The
Builder
BUILDING YOUR BUSINESS
VOLUME 11 ISSUE 4 SEPTEMBER 2007
The interior of the recently completed Pediatric Unit of the Dupage Central Hospital, built by Frank H. Stowell & Sons, Inc. The company is one of the sixteen Builders Association companies involved in the OSHA partnership.
In This Issue... Project Spotlight p2 AGC p3 Financial p5 Green Building p6 Milestones p7 Supplier Showcase p7 Golf Outing p8 Industry p10
COMING ATTRACTIONS Oct. 10 Builders Association Fall Meeting Hilton Garden Inn O’Hare 2930 S. River Road Des Plaines Oct. 11 Holland & Knight Construction Law Seminar 131 South Dearborn St. 30th Floor Chicago Oct. 17 Construction Career Opportunity Program Interview Day Dawson Technical Institute 3901 S. State Street Chicago
No Comparison Builders Association’s Safety Partnership With OSHA Is More Detailed, More Beneficial Than Others In the 18 months it took to put together the original BuildersAssociation/Occupational Safety & Health Administration Safety Partnership, the BA’s Safety Committee was aware that they’d be asking an awful lot of its participants. No other partnership or alliance with OSHA in this part of the country has levels to encourage participating companies to improve. The Builders Association Safety Committee was able to work directly with OSHA while creating the Partnership, and the end result was more incentive for the contractor to perform at a high level every year, in addition to more benefits from OSHA in terms of leeway for small irregularities during inspections. The Builders Association agreement is negotiated between the Association and OSHA rather than being negotiated between an individual contractor and OSHA. The Partnership is comprehensive, which is something Builders Association Safety Director Denise Capasso and others had in mind from the beginning.
“I know part of the reason some other organizations haven’t gone with a Partnership like ours is that they feel it puts too many demands or too much pressure on the contractor,” Capasso said. “That was never something we were worried about. We’ve got a lot of companies with strong safety programs and we knew they’d not only meet those requirements, but keep improving. “We felt like it ought to be a challenge to move to the different levels. It encourages those companies to take strong safety programs and make them even better.” As stated by the agreement, the Partnership’s goals are to: • Reduce workplace injuries and illnesses by 3 percent annually by developing a comprehensive safety and health management process approach • Promote an exposure and hazard free construction worksite
please see Partnership, page 4
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The headquarters for John B. Sanfilippo & Son, Inc. in Elgin. McShane Construction Corporation worked on portions of the plant while other parts were already in operation, allowing the peanut processing plant to remain functional during construction and allowing McShane to complete the project in nine months.
Project Spotlight
New Shell For Peanut People McShane Put New Sanfilippo Home Up In Nine Months BY ANDY COLE When McShane Construction Corporation Project Executive Mark Osman chose construction as a career, chances are he didn’t think somewhere along the way he’d learn a lot about the peanut-roasting process. Be that as it may, he doesn’t regret a second of the time he spent learning about it while McShane built the new headquarters facility for John B. Sanfilippo & Son located at I-90 and Randall Road in Elgin, Illinois. “We had to learn a little bit about the peanut business and they had to learn a bit about the construction business,” said Osman, whose team built the 1.2 million square-foot facility in nine months. “Their people went out of their way to understand the process we had to go through to build their headquarters in the amount of time we had. We had to understand what they
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needed in a processing plant to make the changes we made. That understanding made things a lot easier on every level. “Parts of the processing plant had to be in operation while we were working on other parts of the building. That was probably one of the most difficult things about the project, but everyone involved helped make that work and we were able to complete a great project and have them work in other parts of the facility at the same time.” As a manufacturer of Fisher Nuts since 1922, John B. Sanfilippo & Son, Inc. was careful to choose a construction company that wouldn’t make it go nuts during a quick construction process. Food processing and distribution operations in Elk Grove, Des Plaines and Arlington Heights were moved to the facility in Elgin. Most of the construction was completed during the winter months. According to Osman, there were two time periods where the construction team had to build around workers in a facility that was in use. The demolition process began while the previous tenant of the building, Panasonic, was still in operation, and much
please see Peanut, page 12
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AGC News
AGC Plans ConsensusDOCS Release For September 28 Walsh Construction Executive To Approach Topic At Fall Meeting With just a few weeks until the AGC of America rolls out a new set of standard documents for the industry, the Builders Association wants to help its members understand how these changes affect their business. Bill Ernstrom of Walsh Construction will offer his expert opinion on the impact of the ConsensusDOCS at the Fall Meeting, Wednesday, October 10 at the Hilton Garden Inn O’Hare. Ernstrom will also weigh in on the AGC’s endorsement decision on the A201 standard contract document. Breakfast will be served at 7:30 a.m., followed by the program at 8 a.m. and a question-and-answer session after. The push by owners, contractors, designers and others in the construction industry has led to the creation of the ConsensusDOCS. Over 70 documents will be included in the ConsensusDocs, which have a scheduled release date of September 28. More information is available at www.consensusdocs.org. ConsensusDOCS grew out of a collective effort to come up with a more comprehensive, balanced set of contracts. Groups representing owners, general contractors, subcontractors and the insurance industry have given their input, including: • Building Owners and Managers Association (BOMA) • Construction Owners Association of America (COAA) • Construction Users Roundtable (CURT) • National Association of State Facilities Administrators (NASFA) • Associated Building Contractors (ABC) • Associated General Contractors of America (AGC) • Associated Specialty Contractors, Inc. (ASC) • American Subcontractors Association, Inc. (ASA) • Construction Industry Round Table (CIRT)
Joint Contract • Engineers Documents Committee (EJCDC) • Mason Contractors Association of America Contractors • Mechanical Association of America • Plumbing-Heating-Cooling Contractors—National Association (PHCC) • National Association of Surety Bond Producers (NASBP) • National Electrical Contractors Association (NECA) • National Insulation & Abatement Contractors Association (NIAC) • National Roofing Contractors Association (NRCA) and Decorating • Painting Contractors of America (PDCA) • Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA) • Surety & Fidelity Association of America (SFAA) Brian Perlberg, the AGC’s Senior Counsel in Construction Law and Contract Documents and one of the driving forces behind the project, addressed the restructured series of documents in a previous story in the Builder and answered many pertinent, frequently asked questions in an edition of the Builder Blast. “We (the AGC) probably have the most to lose from this, because we have an existing documents program that has been functioning well,” Perlberg said during a conference call with AGC chapters. “We’re doing this because, in the end, it’s going to be better for the industry. We’ve collected information and gotten everybody’s feedback, but ultimately this is on our shoulders.” The main reason for ConsensusDOCS creation was that the standard form was in need of reform, according to the AGC. Company owners had felt that the original modified standard documents, which were drafted by a singular organization, protected that organization. Also, the quantity of “standard” documents in
