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 ABC’s 2019
Craft Professional of the Year
will inspire the next generation to follow in their footsteps.

...Have an employee who

Do you employ a pipefitter, HVAC tech or electrician who emphasizes safety,
productivity and craftsmanship? A carpenter or plumber with an exceptional work
ethic, who has excellent leadership skills and enjoys giving back to their community?

We’re looking for someone who exemplifies all these characteristics …and who will
make a great spokesperson for our industry.

That’s right. Not only will this year’s winner earn bragging rights as the Merit
Shop Industry’s absolute finest craft professional, they – along with your
company – will be showcased in a professionally produced video that
will be nationally distributed with the goal of encouraging tens of
thousands of America’s youth to consider the trades as a highly
viable career option.

Plus, they will receive a check for $10,000 – provided by

Tradesmen International and NCCER – onstage at the 2019 ABC
National Convention in Long Beach, CA.
Last year’s winner
was Richard Brown from Gaylor Electric.

Tradesmen International and NCCER are Proud Co-Sponsors of ABC’s Craft Professional
of the Year and Craft Instructor of the Year!
Measures Up?

Photo: Taylor Hill

CPOY Nomination has never been easier!

Nominees must hold a journey-level designation and be employed by an ABC Member Firm. All applications will
be judged by an ABC National panel that will choose finalists and ultimately, the 2019 ABC Craft Professional of
the Year. Supervisory personnel, who perform a craft daily, are eligible.
The winner earns an invite, hotel accommodations and one paid round-trip ticket to ABC Convention 2019 in
Long Beach, California, March 24-28, 2019. All finalists and nominating firms are mentioned at the esteemed
Careers in Construction Awards Ceremony on March 28, 2019.

Nomination Deadline: December 15, 2018.

Easy On-line Application and Full Eligibility and
Award Details available at www.abc.org/wdawards*

*See www.abc.org/wdawards for full details on applicant eligibility. www.tradesmeninternational.com

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 TABLE OF
CONTENTS

CONSTRUCTION EXECUTIVE
NOVEMBER 2018

DEPARTMENTS
8 Industry Insider
10 In Brief
12 Construction Markets
16 Safety
20 Technology
96 Business Development
100 Legal
102 Community Outreach
104 Viewpoints

FEATURES
37
Special Section:
COVER STORY 16th Annual

24
Contractors’ Guide to
AIRPORT PLANS Surety Bonding
Manhattan Construction

TAKE FLIGHT
A best practices checklist for busy
contractors, a legislative roundup, the
power of arbitration, insights on the
talent war and more.
American airports have nearly $100 billion in capital needs through
2021 for terminal building, airfield capacity, reconstruction and
surface access.
CONSTRUCTIONEXEC.COM

Construction Executive (ISSN 1544-3620, Vol. 27, No. 9) is published

10 times a year by Associated Builders and Contractors Services Corp.
U.S. subscription rates: $15/yr. for members of Associated Builders and
Contractors; $65/yr. for non-members. © 2018 by Associated Builders
CE.MAGAZINEXPERTS.COM/MEDIAKIT and Contractors Services Corp. All rights reserved. Periodicals postage
paid at Washington, D.C., and additional mailing offices.
Everything you need to know about editorial coverage planned for 2019, plus Postmaster:
Send address changes to:
print and digital advertising opportunities. Construction Executive, ABC Services Corp.
440 First St. NW, Suite 200
Washington, D.C. 20001

Cover Photo: Courtesy of Tampa International Airport.

5
 CE
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management at your company.

Nov. 14
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6
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 INDUSTRY
INSIDER

It’s Transformation Time THE MAGAZINE FOR THE

BUSINESS OF CONSTRUCTION

EDITORIAL

T
Associated Builders and Contractors
editor@constructionexec.com
his month’s election could significantly impact the Michael D. Bellaman, Publisher and
nation’s infrastructure plans for the foreseeable ABC President/CEO
future. At the beginning of the year, the White Lauren Pinch, Editor-in-Chief
Joanna Masterson, Senior Editor
House issued guidelines for a robust investment Maggie Murphy, Digital Editor
in, and a transformational approach to, enhancing
U.S. highways, bridges, tunnels, railways and water DESIGN AND PRODUCTION
The YGS Group
supplies. Will Congress now take on this challenge? (717) 505-9701
While this debate moves forward, turn to page 24 for Mike Vucic, Senior Art Director
a look at what is propelling aviation construction and
ADVERTISING
how airport authorities and contractors are advancing delivery and building MagazineXperts LLC
methods while capitalizing on technology. In the words of one experienced (973) 383-0888
contractor, the tight-knit dberry@magazinexperts.com
Donald R. Berry, National Sales Manager
community of aviation con-
I’m always struction, firms only get repeat
business by doing a great job
REPRINTS
reprints@magazinexperts.com

interested in the first time and every time

after that.
new ventures Bonding is a big component
of public work. Don’t miss CE’s
SUBSCRIBE
ConstructionExec.com/Subscribe
EDITORIAL ADVISORY BOARD

between government 16th annual Contractors’ Guide

Carole Bionda, Nova Group, Inc.
Ann Finley, Viewpoint Construction Software
to Surety Bonding starting
and industry. on page 37 to stay up to date
Tony Joyce, AvalonBay
Tony Rader, Schwob Companies
on the trends and legislation Eric Regelin, Granix, LLC
impacting the surety market. Ed Rojeck, Tradesmen International
On the safety front, I’m always interested in new ventures between gov- Michael Stilley, S&B Engineers & Constructors
Tim Walton, Walton External Affairs
ernment and industry. ABC’s four chapters in Maryland are setting a great
example of leadership in going beyond basic regulatory compliance with a
new strategic partnership with Maryland Occupational Safety and Health.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

Read more on page 16.

Finally, as the industry’s workforce demands remain high, check out how
companies are enhancing their employee value proposition in the Viewpoints
Q&A on page 104. Competition for quality people is fierce, and it’s up to
employers to address the full scope of workers’ wellbeing.

Michael D. Bellaman
Publisher

8
 INBRIEF N.J. Law Expands
P3s; Includes
Prevailing
Wage and PLA
Requirements
GOVERNMENT ENTITIES IN
New Jersey that enter into public-private
partnerships to help finance public
construction projects are now required
to utilize a project labor agreement and
pay state prevailing wages, among other
requirements. Previously, P3s were only
available to state and county colleges,
but did not contain prevailing wage or
PLA mandates.
The new law, Senate Bill 865, allows
the state and its subdivisions, including
counties, municipalities and school
districts, to enter into agreements with
private funding sources provided they
follow the additional mandates, such as
abiding by the state’s prevailing wage
law and utilizing a union-only PLA for
construction of the project.

Senate Considers Death Tax Repeal

THE DEATH TAX Repeal Act (S. 205), pending in the Senate Finance
Committee, would end the federal government’s collection of taxes from small
businesses and family-owned ranches and farms when their owners pass away. This
Oregon Codifies
reform would build on the Tax Cuts and Jobs Act of 2017, which doubled exemp- Tall Wood Buildings
tions to the death tax. OREGON IS THE first state to allow
The measure, introduced by Sen. John Thune, R-S.D., has wide-ranging support wood buildings to exceed six stories
from groups such as Associated Builders and Contractors, American Farm Bureau, without special consideration under
National Association of Manufacturers, National Black Chamber of Commerce and the Oregon Building Codes Division’s
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

National Federation of Independent Business. recent statement of alternative method

(SAM), which provides prescriptive path
Sacramento Passes Local Hiring elements for mass timber construction.
The SAM establishes three new types of
Ordinance construction—Type IV A, B and C—that
THE SACRAMENTO CITY Council voted 7-2 to approve the Local Hire and allow buildings to go as high as nine to
Community Workforce Training Program, which requires contractors working on city 18 stories with varying percentages of
projects exceeding $1 million to allocate 50 percent of their total workforce hours to exposed timber surfaces and sprinkler
area residents. The ordinance prioritizes Sacramento city residents, then Sacramento system requirements.
County residents, and then those in surrounding counties. Oregon based its directive, which is
Additionally, 20 percent of the total hours logged by apprentices must come from intended to be consistent with the use
people who reside in one of 11 economically disadvantaged zip codes and are either a of cross-laminated timber and structural
veteran, woman, prior offender, welfare recipient, foster youth or homeless person. composite lumber, on two years of work
Employees of nonunion contractors will only be able to work on these local hire by the ICC’s Ad Hoc Committee on Tall
projects by signing up at a union hiring hall. Wood Buildings.

10
 INDUSTRY EVENTS
Prevailing Wage
CALENDAR
Repeal Leads to
Lower School Nov. 13-15
Construction Costs Procore Groundbreak
Austin, Texas
in West Virginia
FOLLOWING THE FULL repeal of West
Virginia’s prevailing wage law in 2016, a study
conducted by the University of Kentucky Center
for Business and Economic Research (CBER)
5½
Number of hours per week that
Nov. 14-16
Greenbuild International Conference
and Expo
found that total costs for public school construc- respondents spend hunting
tion in the Mountain State declined by more Chicago
down project data
than 7 percent. Additionally, the CBER found
no evidence that prevailing wage repeal had
any negative impacts on the safety or quality of
construction. Jan. 22-25
As noted in the study, public school construc- Poor Communication World of Concrete
tion costs in West Virginia were slowly rising
between 2008 and 2016, and then began to
and Project Data Las Vegas

reverse when the repeal took effect. Meanwhile,
surrounding states’ public school construction
costs continued to rise.
According to the West Virginia Chapter of
Associated Builders and Contractors, these
findings indicate taxpayers have saved, and will
continue to save, roughly $1 million on each new
elementary school built in the state.
Carry $31 Billion
Price Tag
Feb. 4-7
RESEARCH RECENTLY CON- Association of Equipment Distributors
DUCTED by PlanGrid and FMI Corporation Summit
determined time spent on non-optimal Orlando, Florida
activities such as fixing mistakes, looking for
project data and managing conflict resolution
accounts for $177.5 billion in labor costs per
year in the U.S. construction industry.
The “Construction Disconnected” study
March 5-8
Work Truck Show
also found that rework caused by miscom-
Indianapolis
munication and inaccurate and inaccessible
information will cost the U.S. construction
industry more than $31 billion this year.
Other key findings include:
• On average, construction workers lose March 24-28
almost two full working days each week ABC Convention
dealing with conflict, solving avoid- Long Beach, California
able issues and searching for project
information.
• Miscommunication and poor project

7%
Decline in West Virginia
• More than three-quarters of respon-
public schools construction
costs following prevailing
wage repeal
data account for 48 percent of all
rework on U.S. construction jobsites.
dents provide mobile devices to their
project managers and field supervisors,
but less than one-fifth of companies
editor@constructionexec.com
consistently use apps aside from email,
text and phone calls to access project
data and collaborate with project stake-
holders. visit abc.org/newsline.
 CONSTRUCTION
MARKETS

Is Architectural Materials Selection at a Crossroads?

BY JIM ROMEO

I
n late 2017, Holland’s Amster-

Amenta Emma Architects

dam Airport Schiphol intro-
duced unique flooring produced
with 3D printing and additive
manufacturing. The United
States is following suit, incor-
porating not just things created
through additive manufacturing,
but other modern materials as well.
As international tariffs and talk of
trade wars loom, modern archi-
tectural materials offer innovation
and design challenges to compete
with and complement traditional
building materials. Urban projects can range from all glass to a mix of metal, brick and synthetic stucco, while
Anthony Amenta, a principal-in- suburban developments predominantly use brick and glass.
charge at Amenta Emma Architects,
which has offices in New York and insulation and structural sheathing reused discarded marble pieces to
New England, says exterior materials in a single product. create inexpensive flooring. Today,
depend on the project location. “This all-in-one design reduces terrazzo is valued for its durability,
“Urban projects can range from labor and construction time and design flexibility, long life cycles and
all glass—generally high-rise con- labor costs, and creates a tighter, low maintenance.”
struction, both residential and more weather-resistant enclosure,” Hall says that the use of terrazzo
commercial—to a mix of glass, he says. “Another example is the continues to evolve. “Architects
metal, brick and synthetic stucco,” growing market for variable refrig- and homeowners like having the
he explains. “Suburban develop- erant flow heating and cooling flexibility to work with terrazzo for
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

ments use predominantly brick and
glass for commercial buildings, while
mixed-use and multifamily projects
use a variety of materials, from brick
to cement-fiber clapboards and vinyl
siding to panelized or non-panelized
cementitious systems.
“A lot of what we do to comply
with energy codes involves innova-
tive materials that are invisible to
the end user because they are hidden
within the wall construction or
behind a roof screen.”
As an example, Amenta cites an
air vapor water barrier that combines
systems. Previously associated most
commonly with small residential
applications, we see these system
types increasingly utilized in larger
commercial projects, especially in
renovations of older buildings.”
Jonathan Hall, a marketing
associate with Concord Terrazzo,
Charlotte, North Carolina, says
terrazzo products are in demand,
particularly for LEED projects.
“Terrazzo is considered one of the
world’s first green flooring systems,”
notes Hall. “Created in the 15th
century, Venetian marble workers
their projects, while architects and
general contractors are drawn in
by terrazzo’s sustainability,” he says.
“As a flooring system, terrazzo can
help contribute to LEED credits.
Terrazzo becomes an attractive green
material due to its recycled content
such as post-consumer recycled
glass, porcelain and concrete; low
VOC emissions from epoxy resins;
and local manufacturing sources.”
Tariff Tumult
When talking architectural materi-
als, there is an elephant in the room:

12
trade tariffs. It may take some time
to feel the full effects of impending In the short term, steel tariffs
tariffs on the building and construc-
tion industry, though some see clear probably won’t have much
indications already.
“In the short term, the steel impact on the construction industry.
tariffs probably won’t have much
impact on the construction indus-
But in the long term, builders will start
try,” comments Steve Conboy,
chairman and general manager
to look at mass timber as an affordable
of M-Fire Suppression, Inc., alternative.
Carlsbad, California.
“Projects under way or in the
final stages of design will proceed, the capacity to create new growth this year alone,” says Murray Rice,
with builders simply swallowing the timber quickly.” a principal with Richard and Rice
costs or passing them on to buyers. For some raw architectural Construction based in Deerfield
But long term, builders will start to materials, the effects from tariffs are Beach, Florida. “When you add
look at mass timber as an affordable already noticeable. “Lumber is up in the higher cost for steel and
alternative. The lumber tariffs are 10.5 percent since January. Rebar is lumber, the price to build a typical
easier to handle because we have even worse, jumping up 58 percent 2,500-square-foot single-family

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13
 CONSTRUCTION
MARKETS
home has risen nearly $2,500. A
typical two-story, 4,000-square-foot
single-family home adds $6,000 year
on year.”
Amenta sees tariffs as a significant
problem for the industry, particularly
with regard to metal materials, from
structural steel to aluminum-based
window and storefront assemblies.
“Unfortunately, as imported
materials become more expensive,
domestic suppliers are taking advan-
tage of the situation and raising
prices on the non-tariff alternative
materials as well,” states Amenta.
“We don’t see an alternative to rising
prices. Even modular construction
will be affected, as that process is
as reliant on imported materials as
onsite construction. We would like
to be taking advantage of alter-
native building systems, such as
mass timber, but these also rely on
imported materials. So far, they have
not yet proven to be cost effective
compared to steel systems.”
Nick Martin, a principal
with Martin Architects PC of
Sagaponack, New York, says tariffs
could stimulate materials produc-
tion to be more self-reliant and
aid domestic production to create
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
products that are competitive with
imported materials.
“Worldwide manufacturing will
always continue, but my hope is that
U.S. industry will learn to design a
vertical creation-to-production line
within our own county,” he says.
The Rise of Additive
Manufacturing
The prevalence of trade tariffs
encourages the use of domestic pro-
duction, and even more self-reliance
with materials production that uses
methods such as 3D printing. In
14
Developers can’t afford to
be experimenters.
fact, the domestic creation of more
products may act well in concert
with the emergence of additive
manufacturing.
Additive manufacturing via 3D
printing is expected to make great
strides in the development of archi-
tectural materials, though adoption
of its use is sluggish. According to
Amenta, the construction industry
is slow to change and risk-averse
to adopt additive manufacturing.
He says that until a process is very
tried and true, developers will not
embrace it.
“Developers can’t afford to be
experimenters,” he asserts. “The
large printers that are required for
additive manufacturing—for onsite
concrete pours, for example—rely
solely on the reliability of the print
head. If a problem develops there,
the entire process can grind to a halt.
The enormous size of these printers
makes them expensive and difficult to
transport as well. I believe that mod-
ular construction—somewhat lower
on the hierarchy of technologically
advanced construction methodol-
ogies—will gain market share well
before additive manufacturing does.”
Modular construction in a factory-
controlled environment, rather than
on a construction site, provides
precision and speed, but still relies
largely on human labor; this allows
production to be easily adjusted,
adapted, modified and corrected.
“I am not aware of any large-scale
printers being heavily utilized in a
factory environment for the purpose
of creating building units,” Amenta
adds. “Laser-guided tools are
another technological advancement
and fairly commonplace on larger
construction processes. What’s more,
GPS and satellite technology for
building layout and grading the site
are becoming standard practices.”
Stronger, Safer, More
Durable and Efficient
Architectural materials will always
be sought for their durability, safety
and efficiency; however, their selec-
tion may be at a crossroads. Additive
manufacturing is new and may
greatly change the selection process
when considering the best archi-
tectural materials. The uncertainty
of the effect of tariffs will probably
aid this trend, as well as the search
for better products to adequately
compete with imported materials.
Innovations that provide functional
advantages as well as sustainability
will gain ground.
The U.S. Housing and Urban
Development’s 2017 Innovative
Building Technology Guide is a
good representative of the overall
pulse of building materials selection:
“The landscape of building products,
materials, components and systems
has increased substantially in recent
years. These advancements have
paved the way for the new design
and construction methods that
make buildings stronger, safer, more
durable and more efficient.”
Jim Romeo is a journalist focused on
technology and business topics. For
more information, visit jimromeo.net.
See how Securock® ExoAir® 430 Air Barrier System can remove a step in the installation process.
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© 2018 USG Corporation and Tremco Incorporated. Printed in the USA.

