractor’s balance sheet, price of future departing sharehold- Surety. For more information, visit
whether financed institutionally, ers beyond original expectations cnasurety.com.
83
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
P
ublic-private partnerships are
becoming an important way
to deliver large infrastructure
projects in the United States.
Most of these projects require
surety bonds due to their size,
complexity and scope of work.
The U.S. construction market
continues to provide an excel-
lent source of opportunities for
domestic and international com-
panies. According to the American
Society of Civil Engineers, the
United States will need to invest Still, some states lack the technical exposure. The bottom line is that
$4.59 trillion by 2025 to improve capacity and expertise to consider the private sector and public enti-
the nation’s overall grade of D+ such deals. ties need to find a balance of risk
for infrastructure. As such, the and responsibilities.
repair and rebuilding of highways, Balancing Risk P3s require the involvement of
bridges, airports, rail systems and A P3 project can be delivered in large companies that have the exper-
tunnels are the present focus for different ways, including design-build tise, capabilities, capital base and
state and government agencies. (DB), design-build-finance (DBF), surety bonding support to under-
While the U.S. Department of design-build-finance-maintain take these projects. Many large P3
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
Transportation defines P3s as “con- (DBFM) and design-build-finance- projects have been completed with
tractual agreements formed between maintain-operate (DBFMO). Each the involvement of foreign contrac-
a public agency and a private sector has one common element: P3 tors through their U.S. subsidiaries.
entity that allow for greater private projects pose greater risks for These foreign companies have a large
sector participation in the delivery private contractors. presence in the United States, as well
and financing of transportation Contractors, which ultimately as the resources, experience, capa-
projects,” the reality is P3s differ will handle the design and con- bilities and equity to participate in
significantly from sector to sector struction, may assume additional these P3 projects. P3s are common
and from project to project. risk exposures in P3 projects in other parts of the world, particu-
Many states are still debating depending on the delivery method larly in Europe, Asia, Latin America
whether P3s are the right delivery of the P3 and whether it is DB, and Canada.
method for large, complex projects, DBF, DBFM or DBFOM. By Engaging the surety early in
though 33 states have passed legis- transferring more risk to the the process is very important for
lation allowing the use of them for contractor, it may possibly reduce a successful financial close and
public projects. public entities’ own financial bonding support.
84
Gaining Support and Financing the benefits of P3s is essential for will ultimately benefit taxpay-
It is crucial to understand what a successful financial close of a P3 ers and resolve significant state
is expected from the partnership. project. Most large-scale transpor- budget restrictions for new infra-
Preparing bids for P3 projects can tation P3 projects are eligible to structure investments.
take years and millions of dollars participate in the Transportation There is no one size fits all for
in investments. Detailed contract Infrastructure and Innovation Act the delivery of a P3 project, but
agreements are necessary, and early program (TIFIA loans) and Private states certainly can learn from
involvement of the surety is key. Activity Bonds (PABs). each other through the process
Support from public officials Recent U.S. P3 transportation and past P3 jobs.
is also paramount when it comes projects were funded through a Ultimately, a successful P3
to P3 projects. Public officials combination of public and private requires efforts from public offi-
need to be fully on board with the funds (e.g., through TIFIA loans, cials, the public and private sectors,
project because ultimately they PABS and private equity from and state and federal government
must protect the best interest of investment partners). agencies.
the taxpayers. The public could Overall, approximately $11
very well influence public officials billion in PABs and approximately Martino Sessa is associate vice
to terminate negotiations with the $27 billion in TIFIA loans have president and head of international
private sector. been issued to date. In the end, reverse flow surety for Nationwide,
Educating the public, as well as the availability of funds through New York. For more information,
legislatures and state agencies, about TIFIA, PABs and private funds email martino.sessa@nationwide.com.
