Utility & Transportation Contractor June 2022

Utility & Transportation

Celebrates 100 Years

contracTOR

Spiniello

june 2022

president’s message

From the desk of: roly acosta “Character is like a tree and reputation like a shadow. The shadow is what we think of it; the tree is the real thing.” ~Abraham Lincoln

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t 6’ 4”, the 16th President of the United States casts a much longer shadow than this 5’ 8” 56th President of the UTCA. However, Honest Abe and Cuban Roly both agree that REALITY (the tree) carries greater weight than PERCEPTION (the shadow). It is safe to assume that Lincoln was referring to people; however, the metaphor is easily extended to businesses and trade associations.

Reality can be described as the way a person, company, or association actually behaves. The way you perform your work. An owner’s experience with the company’s work. The meaningful support provided by an association.

Perception, on the other hand, is what people think and feel about you, your company, and the association. I am referring to the same stakeholders in the reality discussion; however, perceptions are not based just on personal experiences. They are based also on what people hear, see, or read.

Often, reality and perception are not close, and the gap can be detrimental. If the perceptions are better than the reality, the gap presents a substantial risk for disappointment when the reality comes out. In the current world of transparency and scrutiny, the reality will surface in due time. If the reality is better than perceptions, the gap restricts preference, opportunity, and advocacy. In either scenario, we need to question if we are dealing too much with the shadow and not enough with the tree.

The contrast between reality and perception reminds me of a letter that hangs in the office of Michael D’Annunzio titled “The Contractor:”

• Reality: The construction contractor is cursed by Dun and Bradstreet with low profits, a high business failure rate, and a demanding job that leaves little time for anything else.

Returning to Old Abe’s metaphor, we also have the distinction between steady/consistent and erratic/unreliable. Character, like the trunk of tree, is solid. It is who we are even when no one is watching. Character is more than just what we try to display for others to see.

Character is doing the right thing because it is right to do what is right. Character does not change. It stays with you, and it defines you.

A shadow is something that remains inconsistent. It is here now and gone shortly based on the source of light, angle of viewing, and position of observation. The shadow belongs to the tree; however, the shadow is at the mercy of others although the tree does not change. The shadows are subject to the opinions of others; regardless of the object casting the shade.

The tree understands that the shadows are only what people see over a defined period and are not reflective of who the tree is at the core. In response, the tree takes advantage of the years of growth and development to establish deep roots in preparation to withstand all that come its way.

• Perception: The construction contractor is an illiterate character with muddy boots hiding big feet and a hard hat hiding an even harder head.

Speaking of deep roots and longevity, this edition of the UTCA magazine celebrates the 100-year anniversary of Spiniello Companies. A tremendous accomplishment for the Solimine family and their dedicated staff. The company’s work is guided by its commitment to “Renewing the past, Building the future.”

• Reality: The construction contractor is an astute businessman, a competent technologist, and a proud craftsman.

Remain true to your tree rings. Be a sequoia, sycamore, aspen, or bristlecone pine and do not waiver in the face of adversity.

• Perception: The construction contractor is blessed by legend with high profits and an affinity for hard drink.

Stay healthy and safe,

2 Utility & Transportation Contractor | june | 2022

Roly

CONTENTS

Cover story 44 spiniello celebrates 100 years

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DEPARTMENTS 2 7 13 21 29 37 53 65

NEWS

President’s Message

75 three reasons to consider a captive for health insurance

Financial Overview

87 does a contractor have to keep working if the owner withholds money...

Legal Dig Accounting Corner Legislative News safety perspective labor relations the pipeline

Published Bimonthly During 2022

1670 Route 34 North Farmingdale, NJ 07727 PO Box 728 Allenwood, NJ 08720 PH: (732) 292-4300 FAX: (732) 292-4310 www.utcanj.org

Publisher: Robert A. Briant, Jr. Editor: Helene Nasdeo Editorial Contributors: Dan Kennedy, Dave Rible Advertising Manager: Helene Nasdeo Production/Graphics: Lauren Hagan, Helene Nasdeo Circulation: Helene Nasdeo Printed By: American Plus Printers Affiliations: ARTBA, Clean Water Construction Coalition, Water Infrastructure Network UTILITY AND TRANSPORTATION CONTRACTOR (ISSN 0192-4843) is published six times a year by the Utility and Transportation Contractors Association of New Jersey, 1670 Highway 34 North, Farmingdale, NJ 07727. Periodical postage paid at Farmingdale, NJ and additional mailing offices.

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Utility & Transportation Contractor | june | 2022 3

By: kevin ellman, cfp & paul D. miller, wealth preservation solutions, llc

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s the second quarter begins, the mood in markets has calmed somewhat, but challenges remain. The conflict in Ukraine continues without a resolution on the horizon. Inflation continues to persist at elevated levels.

Consumer price inflation in the U.S., reached an annualized rate of 7.9% in February, a 40-year high1. Gas prices and high food prices are a direct tax on the consumer. However, this type of inflation historically has been temporary and usually self-corrects as higher prices increase supply and crimp demand.

Inflation today is being driven by a lack of supply which is causing unique challenges for regulators as they must be flexible to ensure their policy actions don’t undermine growth.

With inflation running higher than expected, the Federal Reserve appears poised to tighten monetary policy at a faster pace than previously anticipated:

Financial overview

market outlook summary

Above shows the Treasury Yield Curve as of April 2022 as well as the historical yield curve in the previous two years. In general, the curve has become steeper as interest rates have increased across all maturities.

Countries and companies are seeking new ways to source essential inputs, from oil and gas to auto components, microchips and food ingredients. Localizing sources of supply will keep prices higher because it means companies aren’t necessarily producing raw materials and components in the most cost-effective locations. And demand for labor is likely to continue pushing up wages. The labor market is strong, with employers added 431,000 jobs in March and the jobless rate falling to 3.6%.2

Note: this chart shows year-end Fed Fund Rate prediction from the futures market and is for illustrative purposes only. Forward looking estimates may not come to pass. Past performance is no guarantee of future results.

You may have seen headlines of the U.S. Treasury curve inverting, which has historically signaled a recession is forthcoming. This is a rare occurrence in the bond market when short term rates move higher than long-term rates. Investors view an inverted curve as a recession indicator because it typically accompanies a US Federal Reserve hiking cycle that cools growth—sometimes too much. More likely, the U.S. economy will continue to grow at a slow but steady pace, and we will see the inversion of the curve was driven by inflation expectations rather than a looming recession.