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The trademarks EXOAIR and TREMCO are trademarks of Tremco Incorporated.

 SAFETY

SPECS: A Partnership to Improve

Safety Across Maryland
BY MARY LOU JAY

Coakley & Williams Construction, Inc.

aryland’s new Strategic
Partnership for Excel-
lence in Construction
Safety (SPECS) program
provides both general
contractors and subcon-
tractors with an opportunity to
gain recognition for their efforts
from the Maryland Occupational
Safety and Health Administra-
tion (MOSH) in the Maryland
Department of Labor Licensing
and Regulation Division (DLLR).
Through SPECS, contractors also
can cultivate a more positive and
constructive relationship with these
state agencies.
SPECS is a partnership agree- Coakley & Williams Construction celebrates its SPECS designation onsite at the Southern Area
ment between MOSH and all four Aquatics & Recreation Complex in Brandywine, Maryland.
Maryland chapters of Associated
Builders and Contractors. It
recognizes contractors that have years ago with the idea for a part- ABC and DLLR representatives
gone beyond the basic compliance nership program that would go signed an agreement to establish
with MOSH standards to provide a beyond the agency’s Cooperative SPECS in January 2018. SPECS
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

safer and healthier jobsite for their
employees. Companies that sign a
SPECS agreement become SPECS
partners and receive special incen-
tives and assistance from MOSH.
For example, MOSH agrees to give
special considerations to SPECS
members if they act promptly to
abate any hazards that a MOSH
inspector may see on a jobsite.
Beyond Compliance
ABC of Metro Washington
approached the Maryland
Department of Labor about two
Compliance Partnership.
“The CCP is centered around
jobsites; a general contractor
can designate a particular jobsite
as a partnership site, but there
was no mechanism to recognize
subcontractors at all. And even
with CCP, there was no mechanism
to recognize general contractors as
an enterprise,” says Frank Trujillo,
vice president of risk management
at Miller & Long Co., Inc. Trujillo
previously worked in North
Carolina, which has an enterprise-
based recognition program.
includes some of the elements of
MOSH’s Voluntary Protection
Program, a cooperative partnership
program open to general industry.
“We have taken a lot of things
that are important in VPP—not
just compliance, but also employee
engagement and training, and
feedback on the real nuts and bolts
of how safety programs should
function to get the results you
want,” Trujillo says. “It’s easy for a
company to make sure that it’s in
compliance and not doing anything
illegal. This takes it to that next

16
level, which is talking about how
you protect your people.”
“We were anxious to do this,”
says Allen Stump, MOSH VPP
and SPECS coordinator. “It really
fulfills our mission to assure that
every man and woman in the state
has safe and healthy working con-
ditions. It also gives us a chance to
partner not only with the employ-
ers, but also with the employees.”
Stump says there are four ele-
ments that build comprehensive
safety and health programs: lead-
ership commitment, employee
engagement from the bottom up
as well as the top down, hazard
analysis and prevention control,
and safety training.
The Application Process
Contractors and subcontractors
are eligible for the SPECS program
if they are ABC members that are
contracted on a Maryland con-
struction project and that meet the
requirements for gold, platinum
or diamond designation in ABC’s
Safety Training Evaluation Process.
To apply for SPECS, contractors
must provide:
• a completed SPECS application,
which includes OSHA 300 and
300A reports for the past three
years and any partial for the
current year;
• a copy of their safety and health
plan;
• calculations for DART and total
recordable cases;
• their OSHA establishment
search; and
• a self-audit checklist.
The initial screening of SPECS
applications is done through a peer
review group at the applicant’s local
ABC chapter. Once contractors
become SPECS partners, they must
provide a representative who will
serve as a peer reviewer and help
mentor other contractors that want
to improve their safety programs.
“As you add people to the
process and the pipeline, you are
gaining mentorship resources,”
Trujillo notes.
A big part of the evaluation is a
site visit to ensure that the com-
pany is properly implementing its
safety program. The reviewers inter-
view supervisors and workers onsite
to ensure they are knowledgeable
about and follow safety procedures.
Once the peer reviewers are satisfied
that the company really does have
an exceptional safety program, they
recommend to the state that the
SPECS application be approved.
MOSH then conducts its own
review and site inspection. If it
agrees with the recommendation,
the contractor signs a SPECS agree-
ment with MOSH that lasts for
one year. The ABC peer group and
the state will review each company’s
programs every year, although not
to the same extent, to ensure that
the SPECS requirements are still
being met.
“One of the best things about
SPECS is having a peer group
that can take some of the pressure
off the resources of MOSH and
DLLR,” Trujillo says.
Level 1 and Level 2 SPECS des-
ignations, available to both general
contractors and subcontractors,
are enterprise recognitions that
apply to a company on any jobsite
throughout the state. The primary
difference between them is that a
Level 2 SPECS partner must have
daily pre-task meetings, must have
achieved ABC STEP Platinum or
Diamond status and must provide
all their field supervisors with
OSHA 30-hour training. Any
general contractor that wants to go
for the SPECS Level 3 designation
must first have earned recognition
at Level 2.
Level 3 is a jobsite designation
for general contractors. Those who
achieve a Level 3 SPECS rating can
avoid MOSH programmed inspec-
tions for up to two years; this is an
umbrella that covers all of the sub-
contractors working on their site.
Level 3 partners also can receive
onsite assistance from MOSH.
New Insights Into Safety
No applicant for SPECS fails its
review. If the ABC peer reviewers
determine that a company still
has some safety practices that
need improvement, they suggest
ways that the applicant can bring
its safety program to the SPECS
level. The application is considered
in process until it is approved by
ABC peer reviewers for presenta-
tion to MOSH.
There is no timetable for an
applicant to reach SPECS status.
Mentorship will continue as long as
necessary to ensure that the com-
pany’s safety goals are reached and
SPECS integrity is maintained.
In June, Coakley & Williams
Construction, Inc. became the first
contractor in the state to achieve
the SPECS designation.
CONSTRUCTIONEXEC.COM
“It was refreshing to have this
dialog with the state and to have
the interactions between them and
our field personnel,” says Mike
O’Quinn, senior project manager at
Coakley & Williams Construction.
“It’s a 100 percent positive relation-
ship, and it fosters a tremendous
17
 SAFETY
amount of respect between our
organizations. It gives our company
an opportunity to showcase our
safety culture and the best practices
that we utilize.
“Most importantly, it exposes
all of our subcontractors and
visitors, and the general public, to
the safety culture that we employ,”
he says. “As we develop our safety
culture, we also enhance our
subcontractors’ safety culture and
foster relationships to build up
their safety best practices through
working on our project.”
Helping subcontractors improve
their safety programs is also import-
ant to Forrester Construction,
which became a SPECS partner in
late June.
“Forrester brings subcontrac-
tors onto our jobsites that we can
partner with in setting safety goals
that we achieve together. Our team
is committed to living up to those
goals throughout the job so that
we are providing a safe workplace,”
says John Shumar, construction
executive/safety director. “Each
project team member is looking out
for the others. That’s the core value
we’re looking for.”
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
Scaffold Resource became
SPECS’ first subcontractor partner
in July. Bill Drexel, the compa-
ny’s director of safety, was one of
the peer reviewers for Coakley &
Williams Construction.
“That gave me a window into
what was being looked at and how
the program was going to work. So
when they asked for a subcontrac-
tor to volunteer to be the first sub
through the program, I felt we were
ready,” Drexel says.
The peer review and the MOSH
review served as a gap analysis of
18
No matter how good you’re
doing, you can always improve.
Scaffold Resource’s safety pro-
gram. As a result, the company
has improved its fall protection
recordkeeping.
Forrester Construction also
found the process to be beneficial.
“No matter how good you’re doing,
you can always improve,” Shumar
says. “It was particularly insightful
to see what MOSH looks at when
they do their inspections, and great
to know that Forrester is focusing
on the same areas.”
One of the best aspects of SPECS
is getting to know the MOSH
regulators in a new way. “We see
each other more often. We have
a face with a name. They’re really
looking out for our safety on
projects. When we did our signing,
we went through their facilities and
see everything that they offer for
training,” Shumar says.
A Competitive Advantage
It will be important going forward
for the four ABC Maryland chap-
ters to remain consistent in their
reviews and recommendations,
Trujillo says. “But we have to
remember that we’re looking for
safety leaders. Nobody is perfect, so
we have to be careful that we don’t
create an impossible standard.”
State regulators are also happy
with how the SPECS program is
taking off.
“What encourages me is the
real partnership and trust that
we’re developing with ABC and
their contractors. William Dallas,
assistant commissioner of the
Department of Labor, and I are
invited and are part of the peer
group’s monthly meetings. We can
really have an open discussion,”
Stump says.
“SPECS is a pilot program for
now and based on its success,
our hope is to expand to other
organizations.”
Drexel notes that MOSH has a
limited budget and resources, and
having companies become SPECS
members allows the DLLR to allo-
cate its resources differently. They
don’t have to focus their atten-
tion on general contractors and
subcontractors that already have
outstanding safety programs and
can work with companies that need
more assistance.
“We can act as mentors to help
them with that endeavor—and it
doesn’t cost the Maryland taxpayer
any money,” Drexel says. “We are
trying to elevate the construction
safety of every contractor involved
on Maryland construction sites.”
Reprinted with permission from
E&M Publishers, Building
Washington magazine, a publication
of ABC of Metro Washington.
Mary Lou Jay is a Maryland-
based freelancer writer. For more
information about SPECS, contact
Jason Roberts, ABC of Metro
Washington education director, at
jroberts@abcmetrowashington.org.
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 TECHNOLOGY

How AI and Machine Learning Are Helping

Construction Reduce Risk and Improve Margins
BY MANU VENUGOPAL

T
he construction industry

Autodesk
is often characterized as
high risk and low margin.
According to a McKinsey
report, almost 98 percent of
projects incur cost overruns
or delays. Meanwhile, the con-
struction productivity curve has
remained flat when compared to
other industries. 
In the last decade, with the
advent of cloud and mobile
technologies, industry leaders
have been focused on digitizing Autodesk’s Project IQ helps project teams find actionable high-risk elements in real time and
construction workflows. This has mitigate risk on a daily basis.
resulted in improved efficiencies,
but also has created an explosion
of new data sources in the con- on jobsites every single day. According to Forbes, 80
struction industry. Project teams The volumes are beyond what is percent of shows that people
are now capturing and document- possible to be manually analyzed. watch on Netflix come from
ing data on mobile devices, site Technology is needed to filter out recommendations by algorithms.
progress is documented via drones the noise and find signals in And when it comes to email,
and sensors are used to create a the data. Microsoft Outlook is helping
connected jobsite. Imagine a smart assistant who cut through the clutter with
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

All of this data is now stored in
the cloud and is easily accessible,
but is it being leveraged effectively?
Two major challenges arise.
First, experienced construction
professionals are needed who can
decipher this data to learn from
it, identify risks and improve
processes. With 20 percent of the
workforce about to retire in the
construction industry, a lot of expe-
rience and knowledge is being lost
that will be hard to replace.
Second, a vast amount of
information is being collected
can sift through thousands of data
points, categorize and classify
them automatically, and bring
critical information to leadership’s
attention. Artificial intelligence is
that smart assistant. AI refers to
the broad field of science con-
cerned with getting computers
to do tasks that normally would
require human intelligence.
Machine learning is a branch of
AI that involves algorithms that
allow computers to learn from
data without being explicitly
programmed.
Focused Inbox. By analyzing who
users interact with often, and
the content of the actual emails,
Focused Inbox automatically helps
prioritize and bring to the surface
what is most actionable.
AI for Risk Management
Contractors have to deal with
a flood of information every
single day—thousands of issues,
hundreds of RFIs, and numer-
ous design changes and schedule
adjustments. This is where AI
and machine learning can help:

20

AI and machine learning can be applied to subcontractor management for quality and safety analytics.
by providing assistive and predic-
tive insights on what is critical
and actionable.
Potential applications of AI and
machine learning in construc-
tion are vast, including project
management and subcontractor
management, construction site
monitoring, and predictive analyt-
ics for quality and safety. Several
innovative general contractors are
using this technology to analyze
project data in real time and make
decisions to manage risk from
quality, safety, schedule and cost
perspectives.
Project IQ, which Autodesk
is beta testing with customers,
helps project teams find action-
able high-risk elements in real
time and mitigate risk on a daily
basis. Project IQ has learned
from several million historical
construction issues and observa-
tions, inspection data, building
information models, RFIs and
change orders, as well as project
outcomes, to build a construction
knowledge graph and create an
engine that understands construc-
tion context.
Just this last year, Project IQ
was put to work to help leading
construction companies manage
risk through predictive analytics.
Project IQ can identify projects
and subcontractors carrying a lot of
risk, as well as high-risk issues from
a quality and safety perspective, and
automatically classify them into
actionable categories.
AI for Quality and Safety
Another application of machine
learning to construction data is
Smartvid.io, which prioritizes
visual and audio data accessible
for analysis by AI and machine
learning. It can identify indi-
vidual people in photos and
videos, and analyze the presence
or absence of safety protocol,
Autodesk
including whether someone is
wearing appropriate PPE.
This information can then be
tagged and prioritized to create
notifications for safety officers,
superintendents and others who
can act to correct the safety issue.
A recent testament to the bene-
fits of this technology came from
Jason Timmerman, health and
safety director at Skanska: “By
having an ‘extra pair of eyes that
doesn’t sleep,’ we could better
identify both positive examples
and areas for improvement that we
might otherwise miss.”
Innovative construction com-
panies already are using machine
CONSTRUCTIONEXEC.COM
learning for quality and safety on
their jobsites. “This is not something
that is future-looking,” says Rich
Holbrook, director of construction
operations for Layton Construction.
“It’s happening today. If you’re not
on something like this, you’re going
to fall behind.”
21
 TECHNOLOGY

AI for Productivity

Autodesk
The power of AI-based solutions
can be best unlocked by breaking
down the data silos that exist in
construction today. One such
example is Triax Technologies,
Inc., which helps project teams
manage their workforce in real
time by leveraging their IoT-
enabled Spot-R system. Spot-R
allows users to view the current
location of workers right in their
2D drawings and 3D models. This
data is now available for machine
learning algorithms to track
productivity and recommend
targeted improvements.
Most machine learning appli-
The location of workers can be viewed in 3D models, and then this data can be leveraged by cations are helping the industry
algorithms to track productivity and recommend improvements.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

22
 Imagine a smart assistant who
can help during constructability
reviews and identify problems that
might surface downstream.
understand and mitigate risk
during the construction phase of
a project. As these applications
mature, they will be able to pre-
dict risk and provide intelligent
recommendations much earlier,
such as during preconstruction
and even during the design stages.
Imagine a smart assistant who
can help during constructability
reviews and identify problems that
might surface downstream. AI can
help bring more predictability to
projects by identifying potential
RFIs and costly changes early in the
process itself.
As a first step, construction
businesses should digitize their
workflows and start documenting
all project data. For example, if
safety inspections are still being
done on paper, the company is
missing out on leveraging that
critical information and making it
available for machine learning algo-
rithms to process and predict risk.
Make sure to establish stan-
dards and best practices for data
capture. Invest in a data platform
and connected data rather than in
point solutions.
Manu Venugopal, senior product
manager at Autodesk, is an
architecture, engineering and
construction technology expert and
thought leader focusing on BIM, data
and analytics. For more information,
visit bim360.autodesk.com.

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23
This year marks the completion of the first phase of Tampa
International Airport’s master plan, which focused on decongesting
roads, curbsides and the main terminal. Phase two will include a
17-acre commercial development surrounding the new rental car
facility, and phase three will deliver a new terminal with 16 gates for
domestic and international flights.
AIRPORT PLANS
TAKE FLIGHT
Aging Infrastructure and Rapid Growth in the Aviation Sector Lead to
Improvements and Expansions Across the United States

BY JOANNA MASTERSON

Tampa International Airport

 Metro Nashville Airport Authority (2)
Given that passenger traffic is projected to experience record-setting
growth—increasing from 14 million to more than 23 million—
Nashville International Airport is implementing a capital improvement
plan that includes concourse, ticketing and baggage claim
expansions, as well as a new central terminal, international arrivals
facility and parking structures.

A
irport authorities across the country are master
planning their way through some pretty staggering
growth statistics.
Nashville International Airport (BNA) is on
its fifth consecutive year with about 10 percent growth
in enplanements (i.e., passengers boarding an aircraft).
The FAA’s typical growth rate is 3.5 percent. And it now
boasts 88 percent origin-destination traffic, compared
to only 13 percent of travelers starting and ending their package, a $350 million terminal lobby and interna-
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

trip at the airport back in the late 1980s.
“More than 100 people are moving to Nashville per
day, and have been doing so for a number of years,” says
Robert Ramsey, chief operating officer of the Metro
Nashville Airport Authority. “It’s a blessing, but it
comes with its own set of challenges in terms of staying
ahead of that passenger demand.”
Enter the “BNA Vision” plan—the first major
component of which wraps up this month. JE Dunn
is delivering a 2,400-space parking garage with a
ground transportation center on the first floor to
alleviate curbside congestion. A second parking garage
and administrative building were awarded to Messer
Construction in July, and Hensel Phelps broke ground
on Concourse D work in June. Bids for the largest
tional arrivals facility, will likely be brought to the board
in November, Ramsey says.
In Florida, Tampa International Airport (TPA) is put-
ting the finishing touches on phase one of a three-phase
expansion that will allow it to accommodate 34 mil-
lion passengers annually—roughly double the number
served when the project kicked off in November 2014.
Design-builders including Austin Commercial, Skanska
and Kimmins Contracting have been busy constructing
a 2.6 million-square-foot rental car center, a 1.4-mile
automated people mover and a football field-size main
terminal addition, as well as revamping surrounding
roadways. Ramping up next for phase two will be
express curbside lanes as well as a 17-acre commercial
development around the rental car center.

