I-LinCP Focus

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I NSTITUTE FOR L EADERSHIP IN C APITAL Summer/Fall P ROJECTS 2012 Gulf Coast Regional LinCP Forum September 14, 2012, with a Golf Awards and Pre-Forum Dinner on Sept. 13 The Woodlands Waterway Marriott Hotel Convention Center

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oin architects, facility owners, engineers, contractors, and other capital project leaders at the Gulf Coast Regional Leadership in Capital Projects (LinCP) Forum. Under the theme of “Risk and Recovery: Dealing with Disasters, Resources, and Politics,” this Forum will engage in the following inquiries: • Keynote: How is The Woodlands coping with growth and the challenges of a changing community to keep its vision alive? • Topic 1: How has UTMB addressed politics, FEMA, planning, design, and construction challenges to recover from Hurricane Ike? • Topic 2: As the Texas economy continues to grow, what are the realities and risks of the availability of financial, labor, professional, and material resources? • Topic 3: How is/will the Affordable Care Act affect heathcare capital projects? Looking ahead, what does the “climate” look like for educational projects?

Why should you attend? “As a follow-up to [LinCP Forum] panel discussions or presentations, you work through discussions with your table mates. There’s lots of interaction and dialogue, and everyone gets involved. You get to see how everybody thinks. Nobody leaves the Forum without knowing what is important to the other people they are sharing the room with… Carol creates an informal atmosphere that allows everybody to feel at ease. When we work on projects with the owners and contractors, we are all making demands on each other. We need to be able to get together in these Forums where there are no demands. The roles fade away a bit, and we are just people trying to learn how we can do business

better together,” said past attendee Marie Hoke, Principal, WHR Architects. LinCP Forums bring together a diverse and BALANCED group of capital project stakeholders, including facility owners, program managers, planners, contractors and CMs, subs, engineers, architects, attorneys, developers, and others.

We inspire. We gather in a safe and intimate setting. Registration numbers are limited to no more than 100 people, so you will be able to connect and have REAL conversations with those who influence and help determine project success. We address controversial subjects head-on and seek mutual understanding. There is collaborative information sharing, exploring challenges, and seeking solutions. Presenters and panelists include: • Barry Goodman, Founder and President, The Goodman Corporation • Robert Heineman, FAIA, VP Planning, The Woodlands Development Co. • Don Norrell, President, The Woodlands Township • Steven LeBlanc, Asst VP, Facilities Risk Management, UTMB-Galveston • Emre Ozcan, Vice President, Linbeck • Maurice Robison, AIA, Managing Principal-Houston, HDR Architecture • Bryan Jones, AIA, Assoc. VP and Project Manager, HDR Architecture • Sean Garretson, President, Paragon Planning and Economic Development; Director, Austin-San Antonio Corridor Council • Andrew Quirk, Senior VP, Healthcare Center of Excellence, SKANSKA • Sid Sanders, Senior Vice President, Construction, Facilities Design and Real Estate, Methodist Hospital • …more to be announced! Click here for up-to-date details!

Golf Tournament, Sept. 13 Panther Trails Course at The Woodlands Proceeds from this event will benefit Gulf Coast Regional LinCP Forum registrations and rooming for students and Government/nonprofit facility owners.

Attending the LinCP Forum? Every LinCP Forum registrant who is also a tournament golfer will receive a rebate of $55! Golf tournament details include: • 18-Hole Course • 1 p.m. Shotgun Start, 4-Person Scramble • Awards and Dinner to follow at the Royal Mile Grille

Click here for more details and to register.

Thank You Gulf Coast LinCP Forum Sponsors! SILVER

The Goodman Corp.

COLLABORATOR

SKANSKA

1 I NSTITUTE FOR L EADERSHIP IN C APITAL P ROJECTS


C alendar of E vents

S an A ntonio “L et ’ s G o ” S ocial R ecap

I-LinCP Golf Tournament

On Thursday, June 21, 2012, I-LinCP hosted a social at Luke Restaurant in San Antonio, with a special presentation by Mike Frisbie, the genial City of San Antonio city engineer and director of capital improvement management services. Around 70 attendees enjoyed the special appetizer selections, including Luke’s famous flammenkuche, minimeat pies, bambam shrimp, smoked pepper jelly ribs, and heirloom tomato and house made mozzarella skewers. I-LinCP socials combine learning with networking, and this event concluded with the “8-minute Ripple” process, which made getting to know each other especially fun! The learning piece was provided by Mike Frisbie. During Mr. Frisbie’s 25-year career, he’s been involved in many programs and projects and has fostered much teamwork among agencies, consultants, and contractors. In San Antonio, Frisbie and his CIMS Team work with the engineering, architectural, and contracting community to produce excel-