There are investment opportunities for long-term investors who can tolerate volatility in their portfolio. Consumer spending is still strong with many Americans having significant cash reserves. Corporate balance sheets are healthy, and many companies are generating strong cash flow. Sectors like healthcare and consumer discretionary are not as impacted by energy prices and can outperform in this environment.

1 The Wall Street Journal, March 10, 2022 2 The Wall Street Journal News Alert, April 1, 2022

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Wealth Preservation Solutions, LLC is not affiliated with Kestra IS or Kestra AS.

Utility & Transportation Contractor | june | 2022 7

when may a deficiency regarding a subcontractor listing be waived by a public owner?

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ost contractors who regularly bid on public projects know that there are certain bid elements that are considered material, meaning that if a bidder fails to meet that bid element, the bid must be rejected. Other bid elements are considered minor, meaning that if a bidder fails to meet that bid element, the public owner may use its discretion to waive the deficiency and/or allow a post-bid cure, enabling the bidder to be awarded the contract despite the initial defect.

• Bid bond

Most public project contractors are also aware that listing subcontractors in the prime trades – plumbing, electrical, HVAC, and structural steel – is considered a material bid element for both State and municipal contracts. A recent case decided by the Appellate Division of the Superior Court determined that while the listing of subcontractors is mandatory, certain tangential identifying information may be waived. Epic Management, Inc. v. Borough of Ship Bottom, unpublished, 2022 WL 1086982 (App. Div. April 12, 2022) (“Epic Management”). The court’s reasoning provides a good refresher in what makes a bid defect material or minor and provides a framework for considering whether it is worthwhile to file a bid protest if a competitor has an error in its bid.

These same bid elements are considered material on State jobs. If you notice that the numeric low bidder has failed to include any of these bid elements, it would likely make good business sense to challenge award of the bid.

STATUTORY BID ELEMENTS Both State and municipal contracts must be awarded “not simply to the lowest bidder, but the lowest bidder that complies with the substantive and procedural requirements in the bid advertisements and specifications.” Meadowbrook Carting Co. v. Borough of Island Heights & Consol. Waste Servs., 138 N.J. 307, 313 (1994) (“Meadowbrook Carting”). Generally speaking, statutory requirements are always material. For example, various State laws mandate that bidders must submit an ownership disclosure form, must possess a New Jersey Business Registration Certificate; and must submit certifications regarding affirmative action compliance. None of these requirements may be waived by the public owner.

The Local Public Contracts Law (“LPCL”) identifies certain material bid elements and provides that “failure to submit any one of the mandatory items shall be deemed a fatal defect that shall render the bid proposal unresponsive and that cannot be cured by the governing body.” N.J.S.A. 40A:11-23.2. These mandatory items include:

• Consent of Surety • Statement of corporate ownership

Legal Dig

By: adrienne l. isacoff, florio, perrucci, steinhardt, cappelli, Tipton & Taylor LLC

• Listing of Subcontractors • Acknowledgment of addenda

BID ELEMENTS REQUIRED BY THE PUBLIC OWNER A public owner may also choose to require certain bid elements that are not expressly required by statute. Some examples are a list of references, a certification regarding equipment, and submission of documents that by statute are not required to be submitted with the bid package but must be submitted prior to execution of the contract. Examples of these types of requirements are certificates of insurance, and Public Works Contractor Certification forms for both the contractor and its named subcontractors. If a bidder failed to submit a PWCR in its bid package, but submits it promptly after opening of the bid, a public owner may use its discretion to award the contract to the numerically low bidder by allowing a post-bid cure. Citing Clyde N. Lattimer & Son Constr. Co. Inc., v. Twp. of Monroe Util. Auth., 370 N.J. Super. 130, 137 (App. Div. 2004), the court in Epic Management observed that “because these were additional standards imposed by the Borough, the defect was not material and was waivable.

Epic Management at *3.

ANALYSIS FOR DETERMINING WHETHER A BID ELEMENT IS MATERIAL OR WAIVEABLE As noted, any bid element that is required by statute is material and may not be waived. As to other bid elements that may be required by a governmental unit, the following two-prong analysis is routinely used by our courts: 1. whether waiver would deprive the municipality of its assurances the awarded contract will be adhered to, performed, and guaranteed to meet the specifications.

Utility & Transportation Contractor | june | 2022 13

Legal Dig

2. whether waiver of a bid defect would adversely affect competitive bidding by placing the bidder in a position of advantage over other bidders or otherwise negatively affect competitive bidding.

that a subcontractor be named and does not require the additional information required by the bid specifications. The bid deficiency was not materially defective under statutory requirements.

Meadowbrook Carting, supra, 128 N.J. at 314-15.

The court further noted that if the low bidder failed to provide a Public Works Contractor Registration Certificate for its electrical subcontractor post-bid, the contract award would not be conferred to it. But if it did provide that certificate, any ambiguity regarding its electrical subcontractor would be cleared up. As the court explained:

While possession of a Public Works Contractor Registration Certificate is needed to assure the public owner that the awarded contract would be performed according to its specifications, failure to submit it in the bid proposal would not undermine that assurance or adversely affect competitive bidding as long as the certificate was promptly supplied prior to award of the contract.

LISTING OF SUBCONTRACTORS The reason that listing prime trade subcontractors is uniformly considered a material bid element is that being able to award a subcontract subsequent to being named the low bidder would give that bidder a competitive advantage – commonly referred to as engaging in bid shopping. But even the requirement to name subcontractors must be reviewed in a detailed fashion.

In the Epic Management case, the low bidder did identify its electrical subcontractor on the bid specification form that required “[e]ach bidder shall complete and submit this form with its bid in accordance with N.J.S.A. 40A:11-16.” The form provided blank spaces for the names, addresses, and telephone numbers of subcontractors. It also had blank spaces for subcontractor pricing information. Although the low bidder did name its electrical subcontractor, the challenger asserted that its bid should be rejected because it failed to include the electrical subcontractor's: 1) full name, 2) address and telephone number, and 3) pricing information. Both the trial court and the Appellate Division rejected that argument. The court first observed that the LPCL only requires

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There was no risk of post bid negotiations undermining the competitive bidding process by substituting a similarly named electrical subcontractor. Pursuant to River Vale [the case that initially set forth the two-prong materiality analysis] the defect was not material and was waivable by the Borough, as was the lack of an address and phone number for the electric subcontractor in the bid, neither of which are necessary pursuant to the LPCL. Epic Management at *2.