26
 WHAT OWNERS WANT
“We need people who understand what it takes to work in a busy airport environment.
We’ve basically been tasked with rotating the tires while driving down the highway at
75 mph. We need a team that will help keep us out of the ditch.”
- ROBERT RAMSEY, CHIEF OPERATING OFFICER, METRO NASHVILLE AIRPORT AUTHORITY
“We’re facing rapid growth with functional, yet
aging facilities,” says TPA spokesman Danny Valentine.
“Our challenge has been to update our facilities while
remaining in our existing footprint and accommodating
record passenger numbers without sacrificing our high
customer service standards.”
Mission seemingly accomplished. Via a daily survey,
Valentine reports “we never had more than 5 percent
of passengers indicating they were severely impacted
by construction.”
STANDARDIZED SPECIFICATIONS LEAD TO
HIGHER QUALITY MILITARY AIRFIELD UPGRADES
While the civilian sector invests in terminal expansions and gate
capacity, the military aviation market is experiencing strong
demand for infrastructure upgrades, as well as modifications to
airfield facilities due to changes in equipment and airframes.
Structural Associates, Inc. (SAI), East Syracuse, New York, has
been involved in the aviation sector for more than 40 years and
typically has at least one vertical or horizontal airfield project under
way at any time. Currently, the company has six ongoing projects,
including a tactical UAV hangar addition and taxiway pavement
replacement at Fort Drum, New York; a new hydrant fuel system,
pumphouse and tanks at Dover Air Force Base in Delaware; and
a nationwide Department of Defense “aviation fuels” multiple
award task order contract. SAI also is reconfiguring an existing
hydrant fuel system and upgrading airfield pavement to support a
new KC-46A tanker that is scheduled to be assigned to Pease Air
National Guard Base in Newington, New Hampshire.
According to SAI President Bill Halsey, the biggest change
in the military aviation sector has been improving specification
requirements—leading to a higher quality finished product,
especially when it comes to concrete pavement.
OPTIMISM YIELDS OPPORTUNITIES
On a broader scale, American airports have nearly
$100 billion in capital needs through 2021 for terminal
building, airfield capacity, reconstruction and surface
access, according to Airports Council International-
North America. Yet, on an annual basis, airports only
generate about half of what they need to fund infra-
structure projects through net income, passenger facility
charges, the federal Airport Improvement Program,
capital contributions and state grants.
“There is now a common specification across all military
services that is equivalent to FAA requirements,” he says.
“This standardization has gone a long way toward improving
the life expectancy of the concrete aprons and runways,
reducing maintenance costs and the likelihood of foreign
object damage to aircraft. We will continue to see an empha-
sis on the reduction of life cycle costs for airfield pavements
in the future.”
Because most military airfield projects are procured by DoD
agencies based on a best value proposal process that takes
into account price and technical criteria—plus management
qualifications, past experience and an understanding of the
CONSTRUCTIONEXEC.COM
schedule—the ability to self-perform and partner with trusted
subcontractors is crucial to success.
“We can self-perform some aspects of airfield work, particu-
larly concrete paving, which gives us better project control and
maintains our cost competitiveness,” Halsey says. “SAI also has
developed relationships with many strong subcontractors that
help make us technically and cost competitive on civilian and
military airport contracts.”
27
 Jackson Municipal Airport Authority (2)
Rehabbing terminal roadways and taxiway pavement are two components of the capital improvement program for Jackson-Medgar Wiley Evers
International Airport in Mississippi.

WHAT OWNERS WANT

“What I believe sets companies apart when competing for work is their sense of
ownership of the project and understanding the significance for the owner. We also
look for contactors that make good faith efforts to partner with DBE firms to develop
long-term relationships and maximize on mentoring opportunities, which ultimately has
a positive economic impact on the community.”
- DARION WARREN, DIRECTOR OF CAPITAL PROGRAMMING, JACKSON MUNICIPAL AIRPORT AUTHORITY

In July and August, the FAA awarded $1.38 billion for air travel, steady growth in the number of seats per
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

in infrastructure grants to hundreds of airports via the
third and fourth installments of its $3.18 billion Airport
Improvement Program. And in October, President
Trump signed a five-year FAA reauthorization that will
keep Airport Improvement Program construction grants
at $3.35 billion annually and extend new discretionary
funding to small and medium sized airports.
Atlanta, Los Angeles, Chicago O’Hare and Dallas/
Fort Worth are still the busiest airports, but enplane-
ments are projected to grow the fastest (among large
hub airports) in Fort Lauderdale, Florida, San Diego,
Boston and Newark, New Jersey, according to the FAA
Terminal Area Forecast 2017-2045. For the next 20
years, the FAA anticipates a competitive and profitable
aviation industry characterized by increasing demand
aircraft and airfares rising more slowly than inflation.
Evidence of this optimism is apparent nationwide.
Last year, voters in Kansas City, Missouri, approved
a public-private venture to build a billion-dollar, one
million-square-foot airport terminal, which is expected
to be complete in late 2022.
In May, in response to a 5.3 percent annual uptick
in passenger load, Denver International Airport broke
ground on a $1.5 billion expansion adding 39 new
gates to existing concourses by 2021, resulting in a
30 percent increase in gate capacity. The Colorado
Department of Transportation also is conducting a
study on the feasibility of constructing a hyperloop
transportation system, with initial design concepts
placing the first station near the airport.

28
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Manhattan has completed more than 350 aviation-related facilities for some of the country’s largest airports, including Houston (pictured), where it’s
currently performing a $131 million expansion and renovation of the United Airlines Technical Operations Center, which will be used to service planes.
Moving further west, the San Diego County Regional
Airport Authority is gearing up for phase one of its
latest development plan, which could include phased
construction of a new 30-gate terminal, administrative
building, structured parking and airfield paving. RFQs
for the four procurement packages likely will be released
in 2019 and 2020.
Activity isn’t contained to big cities. But at smaller
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
hubs, the financial pressure is more pronounced as
airports balance spending on things like compliant
pavement versus vehicle access or aesthetic upgrades.
“In general, the challenge we face is the fund-
ing necessary to address aging infrastructure and
assets, and to make facility improvements that can
accommodate passenger increases and potential new
carriers,” says Darion Warren, director of capital
programming for the Jackson Municipal Airport
Authority in Mississippi.
With that in mind, a multi-year capital improve-
ment program is in place for Jackson-Medgar Wiley
Evers International Airport (JAN) that shows a serious
commitment to the future. Current JAN projects
include rehabilitating taxiways and terminal roadways,
30
Manhattan Construction Company
updating terminal flooring and ticket counters,
upgrading the security and access control system,
adding wall murals and improving restrooms—all of
which will be done by next year.
More roadwork will get under way in 2019, and an
existing public parking garage will be converted into
a quick turnaround area for rental car service/storage
that’s adjacent to the existing rental car return area—
creating a consolidated facility. Construction on this
project should begin in late 2020.
HOME AWAY FROM HOME
Manhattan Construction Company, which has an
80-year history in the aviation sector, sees this as a prime
time for both vertical and horizontal airport work.
“9/11 diverted most funding toward security
enhancements, and then a few years later the econ-
omy softened, which further inhibited non-critical
spending on maintenance of airport facilities,” says
Paul Dorsey, Manhattan’s vice president of aviation.
“Now, 20 years later, with aging facilities and not
enough infrastructure to accommodate a strong
economy and record enplanements, many airports are
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 Tampa International Airport
Tampa International Airport has been using BIM, virtual reality and LIDAR for surveying, design and construction of its master plan, which includes a
1.4-mile automated people mover that links the main terminal to economy parking and a new rental car center.

WHAT OWNERS WANT

“First and foremost, we’re looking for strong communication. We want to partner with
design-builders that function as a cohesive team. Taking the time to understand our
vision and communicate their design intent is critical to project success. We are an
airport first and a construction site second, so it’s critically important for them to un-
derstand our specific needs and how to work in a facility that is open around the clock
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

every day of the year. Beyond that, we’re looking for transparency and honesty.”
- JEFF SIDDLE, VICE PRESIDENT OF PLANNING AND DEVELOPMENT, TAMPA INTERNATIONAL AIRPORT

challenged to keep up with maintenance and capacity
constraints, which translates to large-scale projects all
over the country.”
Of particular focus is the amount of time passen-
gers spend “airside” after passing through security or
during layovers.
“Restaurants are getting bigger and better, lounges
are expanding, and hold rooms are getting more
sophisticated with improved seating, queuing and
technology,” Dorsey says. “There are more kid zones,
quiet spaces, rocking chairs, live music and pet relief
areas than ever before.”
Airports also are working hard to personalize their
spaces by emphasizing local culture, food, art and
attractions. For instance, it’s a natural fit for Nashville
to carry its Music City identity through BNA, which
already boasts four stages and has a couple more in the
master plan.
“As soon as you step off the plane, we want you to
know where you are,” Ramsey says.

32
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INFRASTRUCTURE DEMAND
$100 BILLION
American airports’ capital needs through 2021
32%
Increase in U.S. airport infrastructure needs since 2015
PASSENGER DEMAND
822.5 MILLION
Number of passengers enplaned at all U.S. airports in 2016
1.1 BILLION
Projected number of passengers enplaned at large hub airports
in 2045
4.8%
Forecasted increase in total enplanements at all U.S. airports in 2018
84.7%
Projected uptick in passengers enplaned at medium hub
airports by 2045
Sources: Airports Council International-North America, FAA Aerospace Forecast 2018-2038,
FAA Terminal Forecast 2017-2045
Public art is emphasized in Tampa, where seven new
works were commissioned during the phase one expan-
sion. Wellness and sustainability are key components
as well, including widespread indoor landscaping and
town square-like space for community events.
The trend is clear: airports as self-contained cities that
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
serve as a home away from home with top-notch retail
and restaurants, fitness and wellness centers, native
plants in seasonal outdoor spaces, indoor water features
and short-term sleeping rooms—not to mention ubiq-
uitous electrical outlets and excellent WiFi coverage.
EMBRACING TECHNOLOGY AND COLLABORATION
How aviation construction projects are brought to life is
advancing as well. AEC firms that offer integrated project
delivery methods, have sophisticated offsite prefabrica-
tion operations, invest in technology and can navigate
public-private partnerships are in the sweet spot.
Case in point: The Metro Nashville Airport Authority
is utilizing progressive design-build on its Concourse D
expansion. There are five guaranteed maximum prices
34
for portions of work that teams have to design (versus
one upfront lump sum or fixed fee with traditional
design-build).
“They’re responsible for hitting the design-to-budget
number, but they’re bidding packages like a construc-
tion manager at-risk,” Ramsey says. “We have to be
reasonable; there’s so much unknown when working in
an existing facility.
“It wasn’t a good approach to have one GMP for the
owner or the contractor community,” he adds. “Given
the risk a contractor would have to assume, and the check
we’d have to write to cover that risk, we thought progres-
sive design-build would be a more equitable approach.”
BNA is using a set of 20 percent complete drawings
as a framework for each package so all the work is cohe-
sive. Most packages have a six-month design window
before turning loose on groundwork.
“We can’t spend two years in design, six months in
procurement and then move on to construction. At the
growth rate we’re experiencing, that would crush us,”
Ramsey says.
In preparation for this more collaborative environ-
ment, BNA built a project management complex where
in-house engineers can co-locate with designers and
contractors for each major project.
“I don’t want to receive dozens of emails, so we tell
staff to put down the phone and walk to the trailer
next door and sit down to figure things out. It has
worked out really well having contractors adjacent to
us in terms of speeding up the design and construction
process,” Ramsey says.
They’ve also implemented virtual reality workshops
every Friday so operations, maintenance and public
safety personnel can offer input on the drawings they
see, but may not fully understand. Additionally, BNA is
merging BIM with its existing GIS technology for easier
data management and consolidation, and it’s in the
early stages of looking at P3s for a hotel project.
“All that is happening within the next year,” Ramsey
says. “It has forced us to evolve into being a more
sophisticated owner.”
In turn, contractors must rise to the occasion by
embracing technology and collaboration.
“The aviation industry is a tight-knit community and
successes and failures are pronounced,” Manhattan’s
Dorsey says. “You only get repeat business by doing a
great job the first time and every time after that.”
Joanna Masterson is senior editor of Construction
Executive. For more information, email masterson@abc.org,
visit constructionexec.com or follow @ConstructionMag.
OC TOB ER 12TH , 10:15 P.M .

A GOOD NIGHT’S
SLEEP, WITH BLANKET
COVERAGE
IN AN
INS TANT,
B IL L L E W IS
M A N AGE D HIS
R I SK A N D GOT
THE J O B D O NE

The hotel renovation had to be completed in five

weeks. It would take multiple subcontractors to
pull it off, and Bill had no time to waste on
paperwork or mistakes. Thanks to CNA’s Blanket
Additional Insured Coverage, the contractors
insured with CNA’s form could meet the project’s
insurance requirements and start working without
delay — allowing Bill to meet his deadline, and
sleep like a baby.

When it comes to trade-specific coverages

that increase efficiency and peace of
®
mind … we can show you more.

To learn how CNA’s builders and contractors program can help you maximize
business efficiency, contact your independent agent or visit www.cna.com/abc.

The examples provided in this material are for

illustrative purposes only and any similarity to actual
individuals, entities, places or situations is unintentional
and purely coincidental. Please remember that only the
relevant insurance policy can provide the actual terms,
coverages, amounts, conditions and exclusions for an
insured. All products and services may not be available
in all states and may be subject to change without notice.
“CNA” is a service mark registered by CNA Financial
Corporation with the United States Patent and Trademark
Office. Certain CNA Financial Corporation subsidiaries use the
“CNA” service mark in connection with insurance underwriting
and claims activities. Copyright © 2018 CNA. All rights reserved.
Win and Deliver Work With
ABC’s Strategic Partners

Reduce risk and Retain happy, Work safer at

improve safety. healthy employees. any height.
Insurance to protect your Benefits solutions to Equipment for aerial
employees, projects and help you win more access including new and
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productive craftsmen plus equipment, when taking control from the
whenever you need them. and where you need it. office to the field.

Your trusted resources: abc.org/strategicpartners

 INCLUDING
The Year in Surety
Executive Insights from
Leaders in Surety Bonding
The 2019 Directory of Surety
Bonding Professionals

16TH ANNUAL
CONTRACTORS’ GUIDE TO

SURETY
BONDING
PUBLISHED IN
ASSOCIATION WITH:

SFAA AND ABC

SPONSORED BY:
HUDSON INSURANCE GROUP
LIBERTY MUTUAL SURETY
NATIONWIDE®
OLD REPUBLIC SURETY
 Long Beach, Calif.

ABC Convention 2018

started a merit shop movement to

Celebrate.
“ The experience far and away
exceeded my expectations. It
was one of the high points of
my life. More people should
get an opportunity to see
exactly what this is all about.
It’s bigger than any one

Collaborate. individual…this is a movement…

somewhere people’s lives

Connect.

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are changed significantly. The
event was well-planned and
organized and unreal.
Secure your spot at ABC —Richard Brown,

Convention 2019 today. 2018 Craft Professional

of the Year, Gaylor Electric

Register today.
Visit abcconvention.abc.org
16TH ANNUAL SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
CONTRACTORS’
GUIDE TO SURETY
BONDNING

With Special Thanks to Our Sponsors:

MICHAEL P. CIFONE TIMOTHY MIKOLAJEWSKI ANTONIO ALBANESE ALAN P. PAVLIC

SVP, Surety President Vice President, President & COO
hudsoninsgroup.com libertymutualsurety.com Head of Surety orsurety.com
nationwide-mls.com

50 Executive Insights
60 The Year in Surety
64 Embrace the Bonding Process and Your
Business Will Thrive
68 How Different Types of Surety Bonds Support
Editors Small Businesses and Specialty Contractors
Lauren Pinch
Joanna Masterson 70 A Surety Best Practices Checklist for
Construction Executive
Busy Contractors
Contributing Editor 74 Legislative Roundup for the Construction Industry
Bryan Surcouf
The Surety & Fidelity 78 As Talent War Hits Construction and Surety
Association of America
Industries, It’s Time to Innovate and Communicate
Advertising and Design
MagazineXperts
82 Surety Program Considerations for Contractor
Ownership Transitions
Production and Design
The YGS Group 84 The P3 Balancing Act: Risk, Financing and Bonding
CONSTRUCTIONEXEC.COM

Contractors’ Guide to Surety 86 The Power of Arbitration: Negotiation Strategies to

Bonding is a special section of
Construction Executive, published by
Associated Builders and Contractors
Services Corp. Copyright 2018. All
rights reserved.
Ensure a Better Dispute Resolution Process
88 The Intersection of Arbitration and the Miller Act
90 Directory of Surety Bonding Professionals

39
39
Real projects start with
the industry standard
Before they broke ground, Eskew+Dumez+Ripple
ensured the 2016 renovation of the Ace Hotel New
Orleans was protected with AIA contracts.
AIA Contract Documents used: A101-Owner/Contractor-Stipulated Sum, A201-General Conditions,
B101-Owner/Architect, C106-Digital Data Licensing, C401-Architect/Consultant plus associated
administrative G-forms.