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Salary Survey Available From Builders Association If your company is hiring in the near future for any of its key construction managment position, the Builders Association can give you an idea of what you can expect to pay. The Builders Association’s Salary and Benefits Report is the only report of its kind and an accurate source of Chicagoland construction compensation data. The Report, which is published every two years, details trends in salary, benefits and bonuses for the following positions: • Assistant Project Manager • Chief Financial Officer • Engineer • Estimator • Expeditor • Marketing Manager • Office Manager • Operations Manager • Project Accountant • Project Executive • Project Manager • Safety Director • Senior Project Manager • Superintendent • Technology Manager The information in the report is an accumulation of responses from 57 companies, including both members and non-members. General contractors, subcontractors and a number of other construction industry firms were among the respondents. This Report is available for $149 per member and $299 per non-member. For more information or to order, contact Stacey Kelly at 847.318.8585.
the market has increased, cluttering the fractured construction industry and reducing its efficiency. The specific nature of ConsensusDOCS will be to help parties focus on project results rather than waste time negotiating through generalized, vaguely-worded
please see DOCS, page 13 3
V O L U M E Partnership, from page 1 • Increase occupational safety and health training for construction workers Incentives for a contractor from the OSHA Partnership increase as a company achieves Bronze, Silver and Gold levels. Typical partnerships do not include graduated levels and many are limited to regulating the amount of training a company’s employees should receive. The Builders Association’s Partnership with OSHA includes those training requirements with developing a safety and health program, holding weekly meetings and other requirements. The Bronze level of the partnership requires that the contractor develop and implement a written safety and health program, that it conduct weekly employee safety meetings and that it conduct and document self-audits. “It’s not difficult to get started, and it provides encouragement to keep moving up the levels,” Capasso said. “It allows those companies to challenge themselves.” Contractors seeking Silver status must meet the following requirements: • Implement a comprehensive written safety and health program based on the ANSI A10.38-2000 Guidelines or OSHA’s 1989 Safety and Health Program Management Guidelines • Assign at least one trained employee or individual with responsibility for employee safety to administer the firm’s safety and health program and to conduct documented safety inspections of ongoing work • Conduct an orientation for all new employees in the safety and health program of the company, and show evidence of effective employee training for the avoidance of hazards specific to the contractor’s worksite(s) • Conduct weekly employee safety meetings • Conduct and document self-audits as prescribed • Show evidence of employee involvement in the safety and health program • Develop and maintain a Substance Abuse Program • Provide all field construction supervisory personnel with proper training • Maintain an injury/illness rate 5% less than the rate published by the BLS To become a Gold level member, a contractor must accomplish all of the tasks listed above, in addition to: • Serve as a mentor for contractors on their projects who have yet to attain the same level of recognition within the partnership or establish an effective policy for dealing with non-complying subcontractors. The general contractor will document hazards with videos or still cameras and keep track of dates, times, names of exposed employees, what they did to get non-complying subcontractors to comply, and name(s) of management persons spoken to • Ensure designated personnel at each site conduct documented safety inspections of the Gold participant’s work • Train all field construction supervisory personnel in the minimum safety requirements equal to the requirements of the OSHA 10-Hour Construction Course • Implement a 6-foot fall protection policy • Maintain an injury/illness rate 10% less than the rate published by the BLS • Have no willful and repeated serious violations in the last
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Partnership Participants The following companies are signatory to the BA/OSHA Safety Partnership: Airtite Contractors Bulley & Andrews, LLC Frank H. Stowell & Sons, Inc. Herlihy Mid-Continent Company Illinois Masonry Corporation Interior Alterations Joseph J. Duffy Company McShane Construction Corporation Pepper Construction Company Ryan Companies US, Inc. Sigalos & Associates, Ltd. Takao Nagai Associates, Ltd. The George Sollitt Construction Company Thorne Associates Valenti Builders, Inc. W.B. Olson For more information or to become part of the BA/OSHA Partnership, contact Denise Capasso at 847.318.8585 three years, and no fatalities or catastrophes within the last three years that resulted in serious or willful citations What Capasso calls “by far” the most comprehensive agreement of its kind available to Chicagoland contractors didn’t come about by accident. It was a concerted effort by the Association’s Safety Committee to both recognize BA members for their commitment to safety, and encourage them to maintain that high level of commitment. Were the BA/OSHA Partnership like most Partnerships, the levels would not exist, thus eliminating much of the incentive for the contractor. “It helps that the OSHA knows you’re a safety-conscious company,” said Builders Association Chairman and Bulley & Andrews, LLC President & COO Paul Hellermann for a previous article. “It earns respect. (OSHA) knows you’re making an effort and that makes things with them go a lot smoother. I think we’re a very pro-safety organization. This is just another example of that. We strive for excellence in safety and hold ourselves to pretty high standards.” The same could be said of the standards the Builders Association holds itself to, which is why the Partnership ended up different from other agreements. Capasso is confident any company joining the Safety Partnership won’t regret it. “It’s an opportunity to show OSHA and customers how serious your company is about safety,” she said. “It’s also a chance to look at what some other companies serious about safety are doing and see what you can learn from them.” Capasso and the Safety Committee are always looking for new participants in the Partnership. If your company is not on the participants list on this page and you are proud of your safety program, contact Denise at 847.318.8585 to inquire about taking advantage of the Partnership.