Under this reasoning, the court held that there was no basis to compel the municipality to reject the bid, despite the fact that its own bid specifications were not strictly adhered to.

TAKEAWAY While every bidder understandably wants to find a way to compel rejection of the low bidder, even the public policy requirements that bids be awarded only to the lowest responsible bidder do not automatically result in mandatory rejection of a bid that has minor deficiencies. Public owners retain a certain amount of discretion to reject or waive such deficiencies.

growth minded contractors focus more on profits than revenue By: richard p. higgins, cpa, mccarthy & company

Profit is a measure of the company’s ability to operate efficiently. It is the amount of money left over after all costs have been incurred and everything has been paid. It stands that more efficient companies make more profit than companies that operate inefficiently.

In many cases, two contractors in the same market, producing a similar product or service can generate the same revenue. The amount realized in profit can, however, be quite different based on the way the company operates; making it important to focus on profit instead of revenue. Mismanagement, change orders, excess inventory, poor workmanship, supply chain interruptions, waste, and many other factors can eat away at profits.

Revenue Revenue is defined as the money generated from normal business operations, calculated as the average sales price times the number of units sold. (Investopedia) Revenue (gross income) is on the top line of a financial statement. Costs are subtracted from revenue to determine net income on a job or for the entire company.

Profit Profit describes the financial benefit realized when revenue generated from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity in question. Profit is calculated as total revenue less total expenses. (Investopedia) Net profit is on the bottom line of a financial statement. Net profit is the money left over after all costs have been incurred and expenses have been paid. This includes every variable and fixed expense associated with the job or company, as well as taxes and interest.

Revenue Growth Revenue growth is the increase in sales over a previous period

(month, quarter, bi-annual, annual). It can be measured as a percentage (increase/decrease) from one point in time over another. For example, if a contractor set a goal to increase revenue 10% year over year, they would have to generate $110,000 in sales if their starting revenue were $100,000.

While a 10% increase may seem feasible, it might not be practical. A contractor might have to increase payroll costs if they need to hire new workers or pay overtime to complete the extra work needed to generate 10% more in revenue. Among other considerations, a second shift may need to be added, more inventory ordered, and additional equipment purchased. If generating 10% more in revenue means that expenses increase by 12%, the business is actually losing money.

Accounting Corner

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ost business owners focus on revenue when they want to grow their business. Revenue is a critical metric to watch as it measures the success or failure of everything done in a business. Revenue validates how much the public accepts the company’s brand. For most businesses, every single activity done by everyone working within an organization goes into generating revenue.

Profit Growth Profit growth is measured the same way as revenue growth. It is an increase in profits over a previous period and can be measured as a percentage (increase/decrease) from one point in time over another. The difference is that profit growth is not impacted by other variables. The number (result) is what it is.

Profit growth is not dependent on other variables. Basically, the costs incurred are subtracted from revenue to determine the profit on a job or for the company. So, a 10% increase in profit means that a company earning $100,000 in profit the previous year made $110,000 or an additional $10,000 this year.

Increasing Profits There are a variety of ways for a company to increase profits. For the purposes of this article, we are going to focus on suggestions that can impact profits due to inefficiencies. Here are several recommendations that can make a substantial difference if success-

Utility & Transportation Contractor | june | 2022 21

fully implemented: 1. Redesign workflows by identifying bottlenecks and areas for improvement. Design new processes to improve efficiencies and results.

2. Uncover ways to reduce fixed overhead costs to increase revenue.

3. Control inventory to reduce waste and improve cash flow.

Accounting Corner

4. Eliminate tasks and activities that do not add value to the company or customer.

5. Review staff levels and make changes based on current and future needs. Be realistic when making projections. Over- or underestimating staffing needs can make a significant impact on profits.

6. Avoid making cuts for the sake of cutting costs. Although it may seem to make sense, it could serve to decrease revenue. For example, eliminating all advertising costs could result in limited sales. However, reducing the advertising budget and shifting the allocation of funds from print to digital advertising could result in more sales at a reduced cost.

7. Discuss strategic tax planning with your accountant. Analyze the cost vs. the benefit of every transaction from an income tax

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perspective. It might make sense to invest in developing new technology to improve operations if that investment qualifies for a research and development (R&D) tax credit.

8. Focus efforts on the 20% of the business that generates 80% of the profits.

An increase in revenue does not always mean an increase in profit. Although most people use the words in the same sentence, the terms have quite different meanings and implications. A company with growing revenue may actually realize decreasing profits.

The opposite can also be true.

Both metrics – revenue and profitability tell a story about the business and its operations. It is prudent to pay attention to both, as well as costs. The numbers can help identify the best course of action to achieve the desire results.

About the Author . . Richard P. Higgins, CPA, is the partner-incharge of McCarthy & Company’s New Jersey office. Construction Executive named McCarthy & Company one of the Top 50 Construction Accounting Firms™ in the country. Rich can be contacted at 732.341.3893 ext. 17 or Richard.Higgins@McCarthy.CPA. Disclaimer: This article is for informational purposes only and does not constitute professional advice. We strongly advise you to seek professional assistance with respect to your specific issue(s).

constructors for good government 2022 contributors UTCA would like to thank all firms that have contributed to our Industry PAC for 2022 President's Club

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joining the utca at a unique time in new jersey and in the infrastructure industry By: ryan sharpe, director of government affairs & communications

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Whether it was assisting a senior citizen in securing vital property tax relief or helping to craft legislation that would benefit an entire industry, I always took great satisfaction in utilizing my relationships and legislative expertise in order to help a constituent or improve our state.

And now I am very excited to put those skills to work as the new Director of Government Relations and Communications for the Utility & Contractors Association of NJ, an organization that I have had the pleasure of working closely with over my two decades in state government.

Even as I write those words, it is hard to believe that it has been that long since I started out working in the New Jersey Senate, writing speeches, preparing communication materials and acting as a spokesperson for members of the State Senate. From there, I worked on Gubernatorial, U.S. Senate, Congressional and legislative campaigns. Soon after, I returned to the legislative realm, serving as Chief of Staff for a State Assemblyman and eventually becoming Chief of Staff for a State Senator and two members of the Assembly.