Thursday, September 13, 2012 Golf Tournament & Dinner/Awards 11:30 a.m. - 8:30 p.m. Panther Trails Course, The Woodlands 1 p.m. Shotgun Start 4-Person Scramble Awards and Dinner to follow at the Royal Mile Grille Register online here.

Gulf Coast Regional LinCP Forum - The Woodlands Friday, September 14, 2012 Full-day Conference Location: The Woodlands Waterway Marriott Hotel Convention Center 8 a.m. - 5 p.m. Join collaborative discussions to share information, explore challenges and seek solutions with owners, architects, engineers, planners, contractors, program managers, and others working with capital projects. Attend the Golf Tournament and receive a $55 conference registration rebate. Register online here. Sponsorship opportunities available. More information on sponsorships available here.

by Carol M. Warkoczewski lent, long-lasting projects. Frisbie provided an excellent overview of San Antonio’s $596 million Bond Program, which was approved by voters on May 12, 2012. The approved projects are a part of five propositions improving or constructing new local streets, bridges, sidewalks, drainage facilities, parks, recreational facilities, libraries, a community center, and museums. Many projects address infrastructure needs in a specific area while several have a regional or citywide benefit for all residents. I-LinCP again thanks the event sponsors: Platinum: Journeyman Construction, MySmartPlans, Raba Kistner, Saterfield & Pontikes, SpawGlass, TDIndustries, Wiss, Janney, Elstner Associates Gold: Coyle-SDA, CP&Y, Lackey de Carvajal Cx, Lee Lewis Construction, TBG, The Principle Partnering Group, Vickrey & Associates Silver: Baer Engineering, Foster CM Group, Milestone PM, Nathan D. Maier

I-LinCP Reception at South Padre Island October 3, 2012 South Padre Island Location: South Padre Island Birding and Nature Center 8:30 p.m. - 10 p.m. Register online here.

Webinars Coming soon! I-LinCP members are encouraged to submit their ideas. Cost to members will be FREE. Nonmembers will be charged a nominal fee. We will provide continuing education credits/AIA LU’s as much as possible.

For more event information including sponsorship opportunities, please visit www.i-lincp.org.

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I n F ocus : L abor

and

M aterials S hortage

AGC: Skilled Labor Shortage Possible by Associated General Contractors of America Construction employment stalled in June as more former construction workers left the industry, according to an analysis of new federal data released by the Associated General Contractors of America (AGC). The lack of current job openings, along with the departure of experienced workers, suggests a potential skilled-labor shortage may be developing, construction association officials warned. The unemployment rate for former construction workers fell to 12.8 percent, the lowest June rate since 2008 and much better than the 15.6 percent rate in June 2011 or the 20.1 percent rate in June 2010, the AGC reports. Over the past two years nearly 750,000 experienced workers have either found jobs in other industries, returned to school, retired or otherwise left the workforce. For the complete article courtesy of the AGC, click here.

T hank Y ou

to our

Builders Assess Purchasing Needs as Potential Shortages Loom by John Caulfield Wielding their size and buying clout more effectively is how two of the industry’s largest production builders and a leading buying group for custom builders believe they can counter future anticipated shortages in construction labor and building materials. How builders should be adjusting their purchasing strategies as the housing industry recovers was the topic of a panel discussion during Builder’s Housing Leadership Summit in New York City this week. The discussion took place as the Census Bureau reported that national housing starts in April rose 2.6 percent to a seasonally adjusted 717,000 units, and after several of the industry’s largest builders at the Summit said that their sales in the first quarter had risen by anywhere from 25 to 50 percent. For the complete article courtesy of Builder, click here.