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Financial News
Detailing Industry’s Pension Problems BY SCOTT L. SPENCER, CPA AND JONATHAN K. ZEILER, CPA, CCIFP Crowe Chizek and Company LLC Billions of dollars in unfunded pension liabilities could cause headaches for builders in the not-so-distant future. What does your company have in common with General Motors, IBM, several major airlines, and a host of other industry giants? Unfortunately, the answer to that question may be “a looming pension problem.” While the financial problems of multibillion dollar pension funds may seem to have little immediate relevance to most builders, the fact is many contractors may soon be facing pension issues of their own. These issues could have a serious negative impact on future labor costs and on their ability to secure financing, performance bonds, and other vital financial support. Ultimately, they could impair their cash flow and overall financial stability. With so much at stake, prudent owners and financial officers will want to assess their companies’ exposure in this area, and take appropriate steps to prepare for possible changes in funding and reporting requirements. The Size of the Problem As a national issue, the problem of unfunded pension liabilities has been growing — and gaining increasing attention from lawmakers and regulators — for many years. Responding to these concerns, Congress passed the Pension Protection Act of 2006, which went into effect in January 2007. During hearings leading up to that bill, officials of the federal Pension Benefit Guaranty Corp. (PBGC), estimated that singleemployer pension plans in the United States are underfunded by more than $450 billion,1 and multiemployer plans — the unionsponsored and administered plans that are more common in the construction industry — are underfunded by an estimated $150 billion.2 To address this looming shortfall, the act imposed several new funding requirements on participating employers, which can have an immediate impact on a contractor’s cash flow. In addition, the act spells out new reporting requirements designed to provide more timely and accurate information about a plan’s financial condition and the potential liability of the employers who fund it. These changes can directly affect participating employers’ financial statements, which in turn could have significant consequences to a builder’s financing and bonding capacity.
plans’ revenues fail to keep up with the demand for benefits. Moreover, like all sectors of the economy, the construction industry is about to experience the demographic effect of the retiring baby boom generation, along with a variety of other factors ranging from increasing life expectancy to the general ups and downs of the business cycle. Single-Employer vs. Multiemployer Plans Although multiemployer pension plans and single-employer pension plans are both designed to provide specified monthly benefits to workers at retirement, there are major differences in how the two types of plans are structured. Because of these differences, the accounting standards for the two types of plans also vary significantly. For example, in a single-employer plan, the sponsoring company’s liability is generally determined by actuarial formulas that compare the expected projected benefit obligation against the plan’s assets. If the projected future outlays exceed the plan’s assets, the difference is essentially recorded as a liability on the sponsoring company’s balance sheet. This requirement was recently expanded in Financial Accounting Standards Board (FASB) Statement No. 158.5 In multiemployer plans, however, the accounting standards are less clear-cut. Since participants in multiemployer plans can continue to accrue pension credits when they change employers, an individual company’s future pension liability is much more difficult to assess. Thus, even if the sponsoring labor organization has an accurate picture of its pension plan’s long-term solvency, it is difficult to accurately estimate an individual company’s share of any future shortfall. According to FASB Statement No. 5 (typically referred to as FAS 5), a liability is recorded on a company’s balance sheet only when it is probable and the amount can be accurately estimated.6 Clearly, future pension obligations in a multiemployer plan do not meet this standard. Therefore, unlike single-employer plans, unfunded pension
please see Liability, page 14
The Causes of Underfunding In the construction industry in particular, one underlying cause for the growing unfunded liability of multiemployer plans has been the shrinking role of organized labor in the industry as a whole. According to the Bureau of Labor Statistics, the percentage of construction craft workers who are unionized shrank to just 13 percent in 2006,3 a significant decline from 25 percent in 1977.4 As the ratio of active workers to retirees shrinks, union pension
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Green Building
What’s The Difference? Building Better Understanding Of Gaps Between LEED, GBI BY ERIC NYBERG With the push constantly growing for companies to build cleaner, more efficient and environment-friendly buildings, it’s no surprise that “green” has been the way to go for many companies. “Buildings have an impact on the environment and global warming,” said Ujjval Vyas, Principal at Chicago’s Alberti Group. “It’s the performance of these buildings that is going to make it better.” Standards such as the LEED and Green Globes rating systems help construction firms by setting sustainability and efficiency goals for projects during the planning stage of the construction process, and assessing the finished projects according to their green rating principles. According to Vyas, “LEED and Green Globes are two very similar systems with very distinct differences.” What are the differences between LEED and Green Globes? Is one more accepted than the other? Who oversees the rating systems? How are buildings rated? The Leadership in Energy and Environmental Design (LEED) Green Building Rating System was introduced in the United States in 1998 by the U.S. Green Building Council (USGBC). In 2005, the Green Building Initiative (GBI) launched Green Globes. A 2006 study conducted at the University of Minnesota, titled A Comparison of the LEED and Green Globes Systems in the U.S., laid out their main similarities and differences. According to the study, due to their common roots and similar objectives, there are more similarities than differences between LEED and Green Globes. The study estimated that “nearly 80% of available points in the Green Globes system are addressed in LEED 2.2 and that over 85% of the points specified in LEED 2.2 are addressed in the Green Globes system.” Vyas said Green Globes was concerned with allowing the marketplace to continue to innovate and adding value to the system in order to get the market to accept it. He said the GBI tries to find ways to make Green Globes very low cost. In marketing, LEED’s management staff focuses on its leadership in the U.S. and on its consensus-based process of determining its green standards. It is larger and has received more attention in the U.S. than Green Globes. LEED has been used in numerous federal initiatives, NASA, the armed forces, the Smithsonian Institute, and in many state governments. Green Globes, newer and with a smaller U.S. market penetration,
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The interior of the Cook County Domestic Violence Courthouse at 555 W. Harrison Street, Chicago, showing the old walls (left) and the new, LEED certified outer walls. The courthouse, completed in 2003, is Cook County’s first LEED certified “green” building. It was built by The George Solitt Construction Company, one of many Builders Association companies who have shown a commitment to going “green.”