After the legislative maps were changed in 2010, I actually served simultaneously as Chief of Staff for two Assembly members who represented two different legislative districts. Finally, I spent the last ten years working for the Assembly Minority Conference Leader (and current UTCA Executive Director) Dave Rible and his successor, the current Assembly Minority Conference Leader, Ned Thomson.

While I enjoyed my time with the Legislature, I am looking forward to taking on new challenges at the UTCA. And what a time to start out in the industry, with New Jersey slated to receive $13.5 billion over the next five years in federal infrastructure funding as part of the Infrastructure, Investment & Jobs Act (IIJA).

In addition, in only two short years, New Jersey will need to reauthorize the Transportation Trust Fund which provides $16 billion--and supports another $12 billion in borrowing--for critical transportation infrastructure projects across the state.

Of course, many of these and other important issues will be taken up by a Legislature that has recently undergone dramatic changes, including the addition of many new members and the election of a new Senate President, Senate Minority Leader and Assembly Minority Leader. All of this comes against the backdrop of redistricting which means a number of lawmakers will be running in new legislative districts in 2023.

Legislative News

hroughout my more than twenty years of working for the State Legislature, people often asked me what I enjoyed most about my job. While I always said there were many parts I enjoyed (and some that were not as enjoyable), to me, the best part was being able to navigate the state bureaucracy or legislative process in order to better the lives of my fellow residents.

In addition, there is the potential for significant changes in the political makeup of Congress after this year’s midterm elections.

Congress, too, recently had its district boundaries redrawn so there is a distinct possibility that New Jersey’s Congressional delegation could look very different than it does today. And, while it may be hard to believe, the jockeying has already begun among those who want to run for Governor in 2025.

Clearly, this is a unique time in New Jersey and in the infrastructure sector. With “once-in-a-generation” federal funding for infrastructure being allocated to our state and a quickly approaching TTF deadline, the UTCA will be at the forefront of these and other issues which are critical not only to this industry but, will help chart the future of our state. I look forward to using my extensive government experience and unique skill sets to bolster UTCA’s efforts to promote the infrastructure construction field and help build a stronger and more prosperous New Jersey for generations to come.

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we all need to be part of safety By: gregg johanesson, corporate safety director, spiniello companies

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e can keep our employees safe EVERY DAY. Companies large and small and everything in between can have a great safety program but, it takes everyone in the company--and I mean everyone--to promote and take safety seriously. After being in safety for 30 years I have seen a lot of great slogans like “safety first”, “safety is our motto” and “If it’s not safe, don’t do it.” But safety needs to be part of your everyday life.

It needs to come second nature with everything you do.

Senior level bosses and owners. How many times do I hear an owner, or a boss say, “we’ve got to get it done, I don’t care what it takes or what we must do, just get it done”? How many times did I want to ask: “even if it cost a life or limb?”. I know we all want to be safe, it’s human nature. No one wants to get hurt, and I am positive no one wants to get killed or see someone get killed.

The Field employees. If you are the employee, you need to take ownership of your safety and the safety of your co-workers. You need to WANT to work safe. We need to be proactive on the job today. If we take a more proactive approach with the work that we do--whatever that work is--we can eliminate accidents, injuries, and damages. As the saying goes, plan the work and work the plan.

As I travel through New Jersey and the surrounding areas, I still see the risk takers. The workers without the proper PPE, the wrong trench box, or using a ladder that is too short, going into a confined space without testing or monitoring the space. It makes me wonder, is it that the company doesn’t want to supply it, or the employee is too complacent to do it right? Do the owners or bosses know they are doing it unsafely? This is where companies need to tighten up and communicate. Are the people responsible for safety doing what they need to do? And if they are, is everyone just blowing them off because we have been doing jobs like this for years, and no one got hurt or killed? I hear this repeatedly: “I asked for it and never get it.” If we need something for safety, there is a way to get it.

I still learn something new every day and I still enjoy the challenge of selling the safety program to everyone, and I mean everyone. Sell it don’t tell it. There is nothing like going to a job site and seeing everyone in the right PPE and working in the safest way they can, doing quality work for the company they are working for. I hear a lot of workers say it’s a great feeling seeing an owner or boss participate in a safety meeting or go out to a job site and see what his or her employees are doing and thank them for working safely. The little things go a long way. Embrace the safety of your company and make it better as an employee, a boss, or an owner.

Safety Perspective

On September 11, 2001, 343 FDNY firefighters went into the towers and never came out. I have talked with some of the FDNY Chiefs that were there that day. After the planes struck the towers, they set up the command post as firefighters from all boroughs responded. They knew they were sending firefighters in that may never come out and many didn’t. I cannot fathom how they felt that day. And while we can’t compare our work to the bravery of those firefighters, none of us ever want to experience that feeling of losing an employee or co-worker.

Superintendents and Foremen. On the job sites we work today, would you send someone in knowing they may not come out?

Of course not. This is what I mean by we can keep our employees safe every day. Today we have every opportunity to make sure they come out, make sure they go home. Safety is not that hard if we are all in it together.

That’s why it’s so important we lead with all good safety intentions. If you are an owner or a boss, you are not too important to attend a safety meeting in the field or visit a job site and see how things are moving along.

Utility & Transportation Contractor | june | 2022 37

Cover Story

Spiniello Celebrates 100 years - advancing infrastructure in nj and beyond By: dan kennedy, senior director

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arlier this year, Spiniello Companies (Livingston, NJ) celebrated 100 years in business and concurrently announced a new leadership team that plans to honor its history while strengthening the company’s place in the infrastructure industry in New Jersey and beyond. Over the last 100 years, Spiniello has established a client base that spans the public and private sectors, with its “core” competency being public and private water and sewer infrastructure.

Spiniello was incorporated in 1922 and it didn’t take long for the company to become one of the leaders in utility and heavy construction services in New Jersey and the surrounding states.

Business was steady for Spiniello — even during the Great Depression. Public works projects were a perfect fit for the company's expertise. Then, with the dawn of World War II, Spiniello supported the wartime buildup and related construction efforts on the home front.