PROFESSIONAL
EDUCATION
WEBINAR SERIES
Basu
ABC CHIEF ECONOMIST
SPONSORED BY
85
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
C
ontractors know all too well
how quickly a dispute can
get out of hand and end up
Some would argue that the real
in litigation. Performance success of a project depends on
and payment bonds, change
of work order, delay and the mechanisms in place to deal with
acceleration, critical path method
for scheduling and defects may disputes likely to rise during the
be familiar terms to those in the
construction industry, but a judge
construction phase.
or jury would be hard-pressed to
fully understand them, especially
when experts testify on the stand designed for all case types. Thus, In 2017, an American
with differing interpretations of the the clear advantage in arbitration Arbitration Association survey
disputed items. is that the parties have immense asked construction lawyers how
In comes arbitration, which has power over the proceedings. often their clients are involved in
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
been touted as a private forum to Some would argue that the real the development of a contract’s
save money and time in the pursuit success of a project depends on the dispute resolution provisions. The
of a final disposition of claims. mechanisms in place to deal with answer: Clients were only “signifi-
However, there are unique arbitral disputes likely to rise during the cantly or always involved in the
benefits to the construction indus- construction phase. process” 30 percent of the time.
try that are time- and court-tested. Whether it is a public, private or So where can a contractor pro-
Arbitration is a private process P3 project, conflicts are inevitable, vide advice and consultation?
by design that can be customized so contractors should be prepared Consider subcontractor default
to meet the needs of the parties to bring dispute avoidance tools to insurance contracts, many of which
and project, unlike court where the the table. contain a standardized arbitration
entire proceedings are a matter of Above all, the contractor should clause for coverage disputes. Several
public record. be knowledgeable of any applicable points in these types of arbitration
Parties must follow the rules rules or procedures and participate clauses leave the door open for
of the particular court, which are in drafting the contract. negotiation and improvement.
86
1. Locale everyone is making money except 5. Confidentiality
When an arbitration clause does them. It may not be enough to While ADR forums and arbitrators
not specify where the arbitration simply rely on the arbitration pro- adhere to certain standards concern-
will take place, the parties are cess to provide a speedier method ing the privacy or confidentiality of
given an opportunity to agree on of resolving disputes. the hearings, parties might want to
the locale. However, to the extent An emerging trend in arbitra- impose limits on themselves as to
the parties are unable to agree, the tion clause drafting is to include how much information regarding
ADR forum or arbitrator will likely timelines for the completion of an the dispute may be disclosed outside
make that determination. arbitration. the hearing. Except when required
Therefore, it is important that However, it is important to by law, parties to a contract can
the parties specify, pre-dispute, suggest deadlines that are realistic contractually limit parties or arbi-
where the arbitration will take because failure to meet specified trators from disclosing the existence,
place. Further, the choice of the deadlines could jeopardize the content or results of an arbitration
place to arbitrate may be construed enforceability of the arbitration unless they have the prior written
to imply a choice of the applicable award. The uncertainty pre-dispute consent of all parties.
procedural law, which in turn may is that the parties do not know The true power of arbitration lies
affect questions of procedure, court what the scope of a potential claim in the ability of the participants
intervention and enforcement. may be. to take advantage of all available
Here, a “time is of the essence” strategies and techniques to ensure
2. Qualification of Arbitrators provision, where the arbitration the right arbitral process for their
Unlike court, where parties have no hearings shall take place within 90 dispute. Whether the parties are in
say in the appointment of their judge, days of filing and award rendered arbitration or court, the benefits
arbitration clauses can specify that the within 120 days, may be acceptable are only achieved if all the players
arbitrators have a certain type of con- for a small project, but completely know and understand the rules,
struction background or expertise. unrealistic for a multi-million- policies and procedures.
It’s worth mentioning here that dollar project. Contractors also should be mind-
not all arbitrators are attorneys ful that not every dispute requires
or retired judges. Non-attorney 4. Discovery legal action or a legal decision.
construction industry professionals Discovery is one of the most Interestingly, this might explain
serving as arbitrators may seem like expensive and time-consuming why there is a noticeable increase
a new phenomenon to those who portions of the arbitration process in the enrollment of industry
entered the construction practice and, unbeknownst to many, the professionals in alternative dispute
in the last 10 years. However, AAA amount and scope of discovery can resolution training classes. Such
construction panels have included be controlled through a clause in a proactive part on contractors to
architects, engineers, general the contract. In addition, the pro- better understand dispute resolu-
contractors and subcontractors cess can be limited by agreement tion systems will certainly ensure
for more than 90 years. In fact, of the parties at any time up to and that they are better prepared to
today there are approximately 300 including the preliminary hearing. handle potential disputes.