emphasizes its easy-to-use online tool and its integration of green principles at each stage of the construction process. “The main difference between the two is that LEED is still largely a manual system,” said Kevin Stover, the GBI’s head of Commercial Programs. “For LEED you fill out the forms yourself and send them in. Green Globes is interactive.” He added that Green Globes has online questionnaires that become progressively more detailed, addressing each section of the project separately and more completely. “LEED’s system has evolved over the last two years,” said Jeff Olson, Project Superintendent at Pepper Construction, and former LEED committee member. He said that the information can now be filled out online as well as through the paper system. Although LEED has introduced its own online system, the Minnesota study said it remains more complicated than Green Globes’ online system and requires knowledge in various areas. LEED is also more strict and expensive (the maximum fee to certify a large commercial building is $40,000, plus a $600 registration fee) and takes longer to administer certification – up
please see Green, page 13
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New Members H.B. Barnard Company www.hbbarnard.com 53 W. Jackson Blvd., Suite 256 Chicago, IL 60604 Since 1892, H.B. Barnard Company has been a full-service general contractor and construction manager with an emphasis on corporate and institutional alteration work. Industria, Inc. www.industriainc.com 2856 N. Campbell Ave. Chicago, IL 60618 Industria provides general contracting and project management services. It employs in-house union painters and laborers.
W.W. Grainger www.grainger.com 100 Grainger Pkwy. Lake Forest, IL 60045 An MRO and Industrial Supplies Distributor since 1927, W.W. Grainger is the leading broad-line supplier of facilities maintenance products throughout North America. Businesses and institutions depend on Grainger every day for tools, fasteners, lighting, motors, material handling and other equipment. By maintaining relationships built on quality, service and reliability, Grainger has been a trusted resource to customers for over the past 80 years.
Member Milestones Ryan Companies US, Inc. was named 2007’s Developer of the Year by the National Association of Industrial and Office Properties (NAIOP). The award will be accepted by Ryan Companies President Pat Ryan at a conference in Atlanta in October. The award is presented each year to one member-developer company that best exemplifies leadership and innovation in the commercial real estate industry. Evaluation criteria include: Industry and business leadership; Involvement in NAIOP; Quality of products and services; Financial consistency and stability; Ability to adapt to market conditions; and Social consciousness. George Sollitt Construction Company President Howard Strong was presented with a Contractor of the Year Award in June by Coalition for United Community Action. The coalition works with community organizations, labor unions, contractors and government agencies to develop construction training and programs for unemployed and underemployed minorities and females. The Illinois Indiana Masonry Council gave its Silver Award For Excellence in Masonry to the Tarkington Elementary School project in Chicago. George Sollitt Construction Company served as the general contractor. George Sollitt Construction Company is working on what will be its third LEED project for Chicago Public School. The
Miles Davis Academy will be located in the Englewood neighborhood. The school will include science, art and music rooms, a library, a gymnasium, a kitchen and a dining area. Builders Association companies are serving as the general contractor at a pair of projects named among Top Projects Started in the June issue of Midwest Construction Magazine. James McHugh Construction is the contractor at the Aqua Tower and W.E. O’Neil Construction Co. is the Block 37 contractor. Six Builders Association companies were listed as Top Specialty Contractors by the August issue of Midwest Construction. Hill Mechanical Group was listed fourth, Advance Mechanical Systems rated 16th, Case Foundation Company was listed 21st and Amex Construction Co., Inc. is rated 29th. Westside Mechanical was listed 37th and Takao Nagai Associates earned the 108th slot. Opus North Corporation is developing office property in downtown Wheaton. The five-story, 150,000-square foot facility will feature basement-level executive parking and first-floor retail. First Trust Portfolios will be the anchor tenant on the top three floors of the building. The site totals 1.64 acres and will include a four-story parking garage that totals 141,600-square feet.