During the construction boom of the mid-1940s, Spiniello broadened its operations to include the in-place cleaning, repair and rehabilitation of underground pipelines. It also began specializing in the construction of sub-aqueous pipelines. In 1946, the company completed its first in-place cleaning and Cement Mortar Lining (CML) project, and this rehabilitated pipeline remains in service today.

Within a decade, Spiniello was rehabilitating pipelines ranging in diameter from 3 inches to more than 250 inches. In the late 1980s, Spiniello further expanded its methods of pipeline rehabilitation to include Cured-In-Place Pipelining (CIPP) and slip lining technologies.

Managing Growth and Change Spiniello is a long time UTCA member and contributor. Spiniello’s Cosimo Pedicini served on our Board of Directors from 19782002, serving as Board President from 1985-1986. Although they have gone through a tremendous amount of growth and change, they have always been strong in the New Jersey market where they were founded.

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JCMUA Phase 1 and 2 Project

With experience initially in construction insurance and bonding, in 1998 the Solimine family acquired the company from its previous owners. Owner Emil Solimine expanded the company to other regions with services that had the biggest benefit to their customers…working to becoming a “one stop shop” for CIPP and other trenchless infrastructure work.

EJ Solimine, son of owner Emil Solimine, became President in 2015. With Emil recently stepping down as Chairman, his son E.J. proved ready to take on the challenge as their next CEO. Of the change, E.J. Solimine said “This transition in Solimine family leadership has been underway for some time, and Spiniello’s 100th anniversary was the perfect opportunity to formalize this.

We will continue to honor the company’s long history of success since its inception in 1922, with a new vision for the future.”

While EJ admits that he came into the company and learned the business through “trial by fire”, he also was able to bring a fresh set of eyes into the mix. He remains very optimistic about the times ahead.

Over the past decade, the Company’s primary focus was in the Mid-Atlantic, serving as a leading full-service utility contractor in Baltimore and surrounding areas. During that period, most of their New Jersey work was focused on specialty trenchless projects. Now, Spiniello has expanded its Mid-Atlantic model to New Jersey, with the ability to perform traditional open-cut water and sewer projects, while still specializing in complex trenchless projects throughout the Northeast. The Company has also grown geographically, expanding their footprint across the country. In addition to its home base in New Jersey, Spiniello currently has full-service operations based in Washington D.C., Baltimore, and California.

With E.J. Solimine’s move to the CEO position, Patrick Whelan has assumed the role of President at Spiniello. Whelan, who joined the company in August of 2020 as Executive Vice President, has spent 25 years in the construction industry with extensive experience as both an engineer and an attorney. He added

id piles and micro-piles, and a twenty (20) wellpoint dewatering system. Also included were excavating and replacing segments of combined sewer/new manhole installations, manhole repair, and rehabilitation work.

Route 3 Project

“we move to strategically position the company for the future strengthening the business model and solidifying our place as continued leaders in our industry.”

With so many growing demands placed on pipeline infrastructure to meet the needs of the 21st century, Spiniello is ready-with the most current technology, materials, equipment and qualified staff--to create, enhance, and rehabilitate this critical infrastructure. “The changes we have been implementing have already allowed us to see the largest backlog of work in this ownership’s history, and the future bidding opportunities are abundant and promising", said Whelan.

Moving Forward with a Purpose The company looks forward with a great appreciation for its loyal and dedicated team. In addition, they are grateful for the working relationship they maintain with their suppliers, who help them constantly evaluate new technologies and opportunities.

Cover Story

Spiniello has also been integral in the City of Newark’s successful lead service line replacement program and are now working for Trenton Water Works where they have already replaced over 3,750 lead service lines with lead free copper pipes, ensuring safe drinking water for residents. Luis Best, recently appointed Area Manager for Spiniello’s Northeast Region, has been an integral part of each of these challenging projects. While he is extremely proud of the Company’s past accomplishments, “our best days are ahead of us, as we look to provide solutions to the most challenging rehabilitation projects in the area.”

Projects Drive Progress Projects delivered in New Jersey give the company and its leaders a tremendous amount of pride. Of particular note is their Route 3 Passaic River Crossing Sewer Rehabilitation project where they installed 920 LF of 99" x 99" Non-circular Fiberglass Liner Pipe in 108-inch Arch-Shaped Concrete Sanitary Sewer including two access pits, 20' of 6" DIP, and surface restoration.

They also take pride working for several of New Jersey’s largest cities. Their JCMUA Phase 1-2 Infrastructure Rehab Project includes new cured-in-place pipe (CIPP) lining of approximately 8,750 linear feet of combined sewer, the guniting of approximately 10,000 square yards of combined sewer, and the replacement of approximately 32,855 linear feet of combined sewer throughout the city. This scope included sewer cleaning, internal television inspection, maintenance of sewage flows, traffic control, utility relocation, and other appurtenant work. The work also includes manhole rehabilitation and replacement, catch basin replacement and approximately 34,055 linear feet of water main relocations and replacement.

Another project for Jersey City MUA is their 54-inch Sewer/ Siphon Rehabilitation and Replacement Work on Pine Street.

The work includes: Sewer cleaning, maintenance of sewer flows (Bypass), CCTV inspection, Cured-In-Place lining of sanitary sewers, 72-inch steel casing jack and bore operation, support of excavation for jacking pit and receiving pit, including more sol-

JCMUA Pine Street Project

Companies like Hobas Pipe, FerraTex Solutions and Applied Felts have been instrumental in Spiniello’s growth as a leading trenchless provider. Like others in the industry they are looking at the future with both eyes. One eye towards the opportunities with increased funding for infrastructure, with a growing focus on water infrastructure. The other eye to risk and what they are seeing in terms of material availability and price escalation.

Today, Spiniello Companies continues to be pioneers in the field of pipeline rehabilitation, while showcasing additional expertise in heavy construction, water utility, and sewer utility management. Strong and steady leadership and continually updating their service solutions to meet marketr opportunities is positioning them to remain competitive in the New Jersey market and beyond. Join us in congratulating them on their first 100 years in business.

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department of labor proposes major changes to davis-bacon act regulations By: kevin s. brotspies & greg trif, trif & modugno llc

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he Department of Labor (“DOL”) recently published Proposed Rules Updating the Davis-Bacon and Related Acts Regulations (“Proposed Rules”), which, if implemented, stand to have noteworthy impacts on contractors performing federal work or federally funded work. The DOL’s proposals seek to, among other things, change the method for calculating prevailing wage rates and expand the Davis-Bacon Act’s (“DBA”) reach to areas currently outside the DBA’s scope, likely leading to increased labor costs.