industry professionals on the AAA’s Under most ADR forum rules,
CONSTRUCTIONEXEC.COM
national construction roster. arbitrators are authorized to direct a Michael R. Powell is vice president
pre-hearing exchange of documents of the construction division at the
3. Duration of Arbitration and witness lists, but the limita- American Arbitration Association,
Proceedings tions can be unpredictable. In this Los Angeles, and serves as liaison for
A frequent complaint of clients instance, the parties may want to the AAA’s National Construction
in an arbitration hearing is that provide for a more tailored discovery Dispute Resolution Committee. For
when they look around the room, program in their arbitration clause. more information, visit adr.org.
87
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
The Intersection of
Arbitration and the Miller Act
BY ROBERT J. DUKE
T
he Miller Act requires according to Clifford F. MacEvoy pursuant to the arbitration clause
contractors on federal Co. v. United States (1944.) in the subcontract, and the sub-
construction projects over However, there are limits embed- contractor also has sued the surety
a certain threshold to ded in the statute, such as time under the Miller Act? Can the
furnish performance and limitations, notice requirements and Miller Act action be stayed until
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
payment bonds, providing identification of eligible claimants. the resolution of the arbitration,
a remedy to subcontractors and In addition, the operation of the even in light of the liberal construc-
suppliers on the project to seek Miller Act may be affected by the tion of the Miller Act?
recovery for nonpayment. operation of other federal statutes. Recent cases addressing this issue
Because subcontractors and sup- Recent cases illustrate the interplay reflect the prioritization of the
pliers cannot assert a lien on federal between the Miller Act and the Federal Arbitration Act over the
property, the Miller Act payment Federal Arbitration Act, which Miller Act.
bond is their sole remedy. establishes a framework for the
Therefore, the Miller Act is enforceability of arbitration that Recent Cases
highly remedial in nature and was agreed to by the parties and In United States ex rel. Debra’s
“entitled to a liberal construction is an expression of strong federal Glass, Inc. v. The Insurance
and application in order to properly preference for arbitration. Company of the State of
effectuate the congressional intent So what happens when the Pennsylvania (June 13, 2018), a
to protect those whose labor and contractor and subcontractor are payment dispute arose between the
materials go into public projects,” arbitrating a payment dispute prime contractor and subcontractor
88
on a federal project. The prime In the 2018 case United States ex enforceability of a waiver does not
contractor invoked the arbitra- rel. Harbor Construction Company, restrict arbitration of Miller Act
tion clause in the subcontract and Inc. v. T.H.R. Enterprises, Inc., a claims once a suit is filed.
filed a demand for arbitration. subcontractor on a federal project The court also noted that the
Subsequently, the subcontractor claimed that it was not paid in full. legislative history of the provision
commenced an action against It commenced an action against the was clear that it was not intended
the payment bond surety seeking prime contractor and Miller Act to be a statutory preclusion
recovery under the Miller Act. The surety. The prime contractor moved of arbitration.
surety filed a motion to stay pend- to compel arbitration pursuant to As to whether the Miller Act
ing arbitration. the dispute resolution provision claims were within the scope of the
The court noted the long history in the subcontract and to stay the subcontract’s arbitration provisions,
of cases in which arbitration (under action pending arbitration. the court concluded that reference
the Federal Arbitration Act) was The court granted the motion to arbitration being conducted
prioritized over the Miller Act and to compel arbitration. In consid- in accordance with Construction
stays were granted. ering the motion to stay, the court Industry Arbitration Rules indi-
The court also noted the common considered whether the Miller cated that the arbitrator would
questions of fact between the Miller Act claim weighed against it and decide the scope or the arbitration
Act suit and the arbitration and the noted the long line of decisions agreement. (The rules give the
risk of inconsistent outcomes. The that stayed Miller Act claims arbitrator power to determine his
court granted the stay through the pending arbitration. or her jurisdiction.)
completion of the arbitration. The court granted the motion The court granted the motion
In United States ex rel. Red to stay. However, concerned that to stay the Miller Act claims,
Hawk Contracting, Inc. v. MSK in apparently trying to balance pending arbitration.