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Supplier Showcase The products and services offered by the Builders Association’s Supplier members are among the best in the area in their fields. With their association membership, these companies support the Chicagoland construction industry. The Builder will highlight suppliers in the Supplier Showcase, which will feature comments or information on a construction issue from those members. This issue’s contributors commented on risk management issues presented by AGC General Counsel Mike Kennedy at the Builders Association’s Spring Meeting. Jim Drost, HRH Chicago “I think he did an awfully good job of summarizing some very complicated subjects,” Drost said. One issue Kennedy broached was the need for a confidential line for employees to report problems. “I think companies should have one and I think it would be an excellent communication tool,” Drost said. “For one reason or another, people are afraid to talk about some issues. It also has a great benefit to the employer, because they’ll find out about potential problems this way that they wouldn’t otherwise. “Every topic (Kennedy) talked about related to Chicago’s construction industry in some fashion.” Barbara Gimbel, Holland & Knight LLC “I thought it was a good program, and I thought it gave the members another perspective on some important issues,” Gimbel said. “I think he helped the companies that were represented realize their exposure to a lot of things. “It’s a lot to go over, but he did very well with it.” Hilb, Rogal & Hobbs 333 East Butterfield Road Lombard, IL 60148 630-324-2500 www.hrh.com Holland & Knight, LLC 131 South Dearborn Ave., 30th Floor Chicago, IL 60603 312-928-6022 www.hklaw.com
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Foundation News
Heating Up Foundation Funds Golf Outing Raises Nearly $30,000 For College Scholarships BY ERIC NYBERG In defiance of the 95-degree heat, 115 golfers turned out for the annual Builders Foundation Golf Outing on Wednesday, Aug. 1 to enjoy a day of relaxation and to raise money for the Builders Foundation Scholarship Fund. “It was hot,” said Mark Rowland, of ISEC, laughing. “We just had a great time and enjoyed the event. It was a lot of fun.” Held at Makray Memorial Golf Club in Barrington for the second year in a row, the event raised nearly $30,000 and marked
please see Golf Outing, page 15
The winning foursome at the Builders Foundation Golf Outing included (from left): Bob Johnson; Joe Lloyd; Dale Fester; and Jim Valenti.
General Contracting Construction Management
CONGRATULATIONS TO THE WINNERS OF THE RECENT BUILDERS FOUNDATION GOLF OUTING
For additional information, contact Melinda Foukal at 847.446.2200 or visit our website at www.valentibldrs.com
Thanks To The Following Companies For Sponsoring The Builders Foundation Golf Outing ISEC, Inc. Event Chicago Area LECET Mousepad McShane Construction Corp. Course Refreshment James, Schaeffer & Schimming Golf Shirt Bulley & Andrews, LLC Prize, Hole Valenti Builders Cocktail Reception Clark Construction Group, LLC Golf Ball Opus North Corporation Lunch LaSalle Bank Driving Range, Hole-In-One Ryan Companies US, Inc. Cigar Rabjohns Financial Group Hole-In-One RSM McGladrey Hole-In-One HRH/Hilb, Rogal & Hobbs Hole 8
Warady & Davis LLP W.E. O’Neil Construction Co. Weis Builders Ceco Concrete Construction McDonald Modular Solutions George Sollitt Construction Co. Operating Engineers Local 150 Chicago Regional Council of Carpenters Fifth Third Bank Institutional Client Group Catalyst Project Management Zurich North America Insurance Builders Concrete Grove Masonry Maintenance
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Celebrating FortyYears of Brilliant Ideas w w w. i s e c i n c . c o m
Contact: Mark Rowland, Regional Manager 414-393-9600 MARowland@isecinc.com
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Industry News
Undisputed Solution: Consistency Giving Same Work To Same Trades Can Make A Difference In Avoiding, Handling Jurisdictional Disputes BY ANDY COLE Random. Completely unpredictable. Always a surprise. These aren’t descriptions of a trip on the CTA or an afternoon watching Jerry Springer. They’re what representatives of some Builders Association contractors say about the nature of jurisdictional disputes. When the representative of one union on a jobsite claims the work that another union is assigned to do, contractors and construction managers get caught in the middle. A dispute between two unions becomes everybody’s problem in a hurry and it could get even worse if a contractor is caught without a plan for dealing with that dispute. According to most of those polled, that plan begins by simply being consistent. “What you have to look at is ‘have you traditionally and historically given this work to the same group?’” said one contractor’s representative. “If nothing is resolved and you do wind up going to the (National Labor Relations Board), it helps if you’ve demonstrated a strong preference at other jobs for one of those groups doing the work that is at the center of (the dispute).” According to another executive, while there are things a contractor can attempt to create a resolution, there’s no telling when a dispute will occur or end. “It can be pretty random,” he said. “You’re lucky if you get a heads-up before somebody else claims the work and there is a dispute. Work goes on, but these cases can take anywhere from two days to three weeks.” The Builders Association spoke to a number of individuals knowledgeable about the steps their companies go through when
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a jurisdictional dispute arises. Their anonymous responses were used for this article and for an upcoming pamphlet from the Builders Association on best practices in those situations. Steps When Disputes Arise One signal of a jurisdictional dispute seems to be the phone ringing off the hook in the office of Builders Association Labor Director Denise Capasso. The BA is proud to be one of the few associations in the area with a full-time labor specialist, and Builders Association members take full advantage of that fact when a problem pops up. “We’ll have the agents of the unions meet, and if that doesn’t work we write a letter to both groups with our policy, but we’ll also call (the Builders Association),” one administrator said. “We call Denise,” said another. “We seldom come across jurisdictional disputes, but that’s one of our first phone calls when it does happen.”