In the nearly five decades following the Department of Labor’s (“DOL”) 1935 promulgation of its initial regulations pursuant to the DBA, prevailing wages were determined using a three-step process. First, wage surveys would determine whether a majority (over 50%) of workers in a given trade were paid at the same

In 1982, battling inflationary concerns and high costs of construction, the DOL, under President Reagan, enacted new rules turning the three-step process into a two-step process. Effective in 1983, these new rules removed the 30% Rule. Under this twostep process, which has remained in effect for nearly 40 years, if a majority of workers in a region are not paid the same rate, the prevailing wage is determined by a weighted average.

The current two-step process has resulted in a far more frequent use of a weighted average to establish the prevailing wage than the previous three-step method. DOL estimates show that, prior to the 1983 rule changes, as low as 15% of all wage determinations were based on weighted averages. Now, the DOL estimates that as many as 64% of wage determinations are reached using weighted averages.

President Biden’s DOL has now expressed its belief that the “overuse” of the weighted average method is unacceptable and inconsistent with the purpose of the DBA. To address this perception, the DOL, in its March 18, 2022 Proposed Rules, proposes to restore the 30% Rule by returning to the pre-1983 three step method for determining prevailing wages. It is expected that this change will result in the overall increase in prevailing wage rates, especially considering the greater rate of participation in DOL wage surveys by unions and union contractors.

While the DOL acknowledges that the Proposed Rules would likely contribute to inflation by increasing construction costs and wages, the DOL has prioritized what it deems to be the principal purpose of the DBA – to protect the wages of construction workers. In proposing these rule changes, the DOL is expressly undeterred by the current, historical increase in inflation.

Labor Relations

The DBA, originally passed in 1931, required laborers who perform work on certain federal construction contracts be paid at the prevailing wage in the area in which the work was being performed. Since its passage, the DBA has been incorporated into more than 70 other federal laws, commonly known as the “Davis-Bacon Related Acts” (“DBRA”). The DBA’s purpose is to “protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area.”

sult in a determination, then a weighted average of trade workers in that area would be used to establish the prevailing wage.

In addition to reverting to the three-step method for calculating prevailing wages, the DOL’s Proposed Rules also include the following noteworthy changes: wage rate. If so, then that rate would be deemed the prevailing wage for application of the DBA. In the event that there was no majority rate, then a wage rate would be deemed prevailing if it was paid to at least 30% of workers in a given trade. This second step became known as the 30% Rule. If the 30% Rule did not re-

* In an effort to increase the amount of information available and expedite the wage determination process, the DOL may adopt state or local wage determinations in certain circumstances. * The DOL seeks to return to pre-Reagan policy by permitting the combination of rural and metropolitan wage data in determining prevailing wages. Under the Proposed Rules, the DOL

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would be able to determine wage rates within smaller geographical areas. * In an effort to ensure that prevailing wage rates remain current, the DOL has proposed protocols to more frequently update certain non-collectively bargained prevailing wage rates, using the Bureau of Labor Statistics’ Employment Cost Index. * The DOL proposes to redefine the terms “site of the work,” “building or work,” and “construction,” which could significantly expand the DBA’s reach to include off-site pre-fabrication activities, transportation, construction activity involving a portion of a public building, and certain “green” construction activities.

This proposal would extend the coverage of the DBA and its regulations to areas that have been excluded under the current regulations.

Labor Relations

* Contractors would face certain penalties for retaliating against workers who complain about prevailing wage violations or assist in DOL investigations.

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* The DOL seeks to have prevailing wage determinations and DBA requirements be effective by “operation of law,” meaning that these determinations and requirements would be imposed upon contractors even if they were not included in a contract or not provided by the contracting agency.

Contractors that perform work covered by the DBA or DBRA should continue to monitor these Proposed Rules as they proceed through the DOL’s rulemaking process over the coming months.

About the Authors . . . Kevin S. Brotspies, a member of Trif & Modugno LLC, represents businesses, including contractors and subcontractors, in all areas affecting the construction industry, including in employment and labor matters. Greg Trif, a member of Trif & Modugno LLC, represents developers, general contractors, subcontractors, and suppliers in all areas of law affecting the construction industry including contract claims, project crisis management, labor and employment disputes, and business torts.

clean water, healthy families and good jobs coalition By: dan kennedy, senior director

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s previously discussed in this column, the Infrastructure Investment and Jobs Act (IIJA) approved by Congress last year is one of the most significant pieces of legislation in the last 50 years for the UTCA. It provides a longer-term solution for increased funding to rebuild America’s infrastructure. New Jersey needs this funding more than most. Big picture, that means safer more reliable roads, bridges and water infrastructure while creating thousands of good paying jobs. Narrowing into UTCA interests, it will mean more work if all goes as planned. Focusing in further on water infrastructure, the IIJA will provide $55 billion to the traditional State Revolving Fund (SRF) Clean Water and Drinking Water programs. New Jersey’s share of these funds will be meaningful.

That said, they will only address a fraction of the state’s immense water challenges.

FY ’23 Budget Language Limbo While Governor Murphy and the Legislature have made progress on water infrastructure issues, there is much more to do in terms of funding. UTCA and others expressed disappointment that the Governor’s FY ’23 budget address didn’t offer more on water infrastructure–ten words in a budget address is not nearly enough for an issue that is allegedly a high priority. The Governor also created an uproar with Legislative leaders in his own party by excluding language that clarifies the role of the Legislature in approving funding for the $3 billion ARP funding sitting in the bank.

Lead service lines and chemicals like PFAs threaten the health of our families, deteriorating combined sewer systems cause sewage

There is no better way to commit to an affordability agenda than to expand state investment in water infrastructure. Ratepayers not only have to pay the cost of lost drinking water but, will also be on the hook for the removal of lead service lines, as well as efforts to remove harmful chemicals from drinking water, stormwater improvements, and combined sewer upgrades.

These projects will only get more and more expensive as time passes.

The good news is Governor Murphy and the Legislature have a once-in-a-lifetime opportunity to use $1.2 billion of American Rescue Plan funds to accelerate investment in clean water and save New Jersey families from unaffordable water and sewer bills. UTCA was at the forefront of establishing a coalition of diverse interests to rally around this “ask.”