Construction, Inc. (May 8, 2018), the remedial nature of the Miller Thus, an arbitration clause in
a subcontractor on a federal project Act and the policy preference for the subcontract will be enforced
in North Carolina brought claims arbitration, the court limited the in light of the policy preference
against the prime contractor and stay for a period of six months so for arbitration under the Federal
Miller Act surety, alleging that that arbitration could not be used Arbitration Act. The Miller
it had not been paid in full. The as a delay tactic. Act is for the protection of
prime contractor moved to stay the A final example is United States subcontractors and supplier and is
action pending arbitration in South ex rel. Bay South Limited, Inc. v. construed liberally.
Carolina pursuant to the subcon- International Fidelity Insurance However, there are limits. With
tract’s arbitration clause. Company. In this 2017 case, a sub- respect to arbitration, courts
After determining that the contractor on a federal project sued typically stay a Miller Act lawsuit
Federal Arbitration Act was appli- the prime contractor and Miller Act pending the outcome of arbitration.
cable, the court concluded that the surety alleging that it had not been Note, this is not a waiver of
dispute fell within the scope of the paid in full. The contractor and Miller Act rights, but merely a
arbitration clause and granted a stay surety moved to stay the claims, means for the parties that agreed
pending arbitration. pending arbitration. to arbitrate their disputes to do
CONSTRUCTIONEXEC.COM
With respect to the Miller Act The subcontractor argued that so, before taking what are often
claim, the court concluded that the arbitration provision in the sub- the same issues regarding payment
determining the surety’s liability contract operated as an improper to court.
would rely on common issues of waiver to bring a civil action under
fact to be settled during arbitration. the Miller Act. Robert J. Duke is general counsel of
Therefore, the court concluded that The court disagreed and con- The Surety & Fidelity Association
the stay applied to the Miller Act cluded that the applicable Miller of America. For more information,
claim as well. Act provision regarding the email rduke@surety.org.
89
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
2018 Directory of
Surety Bonding Professionals
NATIONAL SURETIES
90
Alan P. Pavlic Offices located throughout Oklahoma,
p: (262) 754-8095 Texas, Arkansas, Arizona and California.
f: (262) 797-9454 INSURICA
Merchants Bonding Company focuses e: appavlic@orsurety.com 5100 N. Classen Blvd., Suite 300
exclusively on surety and fidelity bonding. Oklahoma City, OK 73118
Merchants combines more than 80 years Dillon Rosenhamer
of knowledge and experience with easy p: (405) 523-2100
online tools to deliver common-sense e: dillon.rosenhamer@insurica.com
underwriting and first-class service. Philadelphia Insurance Companies (PHLY)
insurica.com
MERCHANTS BONDING COMPANY is rated “A++ Superior” from A.M. Best
6700 Westown Pkwy. and offers a competitively priced suite of
West Des Moines, IA 50266 bonding options for qualified contract and
Josh Penwell commercial surety accounts.
p: (515) 243-8171 PHILADELPHIA INSURANCE COMPANIES A subsidiary of Marsh & McLennan
f: (515) 243-3854 1 Bala Plaza, Suite 100 Companies, the largest risk management
e: jpenwell@merchantsbonding.com Bala Cynwyd, PA 19004 firm in the United States, Marsh &
merchantsbonding.com p: (800) 873-4552 McLennan Agency specializes in
e: phlysales@phly.com delivering superior employee benefits, risk
phly.com management and surety solutions to the
middle market.
MARSH & MCLENNAN AGENCY
5605 Carnegie Blvd., Suite 300
Nationwide has deep expertise in surety For more than 100 years, Travelers Charlotte, NC 28209
and specialty liability insurance and an has enjoyed a rich heritage as a Mid-Atlantic Region
A.M. Best rating of A+ XV. leader in the surety industry. Travelers p: (704) 365-6213
NATIONWIDE provides a variety of surety products mma-midatlantic.com
7 World Trade Center and services to general and heavy
250 Greenwich St., 37th Floor contractors, construction managers and
New York, NY 10007 subcontractors of all sizes.