N onprofit /G overnmental

and

C orporate M embers

Nonprofit/Governmental City of San Antonio Capital Improvements Management Services • Cypress-Fairbanks ISD • Sam Houston State University Physical Plant • Southwestern University • University of Texas at Austin Project Management & Construction Services • Texas State University System • University of Houston Facilities Planning & Construction • University of North Texas

Corporate E&C Engineers & Consultants • Hunt Construction Group • Skanska • SpawGlass • TDIndustries • Bay-IBI Group Architects • Clark Condon Associates • Flintco • Haynes Whaley Associates • Kiewit Building Group • Kirksey Architecture • Lackey de Carvajal Cx • Lee Lewis Construction • Linbeck • PageSoutherlandPage • Rose Rock

COYLE SDA

ENGINEERS | SURVEYORS | ADVISORS

Elevating the Standard Elevating the Standard

Cheryl L. Gregory, PE

Transportation Manager 9120 Old Dietz Elkhorn Road

cherylgregory@coyle-sda.com

Fair Oaks Ranch, TX 78015 T.830.755.8434 F.830.755.8435 www.coyle-sda.com

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I ntegrated P roject D elivery Excerpt from Integrated Project Delivery White Paper by Randall R. Reaves, Esq., R.A. I. INTRODUCTION Integrated Project Delivery (IPD) evolved out of an industry frustration with construction and design mistakes, excessive costs and delays, and the resulting litigation. Techniques such as partnering and early involvement of construction managers in the design phase were useful in reducing such problems, but more change was needed. A process that reinforced collaboration from the beginning of design to the end of construction, and that gave everyone a stake in the outcome, was essential. The increasing technological sophistication required for complex projects made such collaboration even more important. The use of IPD is growing. I-LinCP members, whether consultant, contractor or owner, should have a basic understanding of this process. Because IPD is new, there is no one single definition. There are, however, key principles with various permutations. This paper provides a description of those key principles, the characteristics of IPD, when it is best used, the special type of agreements used, project processes, and its benefits and drawbacks. IPD is more than just a different set of contractual arrangements. It requires something of a culture shift and a different approach to leadership, which are discussed. Public sector owners may be limited in their ability to fully implement IPD. This paper suggests certain of the IPD meth-

ods that such owners may employ to approach an “IPD-ish” project delivery system. A change to governing laws to allow certain state agencies, such as institutions of higher education for example, to use IPD is advocated. II. WHAT IS IPD? IPD is a project delivery method that supports collaboration and a shared stake in the project outcome. There is, however, no rigid standard definition. Each project tends to be customized by the core team based on the needs of the project. There are some common elements as described below. A. Core Team The core team typically consists of the owner, prime design consultant (such as the architect), and the general contractor or construction manager. The team may also include major engineering consultants, other key consultants, and key subcontractors, in either primary or supporting roles depending on the project. The team and its representatives should be defined as early as possible in the project process. The owner plays a much more active role on an IPD project. B. Management Committee The core team forms a management committee. It is important that the management committee members be persons who have significant involvement in the project, and the authority to bind their respective entities (such as executives). There may be multiple committees or subcommittees with specific roles, such as senior overall management and strategy, and day-to-day project management. The members of the management committee are expected to provide leadership that fosters trust, openness, communication, respect, and collaboration. C. Goals The management committee establishes goals for the project. Goals may be both objective and subjective. Key goals usually include measures of project

cost, schedule, and quality. It is also common to include goals for safety, operational performance, sustainability, and minority participation. The team decides how and when such factors are measured, and weighting criteria. More subjective goals may be of an aspirational nature, such as design creativity, or fostering peak level performance. 1. Cost The project cost should be established at the outset of the project processes. The team, consistent with the owner’s goals for the project, determines whether other factors such as life-cycle costs, for example, are part of the project cost metric. Target pricing can be used. Design is then performed to the detailed target pricing budget estimate, rather than a detailed estimate being produced in response to the design. Time-consuming, difficult, and often contentious “value engineering” and redesign exercises can be minimized through the use of target pricing. Target pricing requires contractors and subcontractors who can produce accurate detailed estimates without extensive sets of drawings. Rather than “buy-out” being a single event, it is a continuously refined process (although, ideally, buy-out should be completed by the time the documents are completed). Target pricing also requires consultants who can establish requirements without fully developed designs and respond nimbly to immediate feedback continually throughout the design process. 2. Schedule IPD has the potential to reduce typical schedule durations. That is a chief selling point to owners. Because of the extensive early planning and early design used in IPD, it is possible to more accurately predict schedule, and to produce detailed phasing and sequencing schedules. Early buy-out of equipment and materials is enhanced thereby reducing overall schedule duration. This white paper is part of I-LinCP’s IPD Initiative. An IPD workshop is being planned for the near future. For the complete white paper, click here.