Learn more about the Ace Hotel project at aiacontracts.org/ce-ace

Photography ©Timothy Hursley

Changing of the Guard
Lynn Schubert Retires From SFAA After 22 Years of Service

I
n 1996, the Surety Association of America, SFAA’s predecessor, set a vision to further enhance
its mission by promoting and preserving the use of surety and fidelity bonds. Historically, the
organization had focused mainly on providing statistical and actuarial materials for its members
and regulators, gradually adding services such as bond form review, advocacy and promotion.
That’s when the talents of Lynn M. Schubert came in. As the first woman to head a
national insurance trade association, Schubert has served as president of SFAA for the past Lynn Schubert
22 years, forever changing the industry for the better. During her dedicated years of leadership,
Schubert transformed the organization to meet the needs of its members in the modern world.
Schubert passionately promoted the industry through the Surety Information Office,
SFAA communications, various publications, federal and state-level advocacy, legal advocacy,
developing strategic partnerships, and testifying before Congress and state legislatures on the
benefits of bonding. She also was a founding member of the International Surety Association, a
confederation of associations from around the world specializing in surety bonds.
In 2018, Schubert was elected to the National Academy of Construction. She is a recipient
of 2017 Trending 40’s Top Association CEOs, the 2015 Martin J. Andrew Award for Lifetime
Achievement from the American Bar Association Fidelity & Surety Law Committee, the
Women Builders Council 2008 Champion Award, and the 2008 Private Sector Leadership
Award of the Jamaica Business Resource Center for work in leading the surety industry in efforts
to assist women and minority contractors to become bondable businesses.
A frequent international lecturer on the topics of fidelity and surety bonds, procurement, and
diversity and inclusion, Schubert received her undergraduate degree in business administration
from East Carolina University and her law degree from the University of Notre Dame.

Thank you for your service, Lynn!

Lee Covington Takes the Helm

L
ee Covington assumed the role of SFAA president on Oct. 1. Previously, he served as
general counsel and senior vice president, governmental affairs for the Insured Retirement
Institute, leading its federal and state legislative and regulatory initiatives since 2009.
His focus on insurance law began in 1993 in Little Rock, Arkansas, where he rose to
become the deputy commissioner of the Arkansas Insurance Department. Covington honed
his leadership skills as the director of the Ohio Department of Insurance from 1999 to 2002,
where he served on the National Association of Insurance Commissioners Executive Committee,
and then moved to positions of influence on the national stage in Washington, D.C. Lee Covington
Covington serves on the board of the Griffith Foundation for Insurance Education and is a
member of the editorial review board of the Journal of Insurance Regulation. He began his legal
career as law clerk to U.S. District Judge Jimm L. Hendren.

Welcome, Lee!
CONSTRUCTIONEXEC.COM

Lauren E. Pinch
Editor-in-Chief

41
LEADERS IN SURETY BONDING

Hudson Insurance Company

Personalized and Responsive Contract and Commercial Surety Solutions

COMPANY CONTACT
100 William St.
New York, NY 10038
Michael P. Cifone, SVP, Surety
(770) 485-4461
mcifone@hudsoninsgroup.com
hudsoninsgroup.com

COMPANY HIGHLIGHTS
• Rated A (Excellent) by A.M.
Best, FSC XV
• Licensed in 50 states and
the District of Columbia
• Treasury listing of
$42,838,000
• Regional expertise and
superior client services
• Represented by select
surety agents

H
udson Insurance Company is part of Hudson
Insurance Group, a specialty insurance group that
writes business on an admitted basis through Hudson
Insurance Company and on a non-admitted basis
through Hudson Specialty Insurance Company and
Hudson Excess Insurance Company. Hudson offers
a wide range of property and casualty insurance products to
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
approach. Our contract underwriters work closely with
our agency partners to understand our customers’ needs
in order to develop a surety program that supports their
plans. Our client base consists of general contractors, as
well as many specialty trade contractors.
COMMERCIAL SURETY

corporations, professional firms and individuals.
Hudson Surety is comprised of an experienced group of
underwriters with deep industry knowledge that enables
us to offer creative, personalized solutions to our clients.
We work closely with select agents throughout the United
States to provide superior service.
Hudson Surety provides surety bond products for
standard contract surety, commercial surety and specialty
contract surety. We have the expertise to work with all
types of contractors and the financial strength to grow
with our valued principals.
CONTRACT SURETY
Regional knowledge of the construction marketplace
has been an important element of our underwriting
Exceptional customer service and a broad appetite for
both standard and non-standard risks have driven the
success of Hudson’s transactional commercial surety
business. Our products include all types of license and
permit bonds, custom bonds, public official bonds, court
bonds and miscellaneous commercial bonds.
SPECIALTY CONTRACT BONDS
For contractors that may not fit the underwriting
criteria of the standard surety market, we offer an
alternative solution utilizing tools such as collateral
and funds control. We support the bonding needs
of the contractor until they qualify for our standard
surety program and participate in the SBA Surety Bond
Guarantee Program.

42 S PEC IA L A DV ER TI S I NG S EC TI O N
Think again. We’ve spent the past century building a specialty insurance platform
with a vast array of products and superior claims handling. From simple to
complex risks, or quite frankly, anything in between, our specialists can construct
a tailor-made program to fit your needs. If you need something unique, just ask us.

The sky’s the limit. THINK HUDSON.

Rated A by A.M. Best, FSC XV

HudsonInsGroup.com
LEADERS IN SURETY BONDING
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
44
Liberty Mutual’s Global Surety Capabilities
We have the capacity, capabilities
and professionals to underwrite
all types and sizes of contractors
and corporations.
S PEC IA L A DV ER TI S I NG S EC TI O N
L
iberty Mutual Surety, a business unit
of Liberty Mutual Insurance, is the
second largest surety in the United
States and a leading surety globally.
We are continually expanding our
global presence by establishing offices
and issuing bonds worldwide. We have the
capacity, capabilities and professionals to
underwrite all types and sizes of contractors
and corporations.
As of July 1, 2018, our combined U.S.
Treasury Listing is in excess of $1.7 billion,
which is among the highest in the industry.
With more than 40 U.S. field offices and
dedicated surety staff in 14 countries, we
have the ability to arrange issuance of
bonds and guarantees in more than 40
countries worldwide.
Liberty Mutual underwrites all types
of regional, national, multinational
and global contractors. Our surety
operations provide program capacity for
all size contractors, and for well-capitalized
construction, manufacturing and supply
risks. In collaboration with other Liberty
Mutual units, we also can provide you
with comprehensive property and casualty
coverage, ensuring that all aspects of your
projects are protected.
When you choose Liberty Mutual,
you’ll work with one company to cover
construction risks from start to finish.
Choose a company that you can trust,
choose Liberty Mutual Surety.
For more information, contact your
independent agent or broker, or visit
libertymutualsurety.com.
COMPANY CONTACT
Stacey McCabe
(610) 832-8240
surety@libertymutual.com
libertymutualsurety.com
You have a passion for
outbuilding the competition.
We have the value-added services to help make it happen.

You’re passionate about being the best. Liberty Mutual Surety shares that passion.
Yes, we have responsive underwriters and industry-leading capacity, but it’s our
value-added services that can really help you grow. Our Professional Advisory
Services and peer benchmarking reports can help you see how you are doing
in relation to other contractors, positioning your company for success
and longevity. Let’s outperform our peers together.

For more information, contact your agent or broker or visit www.LibertyMutualSurety.com.

LEADERS IN SURETY BONDING

Nationwide : ®

Strength. Stability.
Solutions.

N
ationwide® represents a wealth of experience
in surety and specialty liability insurance
ranging from management liability to cyber
and professional liability. Our surety operation
specializes in both commercial and contract
surety bonds. We pride ourselves on developing a
close working relationship with our agents, brokers and
principals in order to ensure a consistent underwriting
approach to mitigate losses.
Our expertise allows us to be innovative. Our
relationships allow us to understand the needs of your
business. The result: unique surety and insurance
products, and an analytical approach unrivaled by
any other firm. We offer comprehensive surety bond
solutions, including 50-state capacity and a flexible,
multi-tiered rating plan, and we continue to add
products each year.
When you work with us, you know you are
working with a strong and stable carrier. Nationwide
is a Fortune 100 company that the U.S. Treasury
listed and approved with a T-listing in excess of $1.1
billion1, and it is one of the largest in the industry.
Add to that an A.M. Best Rating of A+ (Superior),
FSC XV2 and an S&P A+ rating3, and you can be sure
you’re working with one of the most financially stable
companies in the industry.
Nationwide and the Nationwide N and Eagle are service marks of
Nationwide Mutual Insurance Company. ©2018 Nationwide.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

COMPANY CONTACT COMPANY HIGHLIGHTS

7 World Trade Center • Nationwide® is U.S. Treasury listed and
250 Greenwich St., 37th Fl. approved with a T-listing in excess of $1.1
New York, NY 10007 billion, one of the largest in the industry1
• A.M. Best Rating of A+ (Superior), FSC XV2
Antonio C. Albanese • 50-state capacity
p: (212) 329-6984 • Flexible, multi-tiered rating plan
antonio.albanese • National organization offering a full range of
@nationwide.com surety products to meet all needs, from small
Antonio Albanese
nationwide-mls.com to middle markets and large national firms.

1. Nationwide Mutual Insurance Company, July 2018, https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570_a-z.htm#N 2. Affirmed July 2017 3. Affirmed July 2017

46 S PEC IA L A DV ER TI S I NG S EC TI O N
Strength.
Stability.
Solutions.
Essential to projects —
and partnerships.

We’re professional. We’re experienced.

With our extensive underwriting knowledge,
we are skilled in tailoring unique surety
solutions as well as forging strong and lasting
surety relationships. Let us create the bond
solution that will work for you.

T-LISTING

A+ A.M. BEST
IN EXCESS OF

$1.1 A+
STANDARD &
RATED POOR’S
BILLION

A.M. Best: affirmed 10/2/2017

T-Listing: Affirmed July 2018, Nationwide Mutual Insurance Company, https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570_a-z.htm#N
S&P: affirmed 5/24/2017
Nationwide, the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company.
© 2018 Nationwide ESR-0236AO (6/18)
LEADERS IN SURETY BONDING
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
48
See Your Success
O
ld Republic Surety’s ultimate
goal is your success. We’ve
been in the surety industry
long enough to know that
it’s the human element of
underwriting that you need,
not an algorithm or machine. Our
relationships aim for successful,
profitable outcomes for both
our appointed agents and their
contractor clients. Our president
can visit with you on a jobsite,
and our business development
and marketing departments can
willingly share strategies to help
you grow. That’s in addition to the
incredible underwriting talent we
have throughout the country. We
are here for you—to help agents and
contractors succeed.
CAPACITY
Old Republic Surety is well
positioned to assist large and middle-
market contractors with bond
programs based on flexible, common-
sense underwriting. We write contract
bonds, bid bonds, performance and
payment bonds, and maintenance
bonds in all 50 states. Your business’
strengths are unique to you and
deserve the consideration we’ve been
S PEC IA L A DV ER TI S I NG S EC TI O N
trained to provide—your success will
never be determined by a computer
program with Old Republic Surety
as your surety partner.
STANDARD BOND PROGRAMS
Need help setting up a standard bond
program? Having a standard bond
program in place offers contractors
a more nimble approach to bidding
on projects and turning them into
profitable outcomes. Prequalification
can give a contractor the opportunity
to expedite the bond portion of the
bid process.
Understanding the bonding
process is an essential element of a
contractor’s growth. If you need help
positioning yourself with the right
process in place, Old Republic Surety
can help.
CONTRACT BONDS FOR GROWING
CONTRACTORS
We’ve got a bonding option for
smaller, growing contractors through
our FastBond program. Based mostly
on credit score, our FastBonds not
only offer a quick, flexible answer
for a smaller bond, but they also
open the door for small contractors
wanting to grow.
COMPANY CONTACT
445 S. Moorland Rd., Ste. 200
Brookfield, WI 53005
Alan P. Pavlic
(262) 754-8095
appavlic@orsurety.com
orsurety.com
COMPANY HIGHLIGHTS
• A.M. Best rating of “A”
• Licensed in all 50 states
• Writing surety bonds since 1923
• Subsidiary of Old Republic
International
PRODUCT HIGHLIGHTS
The FastBond program is
designed for contractors who
may need their first bond, or who
only have occasional bond needs.
• Local underwriting
• Primarily based on credit score
• Ideal for accounts with no
formal financial presentation
• Subjectivity is flexible
• All construction trade
 Conquer your Challenges
RESPONSIVE Guide your Growth
RELIABLE See your Success
RESPECTED Some of your toughest challenges are ahead. We’re a surety
partner that will be with you from start to finish - even through
the tough stuff. Let’s do this!

www.orsurety.com

SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Executive Insights
How can a construction company mitigate risk when getting ready
to apply for a surety bond?
MICHAEL P. CIFONE
SENIOR VICE PRESIDENT, SURETY
UNDERWRITING
Hudson Insurance
Group
On a daily basis,
construction
companies are con-
fronted with risks
associated with
their labor force, subcontractors,
contract terms, weather and unfore-
seen conditions. The ideal surety
candidate has the ability to identify
risks and manage them effectively.
Once a risk is identified, the
contractor has the option to avoid,
eliminate, reduce or accept it.
The surety understands the risks
surrounding the construction
industry. When contractors are
looking for surety support, they
should demonstrate their knowl-
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
edge of the risks and their plan to
manage these risks. A long-range
plan provides a good starting
point for the contractor to address
issues related to growth initiatives,
succession planning, training and
mentoring, and equipment and
financing needs.
The daily risks associated with
onerous contract terms, labor
shortages, subcontractor defaults
and equipment failures are best
mitigated by a contractor with the
proper management team operating
with a practical long-range plan.
50
HENRY W. NOZKO, JR.
PRESIDENT, SURETY UNDERWRITING
ACSTAR Insurance Company
Unforeseen proj-
ect conditions
can blow up a
project’s cost.
Estimating errors
and omissions
in drawings and
contract documents could lead to
cost overruns. Natural disasters and
defective materials or equipment
can crush the success of a project.
Labor stoppages from work dis-
putes or jurisdictional disputes can
eradicate estimated profits. Funding
shortfalls and litigious owners
could kill a project. It is impossible
for a contractor to control all of
these factors; however, through risk
mitigation, successful outcomes are
greatly enhanced.
Vigorously renegotiate onerous
contract terms and conditions.
Secure insurance coverage for
a particular project exposure in
addition to simply purchasing
required insurance. Confirm that
adequate project financing has been
secured. Negotiate extensions to
labor agreements where the absence
of such could give rise to work
stoppages. Require bonds from
critical subcontractors and suppli-
ers. Research the litigation history
of your customers.
The Executive Insights series is
compiled by Donald Berry, national
sales manager for Construction
Executive. For more information on
participating in a future Q&A, email
dberry@constructionexec.com.
What top qualities should a
construction company look for in a
surety bond producer?
MIKE SANDERS
SENIOR VICE PRESIDENT,
UNDERWRITING
Old Republic Surety
Company
The individual a
contractor selects
as its agent for
surety bonds has a
tremendous impact
on the contractor’s ability to obtain
the most beneficial surety bonding
program possible. Look for a bond
agent who:
• understands the contractor’s
business, goals and plans for the
future;
• asks a lot of probing questions;
• gives you their undivided
attention and really listens to
your story;
• will respectfully challenge
scenarios relative to both their
business operations and to the
surety bonding process;
• can access multiple surety
companies to more effectively
choose the company and the
underwriter that best fits their
surety needs; and
• finds value in building the
relationship between the
contractor and the underwriter.
An agent demonstrating these
traits will be most effective in
presenting a contractor to a surety
underwriter in the most favorable
manner.
 Can’t fit your contractor’s bond
into an express program?