Antonio C. Albanese TRAVELERS BOND &
p: (212) 329-6984 SPECIALTY INSURANCE
e: antonio.albanese@nationwide.com 1 Tower Square
nationwide-mls.com Hartford, CT 06183
Gregg Lyon NHC bonds more projects than any other
p: (860) 954-2416 agency. Our knowledge and customized
e: glyon@travelers.com solutions allow us to provide more
Old Republic Surety provides surety travelers.com options, stronger negotiating power, and
solutions for middle market and large the right terms and conditions to meet our
CONSTRUCTIONEXEC.COM
91
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Orlando
ARKANSAS terms and conditions to meet our
Nielson, Mosholder & Associates
Brad Johnson COLORADO customers’ needs.
4380 St. Johns Parkway, Suite 110
p: (501) 666-6653 NIELSON, HOOVER &
Sanford, FL 32771
e: brad.johnson@insurica.com COMPANY
Laura Mosholder
insurica.com Atlanta
p: (407) 330-3990
e: lmosholder@nielsonbonds.com Nielson, Ward, Gann & Associates
119 Maple St., Suite 220
CALIFORNIA CCIG is based in Greenwood Tampa Bay Area Carrollton, GA 30117
Village, Colorado, and employs Nielson, Wojtowicz, Neu & Ed Ward, Danny Gann
a team of 95 professionals Associates p: (770) 830-7775
delivering a wide range of surety, 1000 Central Ave., Suite 200 e: eward@nielsonbonds.com,
business, and personal insurance St. Petersburg, FL 33705 dgann@nielsonbonds.com
products and services. Kevin Wojtowicz, Jack Neu
At Gallagher, we wear only one
CCIG p: (727) 209-1803 Savannah
hat: “The Hard Hat.” Building
5660 Greenwood Plaza Blvd., e: kwojtowicz@nielsonbonds.com, Nielson, Blome & Associates
surety programs for contractors
Suite 500 jneu@nielsonbonds.com 49 Park of Commerce Way,
is our specialty. We do more than
Greenwood Village, CO 80111 Unit 202
help protect your business. We
Tom Patton Savannah, GA 31405
92
Marilyn A. Blome Dillon Rosenhamer
NEW JERSEY NORTH CAROLINA
p: (912) 233-6260 p: (405) 523-2100
e: mblome@nielsonbonds.com e: dillon.rosenhamer@insurica.com
insurica.com
nielsonbonds.com
93
Are You
Workin
SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Compare
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castellanokorenberg.com/ KWC CERTIFIED PUBLIC surety bond industry, empowers
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Given the complexities of departments with the ability
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CONSTRUCTION EXECUTIVE | NOVEMBER 2018
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CONSTRUCTION EXECUTIVE | NOVEMBER 2018
onstruction executives are tomorrow means gaining control But staying in the rut of wait-
plagued by an environ- over daily schedules, completing ing to see what fires flash today
ment of relentless demands the most important tasks (MITs), isn’t strategic, nor is it sustainable.
coming from every direc- becoming more effective leaders Instead, construction executives
tion—from unpredictable and getting ideal projects at pre- headed toward really winning their
changes and an email inbox cisely the right time. It’s having tomorrow must master five skills.
filling up with other people’s excellent people on the team doing
priorities to clients, customers and the right things, having enough in Respond, Don’t React
coworkers demanding attention the pipeline to retain a consistent It’s not enough to let the day
and resources. It can be exhausting talent pool, showing enough profit unfold, reacting to schedule
and stressful. to further invest while supporting changes, personnel challenges and
Construction leaders who want the family and the organization, new business opportunities without
to win tomorrow need to invest and doing it without feeling carefully considering the long-term
their time wisely today. Winning overwhelmed. ramifications of decisions. Reacting
96
ABC’s Upcoming Events
FEATURING:
Long Beach, Calif.
2019 National Board Meeting National Craft Championships
March 24–28
ABC Nashville, Tenn. Education for ABC Members Excellence in Construction®
CONVENTION 2020
March 23–27 Professional Development for Awards
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Grapevine, Texas
2021 Association Excellence Awards Construction Management
Gaylord Texan
March 7–11 Competition
FEATURING:
Washington, D.C.