please see Disputes, page 11
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Disputes, from page 10 When asked about points of procedure when a dispute arises, many of the professionals polled agreed on one thing … there are no universal points of procedure. The reasons surrounding disputes are as varied as the jobsites on which they occur, and there’s no one way to skin this particular cat. “Each one is unique,” said one administrator trusted with risk management when asked about similarities between the squabbles. “They really do need to be handled on a case-by-case basis. Something that works one time isn’t going to fix every situation. “In many cases, you just have to wait and see what happens. You can get the business reps of the two unions together. In many cases, that’s one of the first things that happens.” An employee on the job site or the risk management professional at a company can take the first steps to sitting the two unions down. “There’s no specific process to follow,” said another executive. “If we’re keeping it generic, the Field Superintendent makes an initial attempt to facilitate an on-site solution. You talk through things and reason with the competing unions, assuming the claim is justified.” Resolutions A number of jurisdictional disputes can be settled not long after they’ve started by the union representatives sitting down and discussing their views with the contractor present. “You can talk to both of the unions at a pre-job conference and get them to agree about which trade is going to perform the work,” one representative said. “You can try to resolve the problem by using a split crew. Ultimately, it’s up to the challenging union to make a case for why they should do that work.” If an agreement can not be reached, one administrator mentioned that his company will send the objecting union a policy, stating his company’s position and rules. Demonstrating a set policy, he says, kills two birds in that it shows the union where the contractor stands and prepares the company to show a history of awarding that work to one union if the case is taken before the National Labor Relations Board. Beyond that, there are a number of NLRB guidelines to follow. A history of awarding certain kinds of work to the same group can go a long way toward preserving a favorable outcome for a contractor. “Once a group challenged our position in a dispute, brought it before the National Labor Relations Board and lost,” that representative said. “We solved the dispute because from the start, we have consistently assigned the same work to the same labor groups.” That philosophy has paid dividends for some of the other contractors, and may have helped stop countless disputes before they even started. Other factors that could help resolve disputes quickly, according to the company administrators, were an experienced Superintendent on-site and knowledge of labor laws. In terms of cutting short jurisdictional disputes or avoiding them altogether, however, nothing can beat good, old-fashioned consistency. “Historically, we always have assigned the same type of work to the same type of craft,” one BA company representative said. “That way, if a problem arises, we can show our old rule of who
always works on what. “We don’t reassign the same work to new labor groups. We always have the same groups do the same jobs they’ve always done for us, and that helps to prevent disputes from starting.” Best Practices No amount of care can completely eliminate the possibility of a dispute on a jobsite. As complicated as the issue can get, simply being prepared and knowledgeable can help a contractor react the right way when the time comes. “I think having a fairly decent knowledge of whose work has been whose, both with our executives and with the guys on the jobsite, has helped us in the past,” one executive said. “We’re in a good situation in that we do tend to have experienced personnel on the job, and they can put what they’ve learned over the years to good use.” Another executive echoed the sentiment that experienced personnel can go a long way toward diffusing a potentially difficult situation. “An experienced Super on your jobsite is important,” he said. “It’s the first step. If the Super doesn’t feel comfortable or doesn’t feel like the matter is likely to get resolved, then management gets involved. You also want to investigate and see if the union that’s claiming the work has previously disclaimed it in another instance, which is sometimes the case. “Either way, you can draw on experience. If you have people who are prepared and knowledgeable, it can help.”
“Each one is unique. They really do need to be handled on a case-by-case basis. Something that works one time isn’t going to fix every situation.”
OGLETREE DEAKINS Attorneys at Law Construction Industry Group
LIFTING SERVICE TO NEW LEVELS
Two First National Plaza, 25th Floor • Chicago, Illinois 60603 P: 312.558.1220 • F: 312.807.3619 • www.ogletreedeakins.com
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Peanut, from page 2 of the construction to the Sanfilippo building was completed while the processing plant and coolers were already in use. “We had some meetings and sat down and coordinated a traffic pattern, and it was important that we stuck to that,” Osman said. “As Sanfilippo moved in, we’d already built up that temporary barrier the width of the building to separate us from the parts that had to be in operation. Work couldn’t stop for them, so it was important for us to get it done in different phases.” Late adjustments to the floor plan created additional challenges. These changes were made to allow Sanfilippo & Son to install cutting-edge coolers and equipment. “As the final layout for the operations within the facility was fine-tuned, some quick reactions and alterations were required,” said Project Engineer Molly McShane. “Since Sanfilippo was moving its facilities into the new location, there was some coordination between construction and production activities that was necessary. “The flexibility and quality of our management and subcontractors were valuable assets to Sanfilippo. Our schedule was tweaked to meeting their specific production needs. As we learned how to better fill their needs, they learned ways to modify their priorities and save time and money.” Precast panels were used to create two 65,000 square-foot cooler areas in the distribution center, one of the adjustments required late in the process. Over a million square-feet of the headquarters was used for the processing plant and McShane built in docks for 68 trucks. “The coolers were kind of a specialty item, so it forced some changes in the original plans,” said Chuck Nicketta, Sanfilippo’s Facilities Manager. “McShane did a great job handling those
Pat Wilharm of McShane Construction Company (above) and Ron Smith of Kenny Construction Company (right photo) were among representatives of contractors who interviewed Dawson Technical Institute students at the Construction Career Opportunity Program Interview Day in June. Job offers were made to a number of candidates, bringing the total number of candidates hired out of the program to 44, and nearly 30 of the highest-rated students in Dawson’s trades programs were interviewed. Other companies represented were: Anthony Roofing; Bulley & Andrews, LLC; Just Rite Acoustics; Leopardo Construction; Pepper Construction Company; Ryan Companies US, Inc.; and The George Sollitt Construction Company.
The Next Construction Career Opportunity Program Interview Day Takes Place Wednesday, October 17. To Get Involved In The CCOP, Contact Mike Schultze At 847.318.8585. 5 12
A roaster inside the processing plant. The headquarters covers a total of 1.2 million square-feet.
changes and still got the job done when we needed it done. Our experience with McShane was excellent.” Nicketta wasn’t the only person impressed by McShane’s speed and quality. The project found itself up for a number of awards over the course of 2007, including the Build-to-Suit Project of the Year at the Commercial Real Estate Awards. As nice as the award would have been, the Project Manager stated that one wasn’t necessary to tell the company that great things came out of its cooperation with Sanfilippo & Son. “Personally, the most rewarding aspect of this project was the relationships built with the Sanfilippo management,” McShane said. “Throughout the course of the project, we gained their trust in our stewardship of their business. “Professionally, it is always rewarding to leave a well-built facility on time and under-budget with a happy client.”