Unconventional Partners Given the challenges getting attention on this matter, we have taken a path to work with tried and true partners and those that on face value, may be opposed to goals backed by a construction-minded association. Henry Ford said, “If everyone is moving forward together, then success takes care of itself.” On water infrastructure funding, when you strip away the differences between groups like the UTCA (and our partners in labor) and environmental and community groups, you see a great opportunity for success.

The Pipeline

The State of New Jersey has received billions in American Rescue Plan (ARP) funds, which can and should be used to fund critical water infrastructure projects ON TOP of the IIJA funding. More than 18 states either have plans in place or are considering proposals to use a sizeable portion of their American Rescue Plan (ARP) funds for clean water investments. New Jersey has roughly $3 billion left in ARP funding. The Biden Administration is encouraging the use of these funds for water infrastructure projects. At this point in the FY 2023 budget process, the Murphy Administration and the Legislature have been non-committal. UTCA is working hard to change that with some old and new partners.

backups in our streets, homes, and businesses, and old stormwater systems can’t handle more runoff from extreme weather. For perspective, New Jersey loses an estimated 130 million gallons of treated drinking water each day to leaky pipes. Over the course of a year, you could fill the American Dream Mall 14 times over with the amount of drinking water we lose. This is literally money going down the drain.

UTCA has played an integral role as a founding partner in the "Clean Water, Healthy Families, Good Jobs" campaign along with NJ Future, the Association of Environmental Authorities.

NJ Business & Industry Association, NJ Utilities Association, South Ward Environmental Alliance, ELEC 825 Operators, NJ Urban Mayors Association, Natural Resources Defense Council, US Water Alliance, MnM Consulting, EnvironmentNJ, New

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Jersey League of Conservation Voters, NJ Laborers Union - Labor-Management Trust Fund, and NJ SHARES. Since we started we have added over 70 endorsing organizations, individuals and elected officials. The endorsing organizations and individuals represent a diverse coalition including labor, business, and community organizations.

This coalition is calling for urgently needed upgrades to New Jersey’s water infrastructure and is asking lawmakers to allocate $1.2 billion in federal funds to help replace lead pipes, shield the system from bigger storms coming with climate change, and remove toxic “forever chemicals” from drinking water.

“MUST HAVES” – NOT “NICE TO HAVES” New Jersey faces a clean water funding gap of roughly $6 billion over five years for lead service line removal, upgrades to combined sewer systems, and improvements to other stormwater infrastructure to handle additional capacity. The state has now made these investments “must haves” as laws have been passed and regulations put in place to require these improvements.

While much progress has been made, without additional funding this year, New Jersey may fall further behind.

The Pipeline

While the coalition has praised Mayor Baraka, Essex County Executive Joseph DiVincenzo and Governor Murphy for taking swift action to replace Newark’s lead service lines and protect the health of residents, we recognize the example of progress in Newark was only possible with an infusion of funding. We are urging Governor Murphy and the Legislature to commit to this additional infusion of funding to more communities so we can continue the progress in clean water infrastructure projects.

Over the next five years, New Jersey faces a $6 billion clean water funding gap-a gap that will fall heavily on our municipalities and residents. UTCA members want the opportunity to compete and deliver on these projects.

VOICE YOUR SUPPORT The most likely path to success is approval of the requested $1.2 billon (as a one time or multiyear commitment) by the Joint Budget Oversight Committee, a panel of six lawmakers that considers proposals by the governor on how to spend the American Rescue Plan funds. The panel includes Sen. Paul Sarlo (D-Bergen), chairman of the Senate’s budget committee. We are actively educating members of the Legislature that would play a role in ensuring our “ask” is prioritized.

This additional funding represents a great opportunity to build on top of the IIJA. While we continue to thank New Jersey’s Congressional delegation for their support, we need to pile on more funding to support New Jersey’s efforts to reform its water infrastructure systems statewide.

Take any opportunity you can to tell Governor Murphy, your state legislators, Senate President Nick Scutari, and Assembly Speaker Coughlin to commit to this additional funding. Give me an email at kennedy@utcanj.org and I can help you add to our advocacy.

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By: Tim Fitzpatrick, managing partner – Employee Benefits, IOA

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elf-insurance is a scary concept to many businesses, particularly small to mid-size employers. Although this strategy can yield big financial benefits, it can also come with a degree of risk, complexity and volatility that most organizations are unwilling to take on. A company moving its health insurance coverage from a fully insured plan, for instance, may now be on the hook for larger, more unpredictable claims that make it difficult to budget for. Properly designed stop loss coverage can help to mitigate these risks, but the cost and sustainability for this type of insurance protection can become prohibitive for smaller groups. Enter the captive concept.

A captive is an insurance company whose purpose is to assume risk on behalf of its owners. The concept of a captive is to bring together like-minded companies and pool premium dollars into a shared fund. The result of this reduces the typical volatility that employers face when trying to self-fund, especially in the small-mid market environment.

NEWS

3 reasons to consider a captive for health insurace within the captive as to how to best apply and manage these resources.

The captive concept is a unique and potentially advantageous approach to health insurance. It can help to provide smaller employers with the proper guidance, structure and stability to entertain a transition to self-insurance. It is, however, still a very complex undertaking, so companies should ensure that they are aligned with the appropriate experts and resources in this arena, including their insurance consultants and financial advisors. There are a number of experienced captive program managers to choose from, but it is important to analyze all of the pertinent details before deciding if this is an appropriate arrangement for your business.

Due to this unique structure, joining a captive can produce potential advantages: 1. Buying Power – a captive is typically comprised of multiple employer groups. This can increase the negotiating ability of the program manager to secure partnerships with best-in-class vendors, insurance carriers and networks. Efficiencies in pricing and contract structure can help to simplify the approach for many companies newer to self-insurance.

2. Decreased Volatility – as mentioned above, this arrangement involves a pooling of funds amongst the membership.

Each individual employer will still obtain reinsurance coverage for their specific plan, but larger claims above those limits can be collectively sustained through this pooled fund. This arrangement helps to provide stability and consistency for the reinsurance market within the overall program.