With some merit, ACSTAR will write it

with 5% collateral

Hank Nozko, Jr. Henry Nozko III

nozkojr@acstarins.com nozko3@acstarins.com
A rated by A.M. Best . Treasury Approved . Licensed Nationwide
30 SOUTH ROAD . FARMINGTON, CT 06032 . TELEPHONE: (860) 415-8400
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Executive Insights
What clauses should bond producers and construction companies be on the lookout for in contracts?
BOGDA M. CLARKE
ASSOCIATE VICE PRESIDENT, SURETY
CLAIMS
Nationwide
Heightened risks
from onerous
contract provisions
pose a threat to
subcontractors
from project delays
wholly unrelated to their work.
If the subcontractor has agreed
to broad language obligating it to
meet the project schedule as it may
be revised and updated, coupled
with “no damage for delay” lan-
guage and clauses allowing the
general contractor to supplement
the subcontractor’s workforce, the
subcontractor’s risks may skyrocket.
A general contractor that has
fallen behind in its work may seek
to avoid its own liquidated dam-
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
ages exposure through contract
provisions allowing for schedule
compression and acceleration,
causing inefficiencies to subcontrac-
tors and back-charge exposure to
the subcontractor. Consequential
damage exposure, without limita-
tion in the subcontract, also may be
unreasonably high.
Subcontractors must not agree
to clauses that unfairly expose their
companies to ruinous consequences
for project delays and disruptions
for which they may not have been
responsible.
52
BRIAN SMITH
CONTRACT UNDERWRITING OFFICER
Liberty Mutual Surety
Contract provi-
sions important to
a contractor’s risk
assessment include
liquidated/conse-
quential damagers,
default, payment
terms, change orders, no damage
for delay, final payment, warranties
and hold harmless/indemnity. Key
questions include:
• Are liquidated damages
reasonable or capped? Is there a
mutual waiver of consequential
damages?
• Is there reasonable time to cure?
Does the termination for default
provision provide adequate
notice to the contractor and
surety?
• Is payment contingent upon
receipt of financing?
• Are change order procedures
clearly defined?
• In addition to time extensions,
is the contractor compensated
for job costs that were
unforeseeable or due to owner
delays?
• Does receipt of final payment
waive all claims?
• Can extended warranties
pass through to suppliers/
manufacturers?
STEVE DORENKAMP
VICE PRESIDENT, CLAIMS MANAGER
Merchants Bonding Company
Our advice is:
Always read your
contract and,
where appropriate,
seek the input of
your surety to help
you avoid onerous
bond language.
Here’s a quick list of clauses to be
aware of:
• Damage clauses, including
liquidated, actual, consequential
and efficiency;
• subcontract flow-down
provisions;
• indemnification clauses;
• environmental indemnification
clauses;
• differing site condition clauses;
• warranty, venue and jurisdiction
provisions;
• attorney fee provisions; and
• statute of limitation waivers.
In each of these cases, the goal is
to limit the risk to what a contrac-
tor and its surety should truly be
responsible for and not force them
to take on unnecessary risks. Your
professional surety agent and surety
underwriter should be able to
assist you with identifying onerous
contract language, allowing you to
modify it and right-size your risk.
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 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Executive Insights
What clauses should bond
producers and construction
companies be on the lookout for in
contracts?
CARL G. CASTELLANO
VICE PRESIDENT, CONTRACT SURETY
Philadelphia Insurance Companies
Cardinal rule
No. 1: Read the
contract and asso-
ciated documents.
Clauses, such as
those outlined
below, will be
favorable for one party but not
favorable for others. Beware of:
• Sole discretion to default/
terminate
• Cross default language
• Consequential damages in
general and especially if
unspecified and uncapped
• Indemnity, particularly those in
which the indemnitor assumes
obligation for damages caused
by indemnitee.
• Unreasonable liquidated
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
damages
• Pay if paid clauses, where
enforceable
• Long-term warranties, which
continue to be the obligation
of the contractor instead of a
manufacturer
• Expanding coverage to such
areas as personal injuries and
copyright infringements
• If the project is bonded, clauses
that could cause greater loss to
a surety
54
How should a construction
company prepare for its first
meeting with a surety bond
producer?
ROBERT E. SHAW
PRESIDENT
Skillings Shaw & Associates
The first meeting
is about the bond
producer and
contractor learn-
ing more about
each other’s goals,
businesses and
history, as well as identifying steps
to meet the contractor’s business
surety goals.
Bring all information, statements
and reports, such as financial state-
ments, résumés of key employees,
trade references, recommendations
and other pertinent documents
requested by the bond producer.
The producer will explain for
whom he or she works, how surety
companies underwrite bonds, how
bond rates work, how to request
a bond, the importance of a good
accountant, why bond under-
writers care about construction
accounting and bank support, the
general surety marketplace, and
how producers can coach contrac-
tors to attain higher levels of surety
capacity.
He or she will explain how bonds
are underwritten based on char-
acter (of the contractor), capacity
(the expertise and experience of a
contractor to handle a project) and
capital (the financial strength of the
contractor and its indemnitors).
Why is it important for contractors
to choose a law firm experienced
in surety bonding?
MICHAEL C. ZISA
PARTNER
Peckar & Abramson
When a contractor
selects a law firm to
defend or prosecute
a claim against a
performance or
payment bond, it is
essential to select a
firm that not only understands the
complexities of construction law
but also has a true understanding
of the legal and practical issues
affecting sureties.
I regularly see well-seasoned
construction lawyers who miss
significant opportunities for their
clients because they do not under-
stand or appreciate the intricacies
of surety law.
They do not understand the
terms of the performance or pay-
ment bond and how those terms
impact the contractor’s and surety’s
right and obligations, which can
result in costly consequences.
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 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Executive Insights
How are surety bond companies keeping up with increased demand within the construction industry?
RICHARD BARNETT
SENIOR VICE PRESIDENT, SURETY
DIRECTOR
Chubb Insurance
Investing in people
remains a top pri-
ority. Contractors
should make sure
they are working
with a seasoned
surety that is not only deep in
talent, but also consistently hires
and trains new entrants.
Similarly, contracts and bond
forms are getting more complex,
particularly for large or privately
financed projects. These require
experienced and responsive legal
resources to identify the inherent
risks and potential solutions.
The surety industry is not
immune to the need to improve
efficiencies through technology.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
Best-in-class sureties are regularly
investing in their platforms to
enhance real-time access to informa-
tion and timely decision-making.
With a growing and changing
market, face-to-face interaction is as
important as ever. A surety needs to
be available to its clients to clearly
understand their needs as well as
their strategy to address risk.
Finally, there is no substitute for
working hard and smart. Demands
are great on contractors, requiring
heavy investments of time and
pursuit costs.
56
MICHAEL GROMAN
VICE PRESIDENT, INTERNATIONAL
CNA Surety
On a pure capacity point of view,
the availability of capital has been
robust given the continued run of
excellent industry results. Many
established sureties have contin-
ued to leverage more of their own
internal capital, and that of the
reinsurers, by taking higher net
retentions and placing higher excess
of loss limits on top, translating
into higher program capacity. Some
sureties have adapted to the growth
challenges by flattening their orga-
nizational oversight and moving
more authority to the field.
Alternative surety solutions, such
as expedited dispute resolution
clauses and partial liquidity bonds,
have grown in usage as contrac-
tors and sureties strive to meet the
requirements of owners and lenders
in the new public-private partner-
ship models.
Lastly, more established sure-
ties are going above and beyond
the extension of surety credit by
providing legal review to help avoid
onerous contract terms, providing
benchmarking tools for clients, and
sharing their claims team insights
on best practices.
BRAD GIBSON
VICE PRESIDENT, SURETY
Marsh & McLennan Agency
The surety industry
as a whole man-
aged to weather
the recession fairly
well and losses fell
significantly short
of expectations.
The profitability of the product has
paved the way for an influx of cap-
ital and resources into the industry,
which has made it possible for
existing sureties to increase capacity.
Surety capacity is readily available
from sureties, often at multiples of
what they could accommodate just
a few years ago.
Smaller sureties that cannot com-
pete on large bond programs have
adapted by offering up “bonded
only” programs. A strong construc-
tion market yielding better profit
margins has allowed sureties to
extend more credit than they once
would for a given balance sheet.
Underwriters are becoming more
adept to get past the numbers to
underwrite individual projects that
create a stretch. Overall, an unprec-
edented amount of surety capacity
is available to accommodate the
growing demand. An open and
proactive approach to communica-
tion with your surety is the key to
accessing it.
 BE
PHLY SURETY BONDING
SURE

WITHOUT THE RIGHT SUPPORT,

YOUR PROJECT WILL GO NOWHERE FAST.

Every project needs design, balance, and support. To bring projects the surety support they need,
turn to Philadelphia Insurance Companies. PHLY has recognized expertise in contract and commercial
surety bonds, from performance and payment bonds to subdivision, service contract, license and
permit, court, probate, and more. PHLY’s value is measured by the strength of relationships with its
partners. When you’re ready to move your project forward, you need to be sure. Be PHLYSure.

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All coverages issued by Philadelphia Indemnity Insurance Company. Philadelphia Insurance Companies is the marketing name for the insurance company subsidiaries of the Philadelphia Consolidated Holding Corp., a
Member of the Tokio Marine Group. Coverage(s) described may not be available in all states and are subject to Underwriting and certain coverage(s) may be provided by a surplus lines insurer. Surplus lines insurers do
not generally participate in state guaranty funds and insureds are therefore not protected by such funds.| © 2018 Philadelphia Consolidating Holding Corp., All Rights Reserved.
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Executive Insights
What advice do you have for
contractors considering making a
claim on a surety bond?
MICHAEL BOMBA
DIRECTOR AND COUNSEL,
CONTRACT DOCUMENTS & RISK
MANAGEMENT
AIA Contract
Documents
A payment bond
is separate from
the contractor’s
agreement for the
project and it often includes sepa-
rate obligations the contractor must
satisfy when a contractor is consid-
ering making a claim. Accordingly,
a contractor should be aware of the
terms of the bond at the outset of
the project and thereafter be careful
to ensure that it satisfies all the
conditions in the bond. A failure
to meet all the required conditions
could result in the surety not being
obligated to make a payment.
Particular attention should be
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
given to the bond’s notice require-
ments. If a contractor fails to
provide notice to the surety of a
claim on the bond within the time
period required, the contractor
could lose its right to payment.
Additionally, many payment
bonds require the contractor to
provide adequate supporting
information in order for the surety
to consider the claim as proper.
Failure to do so also could put the
contractor’s claim at risk, or at the
very least delay any payment being
made by surety.
58
How should alternative
dispute resolution provisions
be approached upfront in
construction contracts?
MICHAEL A. MARRA
VICE PRESIDENT, CONSTRUCTION
DIVISION
American Arbitration
Association
Construction firms
and their lawyers
carefully evaluate
the business terms
in their contracts,
but they often reflexively insert
a boilerplate arbitration clause.
This oversight may jeopardize the
inherent benefits of arbitration
and could result in a more expen-
sive, disruptive and inefficient
proceeding.
Arbitration is a creature of
contract, enabling the parties to
tailor the process to fit their needs
and bypass litigation procedures. If
you do not take advantage of this
critical distinction, you may be
relegated to a more cumbersome
and costly proceeding.
It is vital to give upfront con-
sideration to the details of the
procedures most suitable to any
likely disputes under a contract and
not simply hope for the best once
hostilities have arisen. Parties to a
contract should evaluate their spe-
cific project and potential disputes
to determine if a simple arbitration
clause found in most industry form
documents is sufficient for their
project or if further customization
is needed.
Are you ready for revenue
recognition?
JACK CALLAHAN
PARTNER - CONSTRUCTION
INDUSTRY LEADER
CohnReznick
The new revenue
recognition stan-
dard is now due for
implementation.
Despite the long
lead time and
delays, we find the construction
industry is generally not ready.
Construction CFOs must have
their game plan in place or risk the
consequences of last-minute issues
that may be costly, time-consuming
and will pull much-needed
resources from other areas within
their organization.
As you prepare for this year’s
financial statement audit, meet
with your accountants to discuss
the five-step process that needs to
be put in place. It’s important to be
certain that you are in a position
to gather the information needed
to make legal, accounting and
engineering judgements required
to properly support your financial
statement assumptions.
Review your accounting software
systems to assure that you have the
capabilities to assemble the required
financial information. Have you
addressed key issues, including
software, job tracking, contract
analysis, point-in-time testing and
others?
 305.722.2663 | nielsonbonds.com

JUST BECAUSE YOU’RE NUMBER 1, DOESN’T MEAN YOU STOP BUILDING.

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We get your business.
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
The Year in Surety
BY BRYAN SURCOUF AND DEVIN GIRARDI
S
ince 1998, the surety
industry has protected more
than $9 trillion in contract
and commercial surety
exposure, including $600
billion in 2017 alone. The
direct premium written increased
from $5.9 billion to $6.2 billion in
2017. The industry premium has
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
more than doubled during the past
two decades—up from $2.9 billion
in 1998.
Approximately $25 billion in
losses were paid out, and another
$50 billion in loss adjustment,
underwriting and general expenses
were incurred since 1998. The
continuing low loss ratio signals
that the adherence to underwriting
criteria and prequalification, along
with a greater emphasis placed
on efficiency regarding expenses,
remain strong factors in the indus-
try’s growth.
60
Big Contractors Do Fail
The collapse of the U.K. con-
struction giant Carillion PLC sent
shockwaves through the global
markets and prompted an imme-
diate reminder that big contractors
can fail.
As a multinational construction
company and facilities manage-
ment provider, Carillion PLC
employed 43,000 individuals
worldwide and held approximately
450 governmental contracts across
the U.K. ministries of education,
justice, defense and transportation.
The company held operations in
Canada, the Middle East and the
Caribbean, and was a large con-
struction services provider for the
Canadian government.
In 2016, Carillion boasted £5.2
billion ($7.3 billion) in sales and a
market capitalization of nearly £1
billion ($1.4 billion). The trouble
for the company began due to
losing money on big contracts and
running up massive amounts of
debt to offset its losses. Industry
analysts argue that Carillion
overreached and took on too many
risky and unprofitable contracts,
while it reportedly faced payment
delays from contracts in the Middle
East that have now been disputed.
In 2017, Carillion issued three
profit warnings within a span of
about five months and had to write
off more than £1 billion ($1.4
billion) from the value of some of its
contracts. In January 2018, the con-
struction giant folded under more
than £1.5 billion ($2.1 billion) in
outstanding debts, which left U.K.
taxpayers, and as many as 30,000
subcontractors and suppliers, to
bear the cost of this insolvency. In
Canada, four of Carillion’s compa-
nies were granted protection from
A leader in the Surety
industry for over
130 years, offering
the kind of capacity,
stability and service
you can count on.

Chubb. Insured.
SM

www.chubb.com

©2018 Chubb. Coverages underwritten by one or more subsidiary companies. Not all
coverages available in all jurisdictions. Chubb®, its logo, Not just coverage. Craftsmanship.SM
and all its translations, and Chubb. Insured.SM are protected trademarks of Chubb.
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
creditors under the Companies’
Creditors Arrangement Act.  hospitals and schools.
Construction is risky business.
Research conducted by BizMiner
between 2014 and 2016 indicates
that 29.3 percent of U.S. contrac-
tors fail. That is more than one in
four construction companies.
Most companies perform more
than one job at a time. It is not
uncommon that the loss that
causes the collapse of a company is
not the job being performed for a
public entity, but rather one of its
other projects.
The Canadian Centre for
Economic Analysis reported that
non-bonded construction firms are
10 times more likely to suffer insol-
vency at any given point in time,
making the current situation in the
U.K. possible.  construction contracts and pay
Comprehensive Protection
Surety bonds protect not only gov-
ernments, taxpayers and workers,
but also private owners and lenders
from unforeseen issues that arise
during construction.
Compared to other risk mitiga-
tion tools, surety bonds provide
additional benefits. For example, a
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
letter of credit may provide finan-
cial compensation to a state or local
government if a contractor defaults,
but in a small amount. It almost
never accounts for 100 percent of
the project costs.
The biggest issue with using
letters of credit or similar tools is
that no one is responsible for com-
pleting the contract (and paying
subcontractors and workers) in the
case of default. By contrast, sureties
enable the hiring of replacement
contractors (or re-rebidding of the
contract) and assume responsibility
62
Since 1998, the surety
industry has protected more than
$9 TRILLION
in contract and commercial
surety exposure.
to save projects. Subcontractors can
claim directly on the surety.  phenomena compared to conven-
Sureties pay billions of dollars
a year in claims. During the last
15 years, surety companies paid
nearly $12 billion to complete
subcontractors and suppliers what
they were owed. These numbers do
not include the significant amount
of money sureties spent to finance
troubled contractors so they could
complete contracts and avoid the
trouble caused to owners and sub-
contractors by a default.  impair the portion of society that
In the wake of the Carillion
collapse, one thing is certain:
Surety bonds from licensed surety
companies remain the smartest risk
management tool for the construc-
tion industry.
Public-private Partnerships
P3s are the collaboration of public
entities and private enterprise to
design, finance, construct, oper-
ate and/or maintain many types
of public infrastructure projects.
Sectors that have traditionally
and successfully employed the
P3 project model include trans-
portation, water and wastewater
infrastructure, courthouses, prisons,
P3s are not merely the private
financing of public works. At its
core, the P3 arrangement aims to
harness private sector technology
and its access to capital in order to
solve a public infrastructure need.
Once delivered, the private entity
may then operate the project and
attempt to recoup its investment
through concessions or fees.
Historically, P3s have been
employed to a much greater extent
outside the United States. Here
in America, P3s are a more recent
tional public projects financed
with public funds. While domestic
experience with P3s may be lim-
ited, the current level of interest in
P3s is high (and growing) at both
the state and federal level.
While the P3 arrangement
transfers certain construction and
financial risk to the private part-
ner, the risk of project delivery
still must be properly managed.
Delayed infrastructure can critically
depends on it.
Public entities in the United
States understand the importance
that surety bonds play in the transfer
and management of construction
risk. As a result, surety bonds have
been required for more than a cen-
tury to assure contract performance
and payment for the nation’s public
infrastructure projects.
The Surety & Fidelity
Association of America has gath-
ered data from its member surety
companies that have underwritten
surety bonds on P3s in the United
States. A non-exhaustive list
includes more than $15.87 billion
in bonded P3 projects during the
last five years alone.
The decision to require surety
bonds is often dictated by legisla-
tive mandate; however, individual
risk management also impacts
bonding strategy. For instance, the
state of Virginia does not currently
have a P3 law that requires bond-
ing, yet the recently awarded $984
million “Transform 66” P3 project
to improve I-66 into an inter-
modal/multi-modal corridor was
bonded, as was $2.1 billion in P3
tunnel upgrade projects in the cites
of Portsmouth and Norfolk.
Absent legislative authority,
state and local governments may
not ordinarily have the power to
encumber public property with a
private partner’s lease or license, or
to commit public funds to repay a
private partner. Moreover, existing
procurement codes typically address
public works projects that involve
contracts directly between a public
entity and a contractor improving
property. Investors also prefer to
have clear legal authority to enter
into a P3.
Given these factors, states with
an interest in obtaining private
investment for infrastructure
projects have been moving to enact
P3 laws in recent years. As the P3
market evolves, the legislatures are
recognizing the value of bonding to
secure these P3 projects. In the last
five years, 20 states have enacted
P3 laws and all of them include a
bonding component.
Bryan Surcouf is communications
manager and Devin Girardi is
a surety analyst at The Surety &
Fidelity Association of America. For
more information, visit surety.org.
P3s Secured With Surety Bonds in the
Past Five Years
• $815 million State Highway 288 toll lane expansion and interchange upgrades
in Harris County, Texas
• $899 million Rapid Bridge Replacement program, replacing 558 structurally
deficient bridges throughout Pennsylvania
• $648 million I-77 express toll lanes project in North Carolina
• $803 million U.S. 181 Harbor Bridge Replacement between the Nueces Bay
Causeway and State Highway 286 in Texas
• $540 million, 142-mile San Antonio Waters System - Vista Ridge regional
supply project in Texas
• $916 million South Mountain Freeway (Loop 202) project in Arizona
• $2 billion Purple Line (light rail) in Maryland
• $763 million, 2,510-foot twin tower Ohio River Bridges project at East End
Crossing in Indiana
• $430 million Portsmouth Bypass in Ohio
• $834 million Northwest Corridor express lanes expansion project to I-75/I-575
in Georgia
• $2.32 billion I-4 reconstruction project in central Florida
• $1.3 billion University of California, Merced 2020 campus expansion project
• $513 million Long Beach Civic Center development project in California
Other Large P3 Projects Secured With
Surety Bonds During the Past 15 Years
• $903 million Claude “Bud” Lewis Carlsbad Seawater Desalination Plant in San
Diego County, California, the largest and most advanced desalination facility in
the nation
• $362 million Presidio Parkway Doyle Drive Concession in San Francisco
• $1.64 billion Eagle P3 FasTracks Light Rail project in Denver
CONSTRUCTIONEXEC.COM
• $1.814 billion I-595 Corridor roadway improvements in Broward County,
Florida
• $914 million Miami Port Tunnel Project, expanding access between the Port
and mainland Florida
• $2.047 billion North Tarrant Express Highway construction project (segments
1 and 2), expanding road and bridge capacity in and around the Dallas-Fort
Worth area of Texas
63
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
Embrace the Bonding
Process and Your Business
Will Thrive
BY DANNY McNALLY
W
ith bonding being
integral to public and
commercial construc-
tion projects, the
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
ability to obtain bonds
is the lifeblood of many
construction firms. Yet, when they
hear the word “bond,” contractors
may grimace or, worse, elect to
pass on an otherwise attractive
revenue opportunity by avoiding
projects that require bonding.
They have heard rumors of, or
may have experienced firsthand,
an underwriting process that can
seem arduous and intrusive.
The fact is, establishing and
maintaining a bonding relationship
requires a significant investment of
64
time and resources. This is driven
by the surety’s need to thoroughly
vet a contractor’s qualifications
before extending surety credit.
After all, the surety is generally an
unsecured creditor, holding only a
signed promise from the construc-
tion firm and, often, its owners
personally, to protect it from loss
in the event of a contract default.
And bond premiums average only a
fraction of bonded liability, leaving
little room to pay claims before a
surety finds itself unprofitable.
The flipside of that coin is that
the ability to obtain bonds dramat-
ically increases the potential of a
contractor to grow and earn higher
profit margins on construction
projects by weeding out unqualified
competitors that might otherwise
land contracts at unreasonably low
prices. In performing this valuable
screening function, sureties serve as
an ally for well-run, well-financed
construction companies that qualify
for bonding support.
Further, once approved for
bonding, a contractor enhances its
negotiating position by demonstrat-
ing to prospective project owners
and others that it is stable and has
been thoroughly prequalified, car-
rying the surety’s seal of approval.
Finding the Right Partner
The key to successfully navigat-
ing the bonding process is to first
 Surety