4 I NSTITUTE FOR L EADERSHIP IN C APITAL P ROJECTS


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WENDY BURKE Director of Business Development (713) 244-2218 wburke@hoarllc.com

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Carroll Lee Pruitt, FAIA, NCARB, APA 8553 N. Beach St., # 284, Fort Worth, Texas 76244-4919 p. 817.753.6876 ▪ f. 817.431.3378 ▪ c. 512.589.8095 cpruitt@pruittconsulting.com ▪ www.pruittconsulting.com Registered City of Dallas Green Building Provider Building Code Analysis, Accessibility (ADA &TAS), Energy Serving Fort Worth, Dallas and beyond since 2004

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I-L in CP M ember F ocus Barry M. Goodman Founder and President, The Goodman Corporation I-LinCP Founder and Executive Director, Carol M. Warkoczewski, AIA, MSOLE (CMW) interviewed I-LinCP September Forum keynote speaker, Barry M. Goodman (BMG), about The Goodman Corporation; keys to successful collaboration among various stakeholders; and the future capital projects climate. CMW: Hello, Barry. We welcome you as a new I-LinCP member and look forward to your keynote presentation, “The Woodlands - Weathering the Storm and Challenges of Sustainable Development,” at the Gulf Coast LinCP Forum in September. Please tell us a bit about the services that The Goodman Corporation provides. BMG: The Goodman Corporation (TGC) is a multi-disciplined consulting firm which concentrates on mobility and revitalization programs for local political subdivisions and the private sector. Development of data and information which presents proposed infrastructure projects in the most favorable light constitutes the backbone of our professional base. TGC’s ability to identify potential sources of funding, particularly at the federal level, and to capture local value to match available funding, often makes the difference between vision and reality. Most importantly, the projects must be in the public interest and evidence an equitable distribution of cost benefit to both the public and private sector. Within this context TGC has been able to generate over $1 billion in federal discretionary funding for our client base. CMW: You have been involved in some amazing projects over the years. What is one of the most interesting projects you’ve worked on and why? BMG: The City of Galveston has provided a template for all of my personal creativity and professional satisfaction. Rather than a project, TGC has worked with the City for over 28 years on the development of mobility infrastructure which includes Intermodal Transit/Parking terminals, rail trolley, corridor rede-

velopment, downtown sustainability, park and ride, and many other mobility improvements which link the elements of transportation, community revitalization, and economic development. The rewards which come from being an integral part of the same community, for such a long time, have been extremely satisfying. The TGC mindset is not focused on the success of a particular project, but on creating a framework of local support, funding availability, and continuity which leads to a progression of improvements over time. CMW: Your projects generally involve a need for collaboration between many stakeholders with differing wants and needs. What is the greatest strength that you bring to resolve these challenges, and what suggestions can you give us for improving outcomes between groups? BMG: This is of course the key ingredient to successful projects. Every community has its own set of unique stakeholders from elected and public officials, to the private sector, to the key “movers and shakers” who have an interest (or think they have) in everything that goes on. There is no magic bullet for successful stakeholder involvement. I remember in El Paso several years ago, that creating a set of important downtown improvements (streetscape, parks, transit terminals) required meeting every two weeks for 18 months with three groups of stakeholders (property owners, retailers, and public - institutional). Success required the building of “trust” among divergent interests; and this required time. Eventually everyone landed on the same page. Probably the most important factor, to me, is being honest and straight forward about what is and is not possible; even if the answer is not what they want to hear. CMW: As you look into the future and envision the capital projects “climate” in 10 years, what do you see? BMG: I think there is a great need for both the public sector and the consultant

community to re-examine the approach to project development and implementation. The economic condition in this country necessarily requires that cost effectiveness become the basis for moving ahead with infrastructure projects. I think that the professional community of engineers and architects should consider new models for project development and oversight, which reduce financial risk to the client, and introduce new methodologies for project development which considers cost, time, and result. I think the term “shovel ready” which, at the time of its introduction to support the “economic stimulus” program was something of a misnomer, provides all of us a glimpse into the future. I envision far less reports and studies on the shelf and far more project development in anticipation of future funding. Spending public or private funding to ready projects for future funding, even if not seemingly available, will be successful in the long run. CMW: Barry, thanks very much for your time, and we will see you on September 14, in The Woodlands!