2019 National Board Meeting ABC Legal Conference
ABC June 23–27
LEGISLATIVE Legislative Day Diversity and Inclusion
WEEK Washington, D.C. Summit
2020 Congressional Visits
June 14–18
Free Enterprise Alliance Young Professionals
Reception Symposium
CHAPTER 2019
Seattle Forum for ABC chapter staff executives to
PRESIDENTS July 30–Aug. 1 enhance their association management
MANAGEMENT skills, share effective chapter and business
CONFERENCE Minneapolis
2020 practices, and network with peers.
July 28–30
resources, appropriate training and a Schedule MITs distractions of the rest of the world,
clear destination, and then step aside The daily to-do list is a leader’s and they do it.
so they can do their work. Revisit most important tool and should Winning tomorrow today takes
often enough to know they are on include two MITs. Leaders who try an investment of time, energy and
course. Then let them use their to accomplish everything are likely resources. It doesn’t just happen.
expertise, training and experience to to accomplish little. By contrast, It requires a strategic approach
guide that ship to the destination. those who focus on two MITs daily utilizing high-performing tools to
A poor result often is a result of a see greater quality results. communicate, plan and focus.
poorly communicated outcome. The most effective time manag-
ers choose MITs for the following Eric Herdman is a productivity expert
Choose Effective Over Busy day during the last 90 minutes and speaker with Laurie Richards
Winning the construction game of their workday. This prevents & Associates. For more information,
means choosing effective (E) tasks the early morning anxiety from email eric@laurierichards.com
over busy (B) tasks. It’s easy to get tainting their daily planning and or visit facebook.com/groups/
caught up putting out the latest fire decision-making. resultsandoutcomesgroup.
98
ABC Introduces Two New Programs
ABC Introduces Two New Programs
to Simplify Hotel & Housing Needs
to Simplify Hotel & Housing Needs
LEGAL
A
contractor and owner that agreement concludes when the Between Owner and Contractor,
work together typically have work has been fully completed and which provides the contractor’s
their attorneys negotiate final payment has been received. scope of work, contract time,
their agreement before a On the contrary, a master agree- contract sum and other terms per-
job starts. When the same ment is effective for one year and tinent to the specific work order. It
contractor will be hired to renews automatically, unless either is intended for use when the owner
construct multiple projects, the par- party provides 60 days notice of its and contractor have entered into
ties can benefit from an agreement intent not to renew. a master agreement setting forth
that establishes common terms and When a new project comes the common terms and conditions
conditions applicable to all work. around, the parties can simply add applicable to all work orders.
This prevents additional contract a work order under the umbrella of A221–2014 is not a standalone
negotiations and is where AIA the original master agreement. The agreement and must be used
Master Agreements come in. master agreement helps contractors in conjunction with a master
The attorneys will review all the and owners streamline the con- agreement.
major risk-shifting provisions and tract review process and spend less
create a baseline (the master agree- money on attorney fees. Contractor/Subcontractor
ment) for future projects between Agreement
the parties. Owner/Contractor A401-2017, Standard Form of
This master agreement solidifies Master Agreements Agreement Between Contractor
general contract provisions, such as A121–2014, Standard Form and Subcontractor, establishes the
indemnity, insurance requirements, of Master Agreement Between contractual relationship between
waivers of consequential damages, Owner and Contractor, where the contractor and subcontractor.
or stipulations for working with work is provided under multiple It sets forth the responsibilities
hazardous materials, that will apply work orders, is intended for use of both parties and lists their
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
to each work order. when the contractor’s scope of respective obligations, which are
Use of a master agreement plus a work will subsequently be spec- written to parallel AIA Document
work order creates a contract. This ified through the use of one or A201–2017, General Conditions
contracting method allows multiple more work orders. This contract of the Contract for Construction,
scopes of work to be issued quickly document only provides the which A401–2017 incorporates by
without the attorneys re-negotiating common terms and conditions reference.
the contract. Generally, the work that will be applicable to each
order is straightforward enough that work order. Use of A121 plus a Caitlin Sweeney is a marketing
the parties can complete it them- work order creates a contract that and education specialist on the
selves. It will address the scope of includes both the terms and the global innovations team at the
work, price, time and other project- scope of work. American Institute of Architects.
specific details. A121-2014 is coordinated for For more information, email
Most AIA agreements are meant use with A221–2014, Work Order aiacontractdocs@aia.org or visit
for use on a single project, and an for use with Master Agreement aiacontracts.org.