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 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
partner with a professional surety
bond producer who is in tune
with the local surety and construc-
tion market. Much like a CPA,
attorney and banker, the bond
producer should be considered a
vital member of the contractor’s
advisory group. They should invest
the time to learn about the contrac-
tor’s operation, business plan and
goals, and help design a roadmap
that will enable the contractor to
attain those goals. A good resource
for contractors to locate a quali-
fied surety bond producer is the
National Association of Surety
Bond Producers.
The primary objective of the
professional surety bond agent is to
help the contractor build and main-
tain a profitable business.
He or she will begin by assisting
the contractor in assembling and
reviewing underwriting infor-
mation, including organizational
charts, résumés of the owners
and key personnel, business and
continuity plans, financial state-
ments, schedules of contracts in
progress and recently completed,
and documentation on established
lines of credit.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
Based on the findings of this
review, the agent will determine
which surety company is best suited
to meet the needs of the contractor
and prepare a formal submission to
the surety.
The agent will work with the
surety company underwriter to
establish single project and aggregate
work program limits, which provide
a responsible framework for the con-
tractor to operate within based on
experience and other factors, includ-
ing financial and human resources as
well as available equipment.
66
Agents and underwriters can
provide an independent
perspective.
Increasing the Chances of Success
While helping establish and
maintain a bonding facility is the
first step in the bonding process,
it is by no means the only ser-
vice provided by the professional
surety bond agent or the surety
underwriter. This surety team
is well-equipped to serve as an
invaluable resource and business
partner for the contractor, pro-
viding referrals to accountants,
attorneys and bankers who special-
ize in construction accounting, law
and lending. Working together,
this advisory group can greatly
increase the contractor’s chance of
success in business, while iden-
tifying and addressing potential
threats and weaknesses that could
negatively impact the operation.
Contractors should keep in
mind that it is not always in their
best interest for the surety agent or
underwriter to approve a request
for bonding. One of the most
important services they can provide
to a contractor is to push back, ask
questions and even decline bond-
ing in cases where they perceive an
unusually high level of risk (such
as onerous contract provisions) or
a poor fit between the contractor’s
experience or resources and the
project for which bonding is being
requested. Agents and underwrit-
ers can provide an independent
perspective, helping mitigate risk,
avoid potential pitfalls and ensure
the long-term viability of the
contractor.
In the case of a mature construc-
tion firm, owners often struggle
to identify an exit strategy that
will enable them to transition
ownership of the business while
protecting their legacy and ensur-
ing the livelihood of the valued
employees who helped build the
company. Surety agents and under-
writers can work with the owners
of the business and their trusted
team of advisors to establish a
business succession plan that serves
the interests of all parties without
jeopardizing the company’s bond-
ing capacity.
In summary, there is no question
that establishing and maintaining
a surety program requires a sub-
stantial commitment of time and
resources. However, by embracing
the bonding process—rather than
avoiding or agonizing through
it—contractors will be rewarded
with a business that is robust, and
they will come to recognize their
surety agent and underwriter as
vital members of their advisory
team.
Danny McNally is surety manager
for the Southeast region of FCCI
Insurance Group, Lawrenceville,
Georgia. For more information, call
(800) 226-3224, ext. 5231, email
dmcnally@fcci-group.com or visit
fcci-group.com.
When you have a solid foundation of experience by your side,
there’s nowhere to go but up.
www.cnasurety.com

KNOWLEDGE AND SUPPORT ARE ALWAYS AN ADVANTAGE.

CNA Surety stands alongside contractors and subcontractors at every step of the bonding process to help them better manage
their risks. Through our strong relationships with brokers and independent agents located in all 50 states, Puerto Rico and Canada,
we offer a full range of products, including Bid, Performance and Payment bonds for contractors, as well as Commercial bonds for
customers ranging from individuals and small businesses to Fortune 1000 companies. All backed by the financial strength of the
CNA Insurance Group and highly rated for financial strength by all the major independent rating agencies.

To learn more, contact your independent agent

or visit www.cnasurety.com.

One or more of the CNA companies provide the products and/or services described. The information is intended to present a general overview for illustrative purposes only. It is not intended to constitute a binding
contract. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states
and may be subject to change without notice. Use of the term “partnership” and/or “partner” should not be construed to represent a legally binding partnership. “CNA” is a registered trademark of CNA Financial
Corporation. Certain CNA Financial Corporation subsidiaries use the “CNA” trademark in connection with insurance underwriting and claims activities. Copyright © 2018 CNA. All rights reserved. SU5349C
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING

How Different Types of

Surety Bonds Support
Small Businesses and
Specialty Contractors
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

BY DON SMITH

T
he type of surety bond Set-asides and or limited to small businesses that
with the greatest impact Performance Bonds participate in SBA contracting
on small contractors and The U.S. Small Business assistance programs.
their business goals is a Administration can limit com- Sole source set-aside contracts
contract bond. petition for certain contracts are not competitively bid. This
Contract bonds can via small business set-asides. usually happens where only a
be further broken down into Competitive set-aside projects are single business can fulfill the
public and private sector con- typically less than $150,000 and requirements of a contract. Some
struction bonds. can be open to any small business set-asides are for small businesses

68
in certain categories, such as
8(a) Business Development,
HUBZone, Women-owned Small
Business and Service-disabled
Veteran-owned.
Federal and state governments
have regulations that require a
performance and payment bond
for each contract exceeding a cer-
tain specified amount called the
bond threshold.
For federal (Miller Act) proj-
ects, the threshold amount is
$150,000. For state (little Miller
Act) projects, the threshold varies
from state to state but is typically
less than $100,000. These rela-
tively low thresholds result in
a large amount of federal and
state construction projects to
be bonded.
These projects are generally
competitively bid, and the
lowest qualified bidder receives
the contract award. When small
contractors get qualified with an
acceptable surety, they can enter
their bid and compete for public
sector construction work.
Federal and state governments
also frequently have regulations
that require a certain percentage
of work to be performed by cer-
tain contractor groups that meet
specified requirements. Some of
these specified groups include
women and minority business
enterprises and disadvantaged
business enterprises.
For example, the United States
Department of Transportation
established a DBE program
through the Safe, Accountable,
Flexible, Efficient Transportation
Act that provides opportunities
and increases participation for
state and local transportation
2017 Public Construction Spending:
$279.8 BILLION +
2017 Private Construction Spending:
$950.8 BILLION =
$1.23 TRILLION
Total Construction Put in Place
agencies that receive financial
assistance from the U.S. DOT.
At the state level, the Maryland
General Assembly enacted leg-
islation in 1978 to create an
MBE program that requires state
agencies to make every effort
to achieve an overall goal of 29
percent MBE participation on the
total dollar amount of all procure-
ment contracts.
Licensing and Lien Bonds
In the private sector, there is no
requirement for the use of contract
bonds on construction projects.
Yet, many private owners choose
to require contract bonds on their
projects to protect their interests
in the event of contractor failure.
Another type of surety bond
that small contractors are required
to have are license and permit
bonds, also known as compliance
bonds. These bonds are required
by most states and some local
governments and guarantee that
a contractor will comply with the
state and local government rules
and regulations regarding the
required contractor license.
This type of bond does not
help generate revenue for small
contractors similar to the required
contract bonds for public work,
but without these licenses, the
contractor cannot legally perform
the work in the jurisdiction of the
local government that is requiring
the compliance bond.
Finally, small contractors
sometimes require miscellaneous
bonds, such as a release of lien
bond. A release of lien bond
allows a discharge of a lien filed
on real estate.
This type of bond is not often
needed, but it can be very import-
ant to the contractors involved
because it can allow them to
CONSTRUCTIONEXEC.COM
continue to work on the job while
the dispute is being resolved.
Don Smith is a bond manager
for Liberty Mutual. For more
information, email surety@
libertymutual.com or visit
libertymutualsurety.com.
69
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING

A Surety Best Practices

Checklist for Busy
Contractors
BY MICHAEL ANDERSON

T
oday’s global economy
contains increasing levels
of uncertainty, where
even best-in-class con-
struction companies can
be impacted by changes
in the surety marketplace unre-
lated to their own financial and
operational performance.
John Alberici, chairman of
Alberici Construction Company,
once said, “The price of gasoline
has nothing to do with whether
you’re a good driver or not.” That
sentiment argues for construction
CEOs, CFOs, COOs and owners
to prioritize and invest some of
their valuable time in their surety
relationships.
The following list outlines some
things to do (and not do) that can
assist in maintaining stable, ade-
quate surety capacity to support a
business plan.

DO:
• Communicate. Anticipate the questions a surety may ask.
• Seek the surety’s input when finalizing a business plan,
particularly if it involves pursuits in new markets or sectors.
• Outline the core elements of the company’s culture that
will attract and retain the highest quality talent. Regularly
review and update the firm’s continuity plan.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
DON’T:
• Sit on bad news. Experienced surety underwriters can deal
with bad news, but a surprise can put support on hold.
• Forego the broader perspective underwriters may have for
what has worked and what has not worked in other compara-
ble construction company business plans.
• Presume that the surety only underwrites financial results and
projections. Underwriters look at the whole picture of how a
contractor’s management team plans for and executes on its

• Utilize the surety’s claim department staff as a second set
of eyes on contract terms or pending disputes.
• Ensure the broker has communicated an active backup
plan in case changes outside of the firm’s control affect its
current surety program.
• Maintain a general knowledge of the factors that are driving
conditions in the surety marketplace.
• Ask the surety about its business plan, financial results and
changes in risk appetite. Develop relationships with both
local decision-makers and those in the home office.
objectives.
• Bypass the surety’s claim team as a resource. Their time and
expertise are part of what surety premiums pay for.
• Allow a disruption to the surety program from events beyond
the firm’s control that may impact the surety’s ability to be
responsive to the company’s needs.
• Ignore that macro conditions in the surety industry factor into
strategic decision-making for the surety, just as construction
industry conditions do for contractors.
• Disregard that surety relationships are a two-way street. The
business plan and objectives depend on stable, responsive
support and the relationships that underpin it.

70
ARE YOU
READY?
You have a vision. And every decision…
every project…can get you closer.
The advisory, assurance, and tax professionals at
CohnReznick work to understand your objectives
through all stages of planning to completion.
We help you manage cash flow, capital and
bonding requirements, and job site integrity.
Our multidisciplinary teams deliver diverse
technical expertise and deep industry experience
to all types of contractors including public-private
partnerships. So, you can move ahead with insight
and confidence.

Are you ready to achieve your vision? Let’s get going.

Visit us at cohnreznick.com/construction

Contact:
Jack A. Callahan
CPA, Partner - Construction Industry Leader
Jack.Callahan@cohnreznick.com
732.380.8685
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING

DO:
• Understand how the broker is communicating with the
surety.
• Work with the surety broker to develop an analysis of the
WIP schedules provided to the underwriter.
• Understand the credit model components the surety uses to
determine the pricing and level of surety support extended
to the firm.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
DON’T:
• Assume the company is being presented to underwriters in
the manner it would like, or be reticent in asking to review
one of the broker’s submissions on the company.
• Forget that the WIP schedule is the only forward view financial
information provided to the surety. It can be used to maximize
the support the underwriter offers.
• Pass up an opportunity to improve the reporting of projections
and results to emphasize the factors critical to the surety’s
analysis of the firm.

• Have an objective method for determining the value the • Be satisfied with transactional and service excellence. If the
surety broker is delivering to the team. Employ it on a broker is not assisting both the top and bottom lines, then he
regular cycle. or she is costing the company money.

Surety credit is the most efficient
source of contingent capital a con-
tractor can use in its business. The
word credit has its roots in the Latin
words “credo” and “creditus,” which
mean to believe and to trust. Creditus
is earned through proactive commu-
nication and delivering on promises
(by all parties).
Surety support is an outcome
of a contractor’s good business
performance, but it is achieved
by treating the surety as a part-
ner with a vested interest in the
company’s success along the way.
The time involved to do this can
be managed efficiently. With the
backing of a stable surety, willing
to provide and expand its sup-
port based on credo (and not just
numbers), a contractor will wield a
competitive advantage.
Michael Anderson is senior vice
president of American Global
LLC. For more information, visit
americanglobal.com.

72
WHAT IF?
YOUR COMPANY’S SURETY BROKER
WAS A STRATEGIC BUSINESS PARTNER
NOT JUST A TRANSACTIONAL
REPRESENTATIVE.

There is an enormous amount of risk in construction.

At Marsh & McLennan Agency (MMA), our surety
brokers build and maintain a strategic partnership
with their clients. Our mission is to create a surety
relationship that will enable our clients to be
competitive, meet business plan objectives, and
take advantage of opportunities for growth
and profit.

To learn more about how MMA and its regional

partner agencies can help you find Surety
Bonding, visit MMA-MidAtlantic.com.

WORLD CLASS. LOCAL TOUCH.

BUSINESS INSURANCE EMPLOYEE HEALTH & BENEFITS SURETY BONDING PRIVATE CLIENT SERVICES
Copyright © 2018 Marsh & McLennan Company. All rights reserved.
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING

Legislative Roundup for the

Construction Industry
BY LENORE MAREMA

C
ongress is seeing the mid-
term elections through
without a significant new
infrastructure spending
bill in play. However, the
current House and Senate
conference on the transportation
appropriations for fiscal year 2019
indicates that Congress will reject
the president’s recommendation
to significantly cut discretionary
spending for transportation, which
instead is headed for another boost
next year.
Both the House and Senate
bills provide $46 billion for the
Highway Trust Fund, which is a $1
billion increase over FY 2018. Each
chamber wants to provide addi-
tional spending for highway and
BUILD grants, previously known Regulations on Requests for an Gathering information on federal
as TIGER grants. The conference Equitable Adjustment (REAs) agency practices is a good first step
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

committee just needs to agree on
the amounts.
Federal Change Orders
Congress enacted H.R. 4754
to address the slow approval of
change orders and the resulting
lack of timely payments to con-
tractors. The new law requires that
for every solicitation for a contract
to be awarded to a small business,
the prospective bidders must be
provided with the federal agency’s
policies or practices for compli-
ance with the Federal Acquisition
when a change order is issued.
The FAR requires the agencies to
respond to REAs in “the shortest
practicable time.”
If the agency does not have a
policy or information on its past
practices regarding REAs, then it
must start collecting that informa-
tion for a three-year period. The
agency must collect data on whether
it responded to a REA within 30,
60, 90, 180 or 360 days from receipt
of the REA, or whether the agency
responds to REAs after the comple-
tion of the contract.
to address compliance with FAR
rules on change orders.
Federal Bond Thresholds
Congress failed to pass H.R. 4486,
which would have exempted the
Miller Act bond thresholds from
the required indexing for infla-
tion for all federal acquisition
thresholds. The bill passed the
House but stalled in the Senate.
The Miller Act bond threshold
is scheduled to be reviewed in
2020 and could be increased from
$150,000 to $200,000.