Ready to learn more? Barry Goodman of The Goodman Corporation; Robert Heineman, FAIA, VP Planning, The Woodlands Development Co.; and Don Norrell, President, The Woodlands Township present “The Woodlands - Weathering the Storm and Challenges of Sustainable Development” at the Gulf Coast Regional LinCP Forum, Friday, Sept. 14, 2012. Click here to register now!

6 I NSTITUTE FOR L EADERSHIP IN C APITAL P ROJECTS


O wner -F avorable C ontracts F or D esign S ervices A nd C onstruction – P art II by Randall R. Reaves, AIA, Esq.

P

art I of this article discussed how to form a contract with an architect which protects the owner’s interests. In Part II of this article, we will look at major issues in forming a contract with a general contractor or construction manager. This article will refer to both types of contracting companies as “contractor” in this article. Most printed form construction contracts, including those promulgated by societies of design professionals, tend to favor the design professional and the contractor, but not the owner. The owner will want to ensure that the project is delivered on time with a minimum of claims for extra costs. The contractor will want maximum latitude in obtaining extensions of time, and in the right to increase the price charged to the owner for the project. As with forming a contract with an architect, or other consultant, a strong contract for the owner will clarify for all parties exactly what the rights, obligations, and expectations are for the owner, architect, and contractor. A strong contract will serve as a useful tool to prevent disputes later, and as a method of resolving those disputes when they arise. A robust negotiation of contract terms at the outset, led by an expert consultant or an attorney, will yield many benefits in keeping the project on track. A good contract need not be about unfairly shifting risk to the other party, but should be about spelling out all the details to avoid future misunderstandings and conflicts. There are two basic types of construction contracts. One is a stipulated sum or

lump sum contract. The other type is a cost plus a fee with a guaranteed maximum price, or GMP for short. The GMP contract presents special issues which are discussed separately below. Following are some of the major issues which should be addressed in forming a contract with a contractor along with suggested approaches:

The Contractor’s Reliance on the Drawings Where does the architect’s responsibility for design end and the contractor’s responsibility for a finished product begin? What happens when the contractor encounters something not shown in the drawings? Although the owner does not want the contractor to deviate from the drawings and specifications, it also wants the contractor to extrapolate from the drawings and specs so that the owner receives a finished, functioning product. Even the most complete drawings and specs will not include every conceivable detail and instruction. Most construction contracts, therefore, require the contractor to build what is “reasonably inferable” from the drawings and specs. Unfortunately, this term is rarely defined. The owner will want to define the term to ensure that it requires the contractor to include all material and equipment required for the proper installation of each item or system, and any material and equipment needed to make a complete operating installation. Most construction contracts attempt to address

what happens when the contractor encounters something unexpected. These situations are commonly called “unexpected conditions” or “differing site conditions.” On new construction, they are usually a result of underground discoveries. These conditions are of two types: (1) those which are represented inaccurately or misleadingly in the drawings and specs, and (2) those which could not have been reasonably foreseen. It is difficult for an owner to protect itself against claims based on type 2 conditions. The owner can, however, include some protection against type 1 claims by requiring the contractor to warrant that it has visited the site, and that it has conducted its own general investigation. The contractor should be required to agree that it will thoroughly review the drawings and specs and that it will bring any inaccuracies and inconsistencies to the owner’s attention in writing before proceeding. Note that overly broad contract exclusions of claims for unexpected conditions may cause contractors to pad their pricing with hidden contingencies.