3. Cost Containment Tools and Strategies – captive programs often provide a number of useful tools and resources that are designed to help employers strategically manage their claims and educate their employees to become better healthcare consumers. These include disease management programs, care coordination services, pharmacy benefit carve-outs and data analytic and predictive modeling tools. Employers can also benefit from the advice and experience of other like-minded members

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By: shawn r. farrell, cohen seglias

Reprinted with permission from Shawn Farrell and NUCA NJ. www.nuca.com

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sk any lawyer, not involved in the construction industry, if a party must continue performing if it is not being paid for the services provided and the answer will be a resounding – No! You may stop working. They will tell you that non-payment is a material breach of a contract and the non-breaching party has no obligation to continue. But this is not so simple of a question in the construction industry. Every day on construction projects throughout the country owners, architects, and engineers withhold monies from progress payments based on the unilateral and arbitrary guesses of whether the project schedule is on time; if the contractor has impacted the work of another trade; and if administrative tasks, like the execution of lien releases of sub-subcontractors and vendors, have been provided. To answer the question for construction contracts, you need more information. Some relevant things to consider include: 1) Is the contractor a prime contractor or subcontractor?; 2) Does the contract contain a “time is of the essence” clause or requirement to continue working despite disagreement regarding payment?; 3) Is the withholding of monies related to base contract work or change order work?; 4) What is the level of completion of the project, meaning, has the work project achieved substantial completion?; 5) Did the contractor provide a performance bond on the project?; and 6) What part of the country is the work being performed and how does that jurisdiction deal with this legal issue.

When the owner withholds all or some of the money earned in a progress payment, the owner is taking a big risk. If the owner does not have the right to withhold the money, the owner has materially breached the contract with the contractor. Under the correct factual circumstances, this means the contractor is no longer obligated to complete the work for the original contract price. That is to say, cost overruns to complete are born by the owner, for the failure to pay the full amount of the progress payments to the contractor. Under this paradigm, the contractor has significant negotiating leverage over the owner, to close out a troubled project without any economic loss. Recognizing if the contractor has such negotiating power is an important tool to protecting the company. We as an industry must do a better job analyzing these risks.

NEWS

does a contractor have to keep working if the owner withholds money from a progress payment?

A recent case of mine serves as an example of an improper withholding by an owner and a lesson learned for all of us. My client acted as the mechanical contractor on a multi-prime public works project, for the construction of a new school (the “Client”). The relevant facts: the original contract price equaled $4.1 million; the Client obtained a performance and payment bond; as it concerned a school, time was of the essence; and the Client submitted 21 payment applications. The owner started withholding payment with payment application No. 11. The owner made a rudimentary assessment of a deficiency list and withheld $540,000. The question posed by the Client, can I walk off and if not, what do I have to do?

We considered all six (6) of the above questions when deciding if the owner’s withholding acted as a material breach of contract. As of payment application No. 11, we knew the Client was faced determining if it should stop working or incur the financial burden of carrying the $540,000 withholding until project completion and maybe through trial. The first, and most important consideration of the assessment, would the surety (that stands in the shoes of the Client) agree that the withholding was a material breach. If the surety would not agree, stopping work would mean facing a claim from the owner for the cost of completing and a lawsuit with the Client’s surety. This path would be untenable for the Client. The project was in Maryland and the law is favorable for the Client, meaning there must be a breach of contract in order for the owner to make withholdings from payment. Jurisdictions following the Restatement (2nd) of Contracts or some states that have prompt payment acts, allowing for only suspension of work but not termination of work for non-payment, could produce a different conclusion. Meaning, under state law that allows only for suspension of work (an absent contract language to the contrary) a contractor that properly walks off a project because of non-payment may have to return if it is ultimately paid. While the contractor is entitled to remobilization costs, leaving a job and being forced to return does not make for a harmonious or profitable project. Faced with these considerations, general counsel for the Client, the surety and I discussed all these legal issues, with the surety ultimately requesting the Client to proceed with the work. So, the Client kept working despite the withholding.

That said, this did not mean the Client lost its negotiating leverage for the owner’s breach. During performance, we were able to limit the withholdings to $540,000 and demand the payment

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NEWS

of subsequent progress pay applications (the owner paying applications 16R through 21). Further, the Client continued to work, but only to the point of substantial completion. At substantial completion, the Client stopped and the owner was forced to hire a replacement contractor to finish the work, for the cost of $200,000. Finally, at substantial completion the Client presented the owner with an acceleration claim of $500,000. Whether the Client was entitled to the full contract balance plus acceleration costs rested on whether the owner was in continual breach of contract, since the denial of pay applications 11-16.

If the owner did not breach, then the payment to the replacement contractor of $200,000 would be a proper set off against the $540,000, even with the Client reaching substantial completion. Further, if the owner did not breach the contract, the Client would most likely be subject to the lump sum price and not entitled to acceleration costs of $500,000. Conversely, if the owner breached since pay application no. 11, it owed the full contract balance and acceleration costs, or the payment of approximately $1 million dollars.

Fortunately, without the need for trial, we were able to persuade the owner that the withholding of pay applications 11-16 constituted a breach of contract. In order to prove a “material breach”, the Client demonstrated that at the time the owner withheld the money, it had no sustainable loss and, therefore, it had no reason to take the money. We showed the owner had no sustainable loss two (2) ways. First, as this was a public project, there was a

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performance bond, which guaranteed completion of the project for any breach by the Client. Thus, the owner had not risk of loss. Second, the owner took out of each payment application 10% as retainage. Historically, retainage represents the amount of money necessary to finish the project if the contractor falls into bankruptcy or for other reasons can’t finish. This meant the owner had two (2) separate and equal means of completing the project. Without a proper basis to withhold money, the Client was entitled to the full contract balance and could seek money beyond the contract price for acceleration costs. Because we were able to demonstrate the owner’s material breach, the Client received a payment of $900,000 (which included the full contract balance without any set off).

This result could not have been possible if the Client did not appreciate that the owner does not get to withhold payments without risk, even on a public project. This type of risk analysis is very factually intensive, but necessary. A final note, a contractor is well advised to address the issue of withholding within the contract itself; removing the subjectivity of courts and lawyers from the equation.

About The Author . . . Shawn R. Farrell is a partner at Cohen Seglias in Philadelphia, Penn. For more than 20 years, he has represented general contractors, construction managers, owners/developers, subcontractors, design-builders, engineers, developers, and sureties in construction-related litigation. Shawn can be reach by email at sfarrell@cohenseglias.com or by phone 267-238-4719.