74
Ask your surety agent about the
common sense power of Merchants’ quill.

Merchants Bonding Company™ (Mutual), Merchants National Bonding, Inc. & affiliated companies | 6700 Westown Parkway, West Des Moines, IA 50266
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
According to the data com-
piled by The Surety & Fidelity
Association of America, the federal
government’s exposure to loss from
default would increase by $300
million annually, and subcontrac-
tors would be working on larger
jobs without payment protection.
Federal TIFIA Policy
At several Senate committee
meetings, concern was expressed
over a “Dear Colleague” letter from
the Federal Transit Administration
that suggested that loans under
the Transportation Infrastructure
Financing and Innovation Act
program would be treated as part
of the federal funding in a project
rather than as the state or local
match. This would be a signifi-
cant change in policy, and some
argued that the TIFIA law is clear
that such loans are not federal
funding because the states repay
the loans with local funds. If the
FTA proceeds with this new policy,
there may be fewer applications for
TIFIA loans.
Federal Permitting Decisions
Twelve federal agencies signed
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
a memorandum of understand-
ing to work together under an
executive order that President
Trump issued in 2017 and to
reach environmental and other
permitting decisions within a
goal of two years. A single agency
would take the lead and set the
time frame for major projects that
require an environmental impact
statement. The MOU is intended
to create best practices for agency
cooperation and does not give
project sponsors any new recourse
or remedies.
76
Retainage got more complicated
in Rhode Island and Vermont.
State Budgets
This was the second of a two-year
session for most states, the major-
ity of which focused on their FY
2019 budget. Several states had
heated battles while others needed
one or more special sessions to
finish their budgets. Colorado,
Delaware, Georgia, Iowa, Kentucky,
Massachusetts, Mississippi and
Missouri enacted infrastructure
spending packages this year.
State P3s
State legislatures remain interested
in public-private partnerships. New
Jersey enacted a law that grants
broad authority to the state, local
governments and school districts to
use P3s; however, these entities must
utilize a project labor agreement and
pay state prevailing wages. The new
law also includes a provision that
requires the general contractor, con-
struction manager or design-build
team to post a performance bond
and a payment bond that comply
with the Little Miller Act.
Missouri expanded its exist-
ing P3 law for the Highways and
Transportation Commission to allow
political subdivisions to use P3s and
to allow the commission to use P3s
for stormwater facilities and systems.
Delaware and Vermont enacted
laws to enable the use of P3s.
Delaware’s new law allows county
and municipal governments to
enter into P3s for public lands
through a lease, concession
agreement, easement or license
agreement. Vermont enacted a pilot
project to permit the use of P3s for
transportation projects.
Michigan created a new
Infrastructure Council to develop a
multiyear plan for asset management
in the state. The council has a broad
mission, including reviewing funding
and financing models, best practices
and impediments to delivery.
A P3 bill for public buildings
recently was introduced in Ohio,
and a bill for P3s for virtually any
kind of public works projects was
introduced in Pennsylvania. These
bills could move later in the fall.
State Retainage
Retainage got more complicated
in Rhode Island and Vermont.
Under prior law in Rhode Island,
retainage was released when the
public entity accepts the project.
The new law allows retainage to be
released at substantial completion,
except for the following amounts:
0.5 percent for unknown or fore-
seeable defects that may become
known in the first year after
substantial completion; 2.5 per-
cent for incomplete, incorrect or
missing deliverables; 150 percent
of the reasonable cost to complete
or correct incomplete or defective
work items; and an amount for the
reasonable value of claims and any
costs, expenses and attorneys’ fees
incurred as a result of the claims
if permitted in the construction
contract for the person seeking the
payment of retainage.
 In Vermont, a new law prohibits
a contracting entity or contractor
from withholding as retainage any
amount due and owing for mate-
rials delivered to the construction
project and that are covered by a
manufacturer’s warranty or graded
to meet industry standards, or
both. The new law applies to public
and private construction.
State Bond Thresholds
Rhode Island and Vermont also
considered, but did not make
significant increases to, the state
bond threshold. In Rhode Island,
legislation that would have allowed
payment and performance bonds
to be waived for projects up to
C O U N S E
NEW YORK, NY • RIVER EDGE, NJ
OAKLAND, CA
$250,000 was rejected as way to
cut costs in the state budget.
Vermont considered a proposal
from its state transportation
agency raising its bond threshold
to $1 million so small contrac-
tors could participate in paving
projects under Indefinite Delivery
Indefinite Quantity contracts.
After discussion in the legislature
raised the possibility of unpaid
suppliers and unqualified con-
tractors, the agency withdrew
the recommendation in favor of
further study of the issues.
Construction Manager At-risk
A new law in California now
authorizes counties to use the
Combining an understanding of the legal
and practical issues impacting sureties with
unparalleled construction experience
Peckar & Abramson, P.C.
L T O T H E C O N S
• MIAMI, FL
• CHICAGO, IL • AUSTIN, TX
W W W. P E C K L AW. C O M
construction manager at-risk
method for any kind of infra-
structure project, including, but
not limited to, buildings, utility
improvements associated with
buildings, flood control and
underground utility improve-
ments, and bridges (but excluding
roads). The project cost must
exceed $1 million. Existing law
requires the construction manager
at-risk to possess or obtain suffi-
cient bonding for the construction
services portion of the project.
Lenore Marema is vice president of
government affairs for The Surety &
Fidelity Association of America. For
more information, visit surety.org.
CONSTRUCTIONEXEC.COM
T R U C T I O N I N D U S T R Y
• WASHINGTON, D.C. • LOS ANGELES, CA
• DALLAS, TX • HOUSTON, TX
77
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING

As Talent War Hits

Construction and Surety
Industries, It’s Time to
Innovate and Communicate
BY LARRY TAYLOR

I
t’s all over the headlines: The con-
struction industry is booming, but
qualified labor is in short supply.
The message that needs to be
For those in the surety industry, conveyed is that construction
the ripple effects from construc-
tion growth come with the same and surety careers offer steady
rewards and challenges. While these
industries are growing, unemploy- employment, high wages and plenty of
ment is at all-time lows and talent is
at a premium.
room for career advancement.
Specifically, construction employ-
ment has reached the highest levels have been looking to fill an average has amplified the need with teams
since the beginning of the recession of nearly 225,000 construction that are already lean and doing more
in 2008, and the surety industry is jobs each month, according to the with less. Forbes calls it “an insatiable
battling with every other financial Bureau of Labor Statistics. appetite for fully baked candidates”
services opportunity for the best The 2018 Insurance Industry (i.e., employees who have imme-
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

candidates. Filling the skills gaps as
baby boomers head into retirement
and adopting new, updated recruit-
ing practices to attract talent are
among the top challenges for leaders
in both industries.
The Talent War Up Close
In August, construction added
23,000 jobs and, according to an
industry survey, would have added
more if enough people were avail-
able to fill the positions. Through
the first quarter of 2018, employers
Employment and Hiring Outlook
Survey expects more than 13,000
jobs will open before the year is out.
The Surety & Fidelity Association of
America reports that property and
casualty insurance, which includes
surety, will see more than 400,000
retirements during the next five years.
In general, short-term solutions
to the talent war have included
companies recruiting professionals
to move from job to job, trading
one company for another for gains
in salary or position. The growth
diately transferrable skills and can
hit the ground running). The talent
pool for candidates like these is
small and usually expensive.
One of the big problems for
construction and surety is that
the extraordinary opportunities
and benefits of these careers aren’t
common knowledge. Jobs within the
construction industry simply aren’t
attractive to millennials, who have
been groomed to work elsewhere.
And, a career in surety has often
been one that college graduates luck

78
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
into by happenstance rather than by
intention. They have not heard of
surety, this niche subset of property
and casualty insurance, and it takes
special effort to learn about it before
a young person can truly understand
the opportunity.
The message that needs to be con-
veyed is that construction and surety
careers offer steady employment,
high wages and plenty of room for
career advancement.
Innovation and Communication
To do battle in this war for talent,
industry associations are already
working with federal and state gov-
ernments to find ways to increase the
available labor force, take advantage
of the skills and experience of retirees
who still want to contribute, attract
young people by selling the lifetime
rewards and benefits of careers in
surety and construction, and provide
the education and training they will
need to be successful.
Locally, chambers of commerce,
businesses and associations are col-
laborating to find funding and work
with community colleges, universi-
ties and vocational programs.
For companies, successful talent
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
management strategies include the
following:
• Enhancing campus recruiting
and expanded internship
programs.
• Improving diversity, which is
important for more successful
recruiting and retention.
Companies with diverse
workforces have a proven
competitive advantage with
greater measures in productivity,
engagement and service.
• Creating more mentorships
and avenues for young people
80
Surety & Fidelity:
Careers That Make a Difference
The Surety & Fidelity Association
of America is launching a new
campaign called “Surety & Fidelity:
Careers that Make a Difference.”
The effort includes recruiting tools,
educational materials and online
resources to help surety companies
communicate the benefits of being
in this industry.
Of special note is the SFAA
Foundation (the association’s educa-
tional arm) and its Surety & Fidelity
Industry Intern and Scholarship
Program (SFIISP). Through the
SFIISP, The Surety Foundation
provides awards of up to $5,000
to outstanding underrepresented
students to support their studies
and to encourage their consideration
of the surety and fidelity industry as
a career choice.
The strength of the surety bonding
and construction industries is their
people. While construction and surety
may not seem like a typical career
choice, these jobs are perfect for
to job shadow and experience
a day in the life. Specifically
in construction, there are also
initiatives that target parents and
teachers to make them aware of
employment opportunities.
• Rethinking traditional work
environments. Focus on a great
culture with open collaborative
space, technology for remote
offices to work together,
flexibility to balance work hours
and home life, and opportunities
for employees to stay healthy and
give back to the community.
“I enjoyed the work and office
environment. As an intern, I felt like I was
treated more as an equal employee than
a temporary person. I enjoyed being a
part of meetings, given the opportunity
to complete real work and seeing the
end results of what I had done,” says Nia
Gumbs, 2018 SFIISP intern.
those who want to help build and
guarantee an investment in the future,
as well people looking to do exciting
and meaningful work with nationwide
or even global opportunities. Together,
the industry can change the headline
from “Today’s Talent War” to “The Hot
Jobs of Tomorrow.”
• Updating job descriptions and
employment advertising with a
marketing spin to tell a better
story about the roles, long-term
benefits and transferrable skills
the position will entail and the
lifestyle possibilities that come
with these career choices.
Larry Taylor is president of
Merchants Bonding Company
and chair of the Surety & Fidelity
Association of America Board of
Directors. For more information,
visit merchantsbonding.com.
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING

Surety Program
Considerations for
Contractor Ownership
Transitions
BY DAN PANEK

T
oday, most contractors are
facing the reality that a
significant percentage of
their management teams
will hit retirement age
during the next five to 10
years. After years of dedicating their
time, energy and resources toward
building a successful operation, the
principals of construction firms
must deal with the challenge of per-
petuating their company. Who will
carry on their legacy, and what’s the
best way to structure the transition
of ownership?
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

Transition Options
It seems that fewer contractors
have children or other family
members interested in going into
the business. At the same time,
owners typically want to benefit
from the equity that they’ve built
up in their business.
Some may simply wind down the
operation: complete the remaining
work, sell the equipment and walk
away with the proceeds. However,
for most, this option won’t generate
a sufficient return.
Selling the company outright
may seem like a logical choice,
but there is still the challenge of
finding a suitable buyer willing to
pay the right price. Nor does this
option guarantee that the com-
pany will continue to operate in its
current form and with its employ-
ees protected.
During the past few years, two
ownership transition options
have gained increased attention:
employee stock ownership plans
and private equity investment.
Both potentially address perpetu-
ation of an organization; however,
their structures can vary greatly, as
can their impact on the company’s
balance sheet. This, in turn, can
have unforeseen consequences on
the contractor’s surety credit.
Private equity investment
involves the contractor being
purchased by an investment man-
agement company. Private equity
firms raise the necessary funding
through outside investors, and the
acquisition is often structured as

82
a leveraged buyout. The existing
executive team typically remains
involved in running the day-to-day
operations, with investor oversight
and ultimate control.
The firm uses its financing,
strategic planning and manage-
ment resources to help improve
performance and returns. Once this
objective has been achieved, inves-
tors often will look to capture a
return on their investment through
a sale of the company.
An ESOP is a vehicle by which
a firm’s workforce gains an owner-
ship interest in the company. The
company sets up a trust fund into
which it contributes shares or cash
to buy existing shares. A contrac-
tor can then reward employees
with stock ownership through
various means.
When participating employ-
ees retire or otherwise leave the
company, their shares are bought
back at market value. An outside
valuation must be done annually to
determine the shares’ market price.
A benefit of an ESOP is that
ownership and control stay within
the organization. ESOPs can help
preserve the company culture and
encourage employees to focus on
the organization’s performance.
Surety Challenges
ESOPs and private equity invest-
ments give the departing owners
a built-in market to sell their
shares. With that said, both meth-
ods can create challenges from a
surety perspective.
The debt required to finance
both transactions appears on
the contractor’s balance sheet,
whether financed institutionally,
by outside investors or through
the departing shareholders. This
liability can heavily leverage the
company and negatively impact
its tangible-equity position, push-
ing what was previously a very
strongly capitalized company into
a weak equity position.
Any excess cash in the com-
pany is usually contributed to the
transaction, significantly reducing
working capital. This new debt
generally will need to be serviced
regardless of whether the contractor
is profitable.
The extent to which the trans-
action is funded by shareholder
or “friendly debt” may give the con-
tractor the ability to mitigate the
financial impact some in the sure-
ty’s eyes. Flexible payment terms
can be established in the event that
earnings do not keep pace. The
notes can be subordinated to the
surety, allowing it to consider all or
a portion of the debt as equity.
The formulas used to annually
value company shares can be
aggressive, sometimes increasing
the share price as much as 50
percent in any given year. These
outside valuations are based on
how the company itself performs,
but also include other factors
such as market comparisons with
economic data and valuations of
publicly traded companies.
The result can be an inflated
share price even in years where
a contractor generates minimal
profits or retained-earning growth.
These annual, accelerated share
price increases can significantly
increase the eventual repurchase
price of future departing sharehold-
ers beyond original expectations
and possibly result in additional
debt needed for the transaction.
With both ESOPs and private
equity investments, the compensa-
tion paid to departing shareholders
can include warrants or “earn outs”
that vest at a future date. The value
of this deferred compensation is
based on annual share price eval-
uations. The company remains
responsible for absorbing the result-
ing deferred compensation, which
can be substantial if third-party
valuations result in the share price
outpacing earnings. Any deferred
compensation needs to be struc-
tured so that meaningful financial
targets must be hit before the target
price can be paid out.
Transitioning ownership of an
organization is never an easy deci-
sion. Often, the impact on surety
credit is the last thing considered
when structuring ESOPs and pri-
vate equity investments. Important
transactions such as these should be
vetted with the surety before it is
too late in the process.
If the proposed structure
restricts the ability to continue
with the same surety program,
the return assumptions to justify
the transaction could be dramat-
ically altered. Surety firms should
be seen as partners and can be
valuable consultants. Establishing
expectations early on as to what
the balance sheet should look
like post-transaction can prevent
CONSTRUCTIONEXEC.COM
difficult discussions later regarding
bonding limitations.
Dan Panek is regional AVP/
underwriting director for CNA
Surety. For more information, visit
cnasurety.com.
83
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING

The P3 Balancing Act:

Risk, Financing and Bonding
BY MARTINO SESSA

P
ublic-private partnerships are
becoming an important way
to deliver large infrastructure
projects in the United States.
Most of these projects require
surety bonds due to their size,
complexity and scope of work.
The U.S. construction market
continues to provide an excel-
lent source of opportunities for
domestic and international com-
panies. According to the American
Society of Civil Engineers, the
United States will need to invest Still, some states lack the technical exposure. The bottom line is that
$4.59 trillion by 2025 to improve capacity and expertise to consider the private sector and public enti-
the nation’s overall grade of D+ such deals. ties need to find a balance of risk
for infrastructure. As such, the and responsibilities.
repair and rebuilding of highways, Balancing Risk P3s require the involvement of
bridges, airports, rail systems and A P3 project can be delivered in large companies that have the exper-
tunnels are the present focus for different ways, including design-build tise, capabilities, capital base and
state and government agencies. (DB), design-build-finance (DBF), surety bonding support to under-
While the U.S. Department of design-build-finance-maintain take these projects. Many large P3
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

Transportation defines P3s as “con-
tractual agreements formed between
a public agency and a private sector
entity that allow for greater private
sector participation in the delivery
and financing of transportation
projects,” the reality is P3s differ
significantly from sector to sector
and from project to project.
Many states are still debating
whether P3s are the right delivery
method for large, complex projects,
though 33 states have passed legis-
lation allowing the use of them for
public projects.
(DBFM) and design-build-finance-
maintain-operate (DBFMO). Each
has one common element: P3
projects pose greater risks for
private contractors.
Contractors, which ultimately
will handle the design and con-
struction, may assume additional
risk exposures in P3 projects
depending on the delivery method
of the P3 and whether it is DB,
DBF, DBFM or DBFOM. By
transferring more risk to the
contractor, it may possibly reduce
public entities’ own financial
projects have been completed with
the involvement of foreign contrac-
tors through their U.S. subsidiaries.
These foreign companies have a large
presence in the United States, as well
as the resources, experience, capa-
bilities and equity to participate in
these P3 projects. P3s are common
in other parts of the world, particu-
larly in Europe, Asia, Latin America
and Canada.
Engaging the surety early in
the process is very important for
a successful financial close and
bonding support.