Schedule Projects which are behind schedule are a perennial frustration. What can be done to more closely monitor the contractor’s on-time performance? Require the contractor to submit a detailed schedule prior to being permitted to commence construction. Consider requiring the contractor to create and maintain the schedule using an industry standard software package which the owner specifies. This allows in-house project management teams to view and manipulate the schedule in their copy of the software. • The schedule should show times of commencement and completion for each subcontractor, required activity sequences and durations, contract document packages, completion dates, owner contract document package review periods, project building permits acquisition time requirements, construction contract bid dates, processing of shop drawings

CONTINUED ON PAGE 8

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CONTRACTS CONTINUED FROM PAGE 7 and samples, owner-provided items, and long lead items. • For large projects, insist on a “critical path” schedule rather than a bar graph schedule indicating task durations only. • Require the contractor to update the schedule at least monthly; twice monthly for large projects. • Perhaps most importantly, require the contractor to bring tasks lagging behind schedule to your attention and to recommend action.

Claims Ranking right up there with projects which are behind schedule, as trouble for an owner, are claims for extra time and money. • The key to controlling claims is to include a strict provision mandating that the contractor submit the claim within a certain number of days (usually about 20) after the conditions giving rise to the claim are known to the contractor. The owner will find it harder to defend itself when it is sandbagged at the end of the job with stale claims. • The contract should require every claim to be supported in detail. The supporting data should, at a minimum, include a description of the facts, the legal and contractual basis for the claim, how the facts warrant compensation, and detailed pricing data supporting the amount claimed.

Housekeeping Your contract should require the con-

tractor’s on-site superintendent to keep daily logs showing, at a minimum, date, weather, subcontractors on the job, number of workers, and status of construction. The logs should be available to the owner for inspection upon demand and should be kept by the contractor for three years after the project is finished. These logs may prove invaluable to the owner in defending itself against a claim. Many owners are surprised to find that their construction contract does not give them a specific right to force the contractor (or a subcontractor) to remove a particular worker. This can be a sensitive issue when construction is conducted in close quarters with visitors, clients, students, faculty, or staff. The owner should have the right to require the removal of a worker if, in the owner’s opinion, the worker has engaged in inappropriate, offensive, vulgar, or disruptive behavior or speech, including lewd or sexually harassing behavior or speech.

GMP Contracts GMP contracts present special problems for the unwary owner. In the typical GMP contract, the contractor charges the owner the actual amount of its costs for labor and material plus a mark-up percentage (e.g., 6 percent). The contractor agrees that it will absorb any costs once the total cost for the project exceeds a guaranteed maximum price. Carefully define exactly what types of costs can be charged to the owner. Avoid provisions which allow contractors to pass on legal costs, home office overhead, costs resulting from subcontractor bank-

ruptcies, consequences of a failure to maintain insurance, contractual indemnification expenses, liquidated damages, or unlimited travel and living expenses. Limit the contractor’s performance of subcontract work to general conditions work unless the contractor openly competes with subcontractors for the work and the owner selects the contractor to perform the subcontract work. This prevents abuse on the part of the contractor resulting from the contractor inflating the cost of its work in its role as a subcontractor and then passing it on to the owner as an allowed project expense. Payment for stored materials should be limited to situations in which the materials are stored in a bonded warehouse, the materials are insured, the owner has the right to inspect the materials, and the materials are covered by the contractor’s payment and performance bonds. Require the contractor to submit payrolls and subcontractor/supplier invoices and payrolls each month to support its application for payment.

Conclusion By following the simple contracting guidelines above, and by seeking the advice of an expert consultant or attorney to negotiate and draft actual contract terms, an owner can do much to ensure that a project is built on time and in budget, and that unnecessary litigation is avoided. This article is provided for informational, educational, and discussion purposes only and should never substitute for competent legal advice for a specific project or contract.

I NSTITUTE FOR L EADERSHIP IN C APITAL P ROJECTS

Our Mission

Evolve the capital projects industry through sharing of knowledge for optimized leadership, delivery, and performance.

Board of Directors Jeff Bryson, Denise Cheney, Matt Daniel, Bob Farmer, Marie Hoke, Luma Jaffar, Richard Jennings, Carolyn Karabinos, Mike Lackey, Denise Neu, Rob Roy Parnell, Mark Pearce, Randall Reaves, Bob Richards, Roy Sprague, Carol Warkoczewski (Founder and Executive Director) Business card advertisements are available for $50. The Winter/Spring newsletter will be published online in February 2013. Members are welcome to submit original articles or suggestions for re-printing industry-related articles. Contact Carol Warkoczewski, Founder and Executive Director, at carol@i-lincp.org for more information. Visit our members-only I-LinCP BLOG to add your opinion or comment on newsletter content.

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