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DOCS, from page 3
Green, from page 6
contract terms or claims. The new standard form contract documents will be less general and updated to be more compatible with each party’s specific interests. Perlberg said that the documents will provide fair risk allocation for all parties and utilize industry best practices. Instead of protecting the overriding interest of one party member, the new documents also keep in mind the best interests of the projects as collective wholes. According to Perlberg, the effort to draft the ConsensusDOCS has been several years in the making. The partnership between industry stakeholders and the ConsensusDOCS assures that the new documents will be balanced and actively supported by all parties who united to work on it. The AGC believes this to be an unprecedented effort and the most significant industry development in the last 20 years. The balance that will be found in the new contracts will make them more likely to be used as standard. “We want to get rid of that perception that the industry is just protecting itself,” he said. “Contracts available now will protect the industry that drafted the contract. Getting feedback from everybody for a contract everyone could get behind was essential to making this work. “This isn’t something that happens every year or every other year. It’s going to change the industry as we know it.” Once operational, the documents will be available to AGC members in one of two ways: Subscription or Meter Mode. The AGC recommends subscription, which gives your company access to over 70 documents through a Complete Package Subscription. There are also more specific subscriptions to address a specific topic or delivery method, including: • General Contracting • Design-Build • Subcontracting • Construction & Program Management • Short Forms Each subscription allows your company to print as many contracts and forms as you wish in a one-year period. Meter Mode might be the preferred method for construction industry firms that are unsure of what their contract needs will be or those that only occasionally need contracts. An initial deposit of $200 allows you to view all documents on the screen. Depending on what contract or form it is, the meter will be debited between $5-$35 when the final version of the contract is printed. Users would not be allowed to make copies of the contracts, however, so a general contractor would have to purchase a separate copy for each subcontractor it wished to give the contract to. The American Institute of Architects (AIA) chose not to be involved in creating the ConsensusDOCS, and the AGC will make a decision on whether or not to endorse the A201 Standard Contract Document in early October. The ConsensusDOCS have been a collaboration three years in the making. Attend the Builders Association’s Fall Meeting to get a better idea of what these developments mean to you.
to four months, according to the Minnesota study. By contrast, “Green Globes’ web-based self-assessment tool can be completed by any team member with general knowledge of the building’s parameters,” according to the Minnesota study. It provides preliminary and final ratings during the assessment, for a flat registration fee of $500 with certification costs ranging from an estimated $4,000 to $6,000. The relative low cost for using Green Globes may stem from its sponsorship and funding by outside sources. In 2006, Green Globes was examined and critiqued by a UC-Berkeley graduate architecture class that found it to be funded by the National Association of Home Builders (NAHB), with the majority of the funds coming from the forest products industry. Because of this, students concluded, Green Globes is not bias-free, and any outside funding from groups that would receive financial gain from the GBI’s decision making is detrimental to its image of integrity. Olson commented that LEED does not receive any outside funding and is almost completely a volunteer-based organization, which gives LEED more legitimacy. One important difference between the two rating systems is the use of prerequisites. LEED requires a minimum performance level in categories such as energy use, erosion control and indoor air quality, among others. In contrast, similar action in Green Globes earns points towards certification. While the lack of a minimum perfit also makes it less challenging for a project to achieve lower-level certification than it would with LEED. Each person interviewed hinted, that while there is no shortage of differences between the two systems, the similarities between the two can be just as important, as each tries to encourage the surge in “green” building to continue.
Does Your Company Have A Challenging Project You’d Like Our Membership To Know About? To Submit It For Our Project Spotlight, Call Andy Cole At 847.318.8585. 13
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Liability, from page 5 liability in a multiemployer plan remains “off the books” until the sponsoring union actually assesses the company to cover the shortfall, or until some other “triggering event” occurs. Triggering Events Most triggering events involve a company partially or completely withdrawing from the pension plan — for instance, an employer elects to withdraw from the union, or the company changes to an open-shop labor arrangement. Selling certain assets or discontinuing certain types of operations can also be considered a triggering event. The Pension Protection Act of 2006 defined a new type of triggering event, which can occur when a plan fails to meet certain financial stability criteria (as discussed below). Whenever a triggering event does occur, the participating company incurs a liability that is required to be recorded under the rules of FAS 5. The amount will be calculated by the union, generally based on the employer’s prorated portion of the unfunded liability. Typically this is done by comparing the employer’s contributions over the last five years to the contributions made by all participating employers during the same period. Until such a triggering event occurs, FAS 5 requirements generally prevent management from recording an unfunded pension liability on its financial statements. In the interest of full disclosure, however, and depending on the size of the liability, a company should consider including a disclosure on its financial statements and alerting all interested parties to the possibility that it may be exposed to future pension liabilities. Changing Requirements When the Pension Protection Act went into effect this year, it established new actuarial and funding formulas that are used to evaluate the financial stability of multiemployer pension plans. It establishes specific criteria for determining when a plan is in “critical” or “endangered” status, and — of special significance to employers — it spells out steps the parties in a plan must take in these cases. 7 For example, if a plan is deemed to be in critical status, the contributing employers are obligated to pay a surcharge equal to 5 percent of their annual contribution in the first year, and a 10 percent surcharge every year after that until the plan is no longer deemed to be in critical status. In addition to having an immediate short-term financial impact, this recurring annual liability could also affect certain key ratios that are used by financing and bonding agencies to assess your company’s credit and performance capacity. Preparing for the Unknown The funding and reporting requirements begun by the Pension Protection Act of 2006 may very well be indicative of other future