100
The #1 Payroll Service
for Contractors
Kinsley Construction
insley Construction, Inc. is a
modern-day master builder
with deep family roots.
Headquartered in Central
Pennsylvania, with offices in
Baltimore and Hagerstown,
Maryland; metro Washington, D.C.;
and Eastern Pennsylvania, the com-
pany works with clients throughout
the Mid-Atlantic region.
Kinsley delivers building solu-
tions through preconstruction,
construction management, general
contracting and design-build ser-
vices, but the firm’s most rewarding Kinsley Construction’s #BuildYork initiative is focused on supporting the city’s revitalization efforts.
line of work is its dedication to
bettering communities.
Kinsley’s commitment to com- through education, training and Employees are encouraged to
munity stemmed from the beliefs health services. Kinsley recently participate in community events
founder Robert (Bob) A. Kinsley implemented a new initiative, and give back when they can. Each
and his wife, Anne Kinsley, prac- #BuildYork, that is focused on year, staff participates in various
ticed since the company’s inception supporting the city’s revitalization organizations’ volunteer days,
in 1963. It has always been a part and honoring the company’s deep National Night Out, American
of the company philosophy to give roots, strong ties and big plans for Red Cross blood drives and more.
back to the communities where its its hometown. Their efforts are recognized in the
employees live and work. Bob and Through the years, Kinsley has internal employee newsletter, social
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
Anne believed that “if the commu- built strong ties with clients as well media posts and blog posts on the
nity supports you, then you should as other businesses and non-profits buildyork.com website.
support the community”—a message in the area. The #BuildYork ini- Kinsley is managed by second-
passed down to their five sons who tiative is focused on how Kinsley generation family executives, and
now work together to lead Kinsley. and its employees can help make a a total of 15 family members are
The top two organizations positive impact in the community, among the firm’s more than 1,300
Kinsley supports regularly are the on and off the jobsite. Employees employees. Robert Kinsley remains
United Way and the Appell Center support and volunteer for more involved in all aspects of the com-
for the Performing Arts in York, than 100 local organizations, which pany on a daily basis.
Pennsylvania. Employees provide is something they’re very proud of
monetary donations as well as vol- and thankful for. Maggie Murphy is digital editor of
unteer for events like United Way’s While the #BuildYork initiative Construction Executive. For more
Day of Action. is currently centered on the York information, email murphy@abc.
They also support major office, Kinsley plans to implement org, visit constructionexec.com or
organizations who help people it company-wide. follow @ConstructionMag.
102
AMERICA’S #1 CONSTRUCTION
ACCOUNTING SOFTWARE®
With an open door policy, apprentice to the president. They for whatever they aspire to be. Also,
we can better understand each want human resources personnel there inevitably are times when
employee as an individual and to be approachable, solid com- business decisions may negatively
make the necessary accommoda- municators who listen carefully to impact our employees, and it is
tions to see that their needs are met, their questions and concerns, and critical to have the right people in
whether it’s through an Employee provide guidance when needed. these roles to help employees navi-
Assistance Program or just sitting Employees want to be treated gate most effectively.
down for a cup of coffee. with dignity and respect. If an We have spent a lot of time
Knowledge also is key as it relates investigation was to take place, coaching our managers on what
to health care, benefits, personnel human resources should patiently they can do to best meet their
issues, transitioning into a new listen to both sides of the story, uti- employees’ emotional needs. We’ve
position or onboarding. If we don’t lize the facts while avoiding hearsay put together a toolkit of proven
have an answer, we will find it and being discrete. This will build techniques that our leaders use to
even if it takes all day just so our employee trust and help create a help make their people feel valued
employees know they are valued. better work environment. and cared for.
104
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