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changes that could have an even greater impact on builders. While accounting governmental bodies have not yet provided guidance on how to address multiemployer funding status, it is reasonable to expect the issue may be addressed soon, given the general direction of the accounting industry and the increased scrutiny being given to these plans. As an employer, your company can begin planning for this now by meeting with the collective bargaining agents who represent your employees. Request as much information as possible about the financial condition of the pension plan and the union’s strategic action plan for reducing the unfunded status. In addition, ask for a detailed explanation of how the union calculates an employer’s liability if a withdrawal or other triggering event occurs. By assessing your exposure now, and by taking steps to meet any anticipated shortfall, you will be better prepared to manage any financing and accounting problems that may occur as a result of an unfunded pension liability. Scott L. Spencer, CPA, and Jonathan K. Zeiler, CPA, CCIFP, specialize in construction services with Crowe Chizek and Company LLC in Oak Brook, Ill. Scott Spencer can be reached at 630.575.4319 or by e-mail at sspencer@crowechizek.com. Jonathan Zeiler can be reached at 630.575.4237 or by e-mail at jzeiler@crowechizek.com. 1 Bradley D. Belt, testimony before the U.S. Senate Committee on the Budget, June 15, 2005. 2 Douglas Holtz-Eakin, testimony before the U.S. House of Representatives Subcommittee on Select Revenue Measures, Committee on Ways and Means, June 28, 2005. 3 “Union Membership by Industry, 2006,” Monthly Labor Review, U.S. Bureau of Labor Statistics, Feb. 9, 2007. 4 Robert E. Baldwin, “The Decline of U.S. Labor Unions and The Role of Trade,” Institute for International Economics, Washington, D.C., 2003, p. 7. 5 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” Financial Accounting Standards Board Statement No. 158, September 2006. 6 “Accounting for Contingencies,” Financial Accounting Standards Board Statement No. 5, March 1975. 7 Pension Protection Act of 2006, pp 89-90.
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Golf Outing, from page 8 the Builders Foundation’s second most successful fundraiser to date, thanks to the generosity of many of its members. At the end of this coming academic year, the Builders Foundation will have doled out $64,500 in scholarships to worthy recipients since the Foundation’s inception in 2003. Ceco Concrete Construction’s Phil Diekemper, in an email on behalf of the Builders Foundation, said that he personally thought this was the best outing to date, and extended his thanks and kind words to the Builders Association staff and Foundation President Jim Valenti. The event gave members several chances to win prizes, have fun, network and compete. Throughout the round, members participated in hole-in-one contests with prize opportunities sponsored by Rabjohns Financial Group, LaSalle Bank, and RSM McGladrey. Other golf prizes were awarded to members for the ball hit closest to the pin, the straightest drive, and longest putt of the day. In addition, the staff of the Builders Association oversaw the raffle of a Calloway driver, a family-size camping tent, a PlayStation 3 and a GPS navigational system, which were distributed to winners during the reception dinner. Members also received complimentary gifts and golf accessories, and raffle participants who lost out on winning the prizes were eligible for one of five “second-chance” raffle prizes. “We enjoy [the outing] every year,” said Sherwin Mirsky of James, Schaeffer & Schimming. “I thought things were very wellhandled – the cigars, drink tables, prizes, everything.” Enjoyable as it was for members, the focus of the event was on contributing to the fund for this year’s scholarship winners: Brandon Feeley, a Purdue University senior majoring in Construction Engineering and Management, and Josh Galasso, a junior at Bradley University majoring in Construction Management. Each receives a $3,000 award renewable for up to two years. Galasso, a graduate of Cary-Grove High School, spent last
summer interning as a Jobsite Assistant Safety Supervisor with Pepper Construction Company. Feeley – from Lockport High School - worked in surveying and layout for Walsh Construction last summer and will graduate next year. He hopes to pursue work in heavy and highway construction. Galasso and Feeley bring the total number of students assisted by the Builders Foundation to 15. Thanks to the generosity of the Builders Association members, the Foundation continues providing funds to worthy college students for years to come. Applications for the 2008 scholarships are now available. The deadline for applications is November 1.
Above, Mark Johnson of Seyfarth Shaw takes a shot from one of Makray Memorial Golf Club’s beautiful fairways. At left, golfers enjoy each other’s company during the 19th Hole Cocktail Reception, held in the upstairs portion of Makray’s clubhouse.
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The
Builders Association Staff
Builder The Builder is published periodically by the Builders Association, a trade association of commercial, industrial and institutional contractors and affiliated industry firms dedicated to quality construction in the Chicagoland area. 2007 Board of Directors Chairman Paul Hellermann Bulley & Andrews, LLC Vice Chairman J. David Pepper Pepper Companies
John O’Malley Case Foundation Company Howard Strong George Sollitt Construction Co. Sheri Tantari McShane Construction Corp. Dana Thorne Thorne Associates
Treasurer John Russell W.E. O’Neil Construction Co.
Lynn Treat Ryan Companies US, Inc.
John Benz William J. Scown Building Company
Builders Association 9550 W. Higgins Rd., Suite 380 Rosemont, IL 60018 (847) 318-8585 www.bldrs.org
George Ferrell Henry Bros. Co.
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Leon LaJeunesse Custom Contracting, Ltd.
Have a construction-related problem or question? Call your professional trade association. While each staff member can assist you, you may find it helpful to speak directly to the individual who has primary responsibility for a particular area. Al Leitschuh, President BA Goverance, Industry Relations Mike Schultze, Vice President Industry Relations, Government Relations Denise Capasso, Labor and Safety Director Ryan Schoonover, Membership Manager Marketing, Membership Development Andy Cole, Communications Manager Stacey Kelly, Project Coordinator Administration, Education Programs Kelly Fierro Accounting Liz Humrickhouse Eric Nyberg Communications Interns