84
Gaining Support and Financing
It is crucial to understand what
is expected from the partnership.
Preparing bids for P3 projects can
take years and millions of dollars
in investments. Detailed contract
agreements are necessary, and early
involvement of the surety is key.
Support from public officials
is also paramount when it comes
to P3 projects. Public officials
need to be fully on board with the
project because ultimately they
must protect the best interest of
the taxpayers. The public could
very well influence public officials
to terminate negotiations with the
private sector.
Educating the public, as well as
legislatures and state agencies, about
the benefits of P3s is essential for
a successful financial close of a P3
project. Most large-scale transpor-
tation P3 projects are eligible to
participate in the Transportation
Infrastructure and Innovation Act
program (TIFIA loans) and Private
Activity Bonds (PABs).
Recent U.S. P3 transportation
projects were funded through a
combination of public and private
funds (e.g., through TIFIA loans,
PABS and private equity from
investment partners).
Overall, approximately $11
billion in PABs and approximately
$27 billion in TIFIA loans have
been issued to date. In the end,
the availability of funds through
TIFIA, PABs and private funds
will ultimately benefit taxpay-
ers and resolve significant state
budget restrictions for new infra-
structure investments.
There is no one size fits all for
the delivery of a P3 project, but
states certainly can learn from
each other through the process
and past P3 jobs.
Ultimately, a successful P3
requires efforts from public offi-
cials, the public and private sectors,
and state and federal government
agencies.
Martino Sessa is associate vice
president and head of international
reverse flow surety for Nationwide,
New York. For more information,
email martino.sessa@nationwide.com.

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85
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING

The Power of Arbitration:

Five Negotiation Strategies
to Ensure a Better Dispute
Resolution Process
BY MICHAEL R. POWELL

C
ontractors know all too well
how quickly a dispute can
get out of hand and end up
Some would argue that the real
in litigation. Performance success of a project depends on
and payment bonds, change
of work order, delay and the mechanisms in place to deal with
acceleration, critical path method
for scheduling and defects may disputes likely to rise during the
be familiar terms to those in the
construction industry, but a judge
construction phase.
or jury would be hard-pressed to
fully understand them, especially
when experts testify on the stand designed for all case types. Thus, In 2017, an American
with differing interpretations of the the clear advantage in arbitration Arbitration Association survey
disputed items. is that the parties have immense asked construction lawyers how
In comes arbitration, which has power over the proceedings. often their clients are involved in
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

been touted as a private forum to
save money and time in the pursuit
of a final disposition of claims.
However, there are unique arbitral
benefits to the construction indus-
try that are time- and court-tested.
Arbitration is a private process
by design that can be customized
to meet the needs of the parties
and project, unlike court where the
entire proceedings are a matter of
public record.
Parties must follow the rules
of the particular court, which are
Some would argue that the real
success of a project depends on the
mechanisms in place to deal with
disputes likely to rise during the
construction phase.
Whether it is a public, private or
P3 project, conflicts are inevitable,
so contractors should be prepared
to bring dispute avoidance tools to
the table.
Above all, the contractor should
be knowledgeable of any applicable
rules or procedures and participate
in drafting the contract.
the development of a contract’s
dispute resolution provisions. The
answer: Clients were only “signifi-
cantly or always involved in the
process” 30 percent of the time.
So where can a contractor pro-
vide advice and consultation?
Consider subcontractor default
insurance contracts, many of which
contain a standardized arbitration
clause for coverage disputes. Several
points in these types of arbitration
clauses leave the door open for
negotiation and improvement.

86
1. Locale
When an arbitration clause does
not specify where the arbitration
will take place, the parties are
given an opportunity to agree on
the locale. However, to the extent
the parties are unable to agree, the
ADR forum or arbitrator will likely
make that determination.
Therefore, it is important that
the parties specify, pre-dispute,
where the arbitration will take
place. Further, the choice of the
place to arbitrate may be construed
to imply a choice of the applicable
procedural law, which in turn may
affect questions of procedure, court
intervention and enforcement.
2. Qualification of Arbitrators
Unlike court, where parties have no
say in the appointment of their judge,
arbitration clauses can specify that the
arbitrators have a certain type of con-
struction background or expertise.
It’s worth mentioning here that
not all arbitrators are attorneys
or retired judges. Non-attorney
construction industry professionals
serving as arbitrators may seem like
a new phenomenon to those who
entered the construction practice
in the last 10 years. However, AAA
construction panels have included
architects, engineers, general
contractors and subcontractors
for more than 90 years. In fact,
today there are approximately 300
industry professionals on the AAA’s
national construction roster.
3. Duration of Arbitration
Proceedings
A frequent complaint of clients
in an arbitration hearing is that
when they look around the room,
everyone is making money except
them. It may not be enough to
simply rely on the arbitration pro-
cess to provide a speedier method
of resolving disputes.
An emerging trend in arbitra-
tion clause drafting is to include
timelines for the completion of an
arbitration.
However, it is important to
suggest deadlines that are realistic
because failure to meet specified
deadlines could jeopardize the
enforceability of the arbitration
award. The uncertainty pre-dispute
is that the parties do not know
what the scope of a potential claim
may be.
Here, a “time is of the essence”
provision, where the arbitration
hearings shall take place within 90
days of filing and award rendered
within 120 days, may be acceptable
for a small project, but completely
unrealistic for a multi-million-
dollar project.
4. Discovery
Discovery is one of the most
expensive and time-consuming
portions of the arbitration process
and, unbeknownst to many, the
amount and scope of discovery can
be controlled through a clause in
the contract. In addition, the pro-
cess can be limited by agreement
of the parties at any time up to and
including the preliminary hearing.
Under most ADR forum rules,
arbitrators are authorized to direct a
pre-hearing exchange of documents
and witness lists, but the limita-
tions can be unpredictable. In this
instance, the parties may want to
provide for a more tailored discovery
program in their arbitration clause.
5. Confidentiality
While ADR forums and arbitrators
adhere to certain standards concern-
ing the privacy or confidentiality of
the hearings, parties might want to
impose limits on themselves as to
how much information regarding
the dispute may be disclosed outside
the hearing. Except when required
by law, parties to a contract can
contractually limit parties or arbi-
trators from disclosing the existence,
content or results of an arbitration
unless they have the prior written
consent of all parties.
The true power of arbitration lies
in the ability of the participants
to take advantage of all available
strategies and techniques to ensure
the right arbitral process for their
dispute. Whether the parties are in
arbitration or court, the benefits
are only achieved if all the players
know and understand the rules,
policies and procedures.
Contractors also should be mind-
ful that not every dispute requires
legal action or a legal decision.
Interestingly, this might explain
why there is a noticeable increase
in the enrollment of industry
professionals in alternative dispute
resolution training classes. Such
a proactive part on contractors to
better understand dispute resolu-
tion systems will certainly ensure
that they are better prepared to
handle potential disputes.
CONSTRUCTIONEXEC.COM
Michael R. Powell is vice president
of the construction division at the
American Arbitration Association,
Los Angeles, and serves as liaison for
the AAA’s National Construction
Dispute Resolution Committee. For
more information, visit adr.org.
87
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
The Intersection of
Arbitration and the Miller Act
BY ROBERT J. DUKE
T
he Miller Act requires
contractors on federal
construction projects over
a certain threshold to
furnish performance and
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
payment bonds, providing
a remedy to subcontractors and
suppliers on the project to seek
recovery for nonpayment.
Because subcontractors and sup-
pliers cannot assert a lien on federal
property, the Miller Act payment
bond is their sole remedy.
Therefore, the Miller Act is
highly remedial in nature and
“entitled to a liberal construction
and application in order to properly
effectuate the congressional intent
to protect those whose labor and
materials go into public projects,”
88
according to Clifford F. MacEvoy
Co. v. United States (1944.)
However, there are limits embed-
ded in the statute, such as time
limitations, notice requirements and
identification of eligible claimants.
In addition, the operation of the
Miller Act may be affected by the
operation of other federal statutes.
Recent cases illustrate the interplay
between the Miller Act and the
Federal Arbitration Act, which
establishes a framework for the
enforceability of arbitration that
was agreed to by the parties and
is an expression of strong federal
preference for arbitration.
So what happens when the
contractor and subcontractor are
arbitrating a payment dispute
pursuant to the arbitration clause
in the subcontract, and the sub-
contractor also has sued the surety
under the Miller Act? Can the
Miller Act action be stayed until
the resolution of the arbitration,
even in light of the liberal construc-
tion of the Miller Act?
Recent cases addressing this issue
reflect the prioritization of the
Federal Arbitration Act over the
Miller Act.
Recent Cases
In United States ex rel. Debra’s
Glass, Inc. v. The Insurance
Company of the State of
Pennsylvania (June 13, 2018), a
payment dispute arose between the
prime contractor and subcontractor
on a federal project. The prime
contractor invoked the arbitra-
tion clause in the subcontract and
filed a demand for arbitration.
Subsequently, the subcontractor
commenced an action against
the payment bond surety seeking
recovery under the Miller Act. The
surety filed a motion to stay pend-
ing arbitration.
The court noted the long history
of cases in which arbitration (under
the Federal Arbitration Act) was
prioritized over the Miller Act and
stays were granted.
The court also noted the common
questions of fact between the Miller
Act suit and the arbitration and the
risk of inconsistent outcomes. The
court granted the stay through the
completion of the arbitration.
In United States ex rel. Red
Hawk Contracting, Inc. v. MSK
Construction, Inc. (May 8, 2018),
a subcontractor on a federal project
in North Carolina brought claims
against the prime contractor and
Miller Act surety, alleging that
it had not been paid in full. The
prime contractor moved to stay the
action pending arbitration in South
Carolina pursuant to the subcon-
tract’s arbitration clause.
After determining that the
Federal Arbitration Act was appli-
cable, the court concluded that the
dispute fell within the scope of the
arbitration clause and granted a stay
pending arbitration.
With respect to the Miller Act
claim, the court concluded that
determining the surety’s liability
would rely on common issues of
fact to be settled during arbitration.
Therefore, the court concluded that
the stay applied to the Miller Act
claim as well.
In the 2018 case United States ex
rel. Harbor Construction Company,
Inc. v. T.H.R. Enterprises, Inc., a
subcontractor on a federal project
claimed that it was not paid in full.
It commenced an action against the
prime contractor and Miller Act
surety. The prime contractor moved
to compel arbitration pursuant to
the dispute resolution provision
in the subcontract and to stay the
action pending arbitration.
The court granted the motion
to compel arbitration. In consid-
ering the motion to stay, the court
considered whether the Miller
Act claim weighed against it and
noted the long line of decisions
that stayed Miller Act claims
pending arbitration.
The court granted the motion
to stay. However, concerned that
in apparently trying to balance
the remedial nature of the Miller
Act and the policy preference for
arbitration, the court limited the
stay for a period of six months so
that arbitration could not be used
as a delay tactic.
A final example is United States
ex rel. Bay South Limited, Inc. v.
International Fidelity Insurance
Company. In this 2017 case, a sub-
contractor on a federal project sued
the prime contractor and Miller Act
surety alleging that it had not been
paid in full. The contractor and
surety moved to stay the claims,
pending arbitration.
The subcontractor argued that
the arbitration provision in the sub-
contract operated as an improper
waiver to bring a civil action under
the Miller Act.
The court disagreed and con-
cluded that the applicable Miller
Act provision regarding the
enforceability of a waiver does not
restrict arbitration of Miller Act
claims once a suit is filed.
The court also noted that the
legislative history of the provision
was clear that it was not intended
to be a statutory preclusion
of arbitration.
As to whether the Miller Act
claims were within the scope of the
subcontract’s arbitration provisions,
the court concluded that reference
to arbitration being conducted
in accordance with Construction
Industry Arbitration Rules indi-
cated that the arbitrator would
decide the scope or the arbitration
agreement. (The rules give the
arbitrator power to determine his
or her jurisdiction.)
The court granted the motion
to stay the Miller Act claims,
pending arbitration.
Thus, an arbitration clause in
the subcontract will be enforced
in light of the policy preference
for arbitration under the Federal
Arbitration Act. The Miller
Act is for the protection of
subcontractors and supplier and is
construed liberally.
However, there are limits. With
respect to arbitration, courts
typically stay a Miller Act lawsuit
pending the outcome of arbitration.
Note, this is not a waiver of
Miller Act rights, but merely a
means for the parties that agreed
to arbitrate their disputes to do
CONSTRUCTIONEXEC.COM
so, before taking what are often
the same issues regarding payment
to court.
Robert J. Duke is general counsel of
The Surety & Fidelity Association
of America. For more information,
email rduke@surety.org.
89
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING

2018 Directory of
Surety Bonding Professionals
NATIONAL SURETIES

HUDSON INSURANCE COMPANY

Surety for an imperfect world. When
other sureties hesitate, call us.
ACSTAR INSURANCE COMPANY
30 South Rd.
Farmington, CT 06032
Hank Nozko Jr. or Henry Nozko III
p: (860) 415-8400
f: (860) 404-5394
e: nozkojr@acstarins.com or
nozko3@acstarins.com
acstarins.com
American Global is focused on
supporting the insurance, surety and risk
management needs of its clients while
providing added value as a trusted advisor.
AMERICAN GLOBAL LLC
2121 SW 3rd Ave., 5th Floor
Miami, FL 33129
Torre Taylor
p: (305) 351-9154
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
100 William St.
New York, NY 10038
For more than 100 years, CNA Surety
Michael P. Cifone
has been there for our customers,
p: (770) 485-4461
providing solutions and the financial
f: (404) 275-2311
security that lets them focus on what
e: mcifone@hudsoninsgroup.com
they do best. We provide contract and
hudsoninsgroup.com
commercial surety bonds in all 50
states, Canada and Puerto Rico.
CNA SURETY
151 North Franklin St.
Chicago, IL 60606
United States
Bill Waters
p: (312) 822-2334 As the eighth largest surety writer in
e: william.waters@cnasurety.com the United States, IFIC Surety’s lines
cna.com/surety of business include contract,
commercial, subdivision and specialty
offered through a nationwide network
of independent agents.
IFIC SURETY
One Newark Center, 20th Floor
FCCI is a trusted provider of insurance Newark, NJ 07102
and surety bonding for the construction Adrian Oddi
industry. Founded by contractors in p: (973) 776-8740
1959, we have earned the trust of our e: aoddi@ific.com
customers by keeping our promises and ific.com

e: info@americanglobal.com doing what we say we are going to do.

americanglobal.com FCCI INSURANCE GROUP
6300 University Pkwy.
Sarasota, FL 34240
Scott Paice
A leader in the surety industry for more p: (941) 907-2726 Liberty Mutual Surety has the capacity,
than 130 years, offering the kind of e: spaice@fcci-group.com capabilities, and professionals to
capacity, stability and service you can fcci-group.com underwrite all types and sizes of
count on. contractors and corporations worldwide.
CHUBB LIBERTY MUTUAL SURETY
202B Halls Mill Rd. 2200 Renaissance Blvd., Suite 400
Whitehouse Station, NJ 08889 King of Prussia, PA 19406
Kevin Waldron Hudson Insurance Company’s surety Jennifer Kovolski
p: (908) 903-2966 team provides surety bond products for p: (610) 729-1931
e: kwaldron@chubb.com standard contract surety, commercial e: surety@libertymutual.com
chubb.com surety and specialty contract surety. libertymutualsurety.com

90

Merchants Bonding Company focuses
exclusively on surety and fidelity bonding.
Merchants combines more than 80 years
of knowledge and experience with easy
online tools to deliver common-sense
underwriting and first-class service.
MERCHANTS BONDING COMPANY
6700 Westown Pkwy.
West Des Moines, IA 50266
Josh Penwell
p: (515) 243-8171
f: (515) 243-3854
e: jpenwell@merchantsbonding.com
merchantsbonding.com
Nationwide has deep expertise in surety
and specialty liability insurance and an
A.M. Best rating of A+ XV.
NATIONWIDE
7 World Trade Center
250 Greenwich St., 37th Floor
New York, NY 10007
Antonio C. Albanese
p: (212) 329-6984
e: antonio.albanese@nationwide.com
nationwide-mls.com
Old Republic Surety provides surety
solutions for middle market and large
contractors, as well as emerging
contractors. We have a Best’s rating
of “A” and consistently offer creative
underwriting options and superior service
in all 50 states.
OLD REPUBLIC SURETY COMPANY
445 S. Moorland Rd., Suite 200
Brookfield, WI 53005
Alan P. Pavlic
p: (262) 754-8095
f: (262) 797-9454
e: appavlic@orsurety.com
Philadelphia Insurance Companies (PHLY)
is rated “A++ Superior” from A.M. Best
and offers a competitively priced suite of
bonding options for qualified contract and
commercial surety accounts.
PHILADELPHIA INSURANCE COMPANIES
1 Bala Plaza, Suite 100
Bala Cynwyd, PA 19004
p: (800) 873-4552
e: phlysales@phly.com
phly.com
For more than 100 years, Travelers
has enjoyed a rich heritage as a
leader in the surety industry. Travelers
provides a variety of surety products
and services to general and heavy
contractors, construction managers and
subcontractors of all sizes.
TRAVELERS BOND &
SPECIALTY INSURANCE
1 Tower Square
Hartford, CT 06183
Gregg Lyon
p: (860) 954-2416
e: glyon@travelers.com
travelers.com
NATIONAL BROKERS
Offering surety, property and casualty,
and risk management programs designed
specifically for the construction industry.
Offices located throughout Oklahoma,
Texas, Arkansas, Arizona and California.
INSURICA
5100 N. Classen Blvd., Suite 300
Oklahoma City, OK 73118
Dillon Rosenhamer
p: (405) 523-2100
e: dillon.rosenhamer@insurica.com
insurica.com
A subsidiary of Marsh & McLennan
Companies, the largest risk management
firm in the United States, Marsh &
McLennan Agency specializes in
delivering superior employee benefits, risk
management and surety solutions to the
middle market.
MARSH & MCLENNAN AGENCY
5605 Carnegie Blvd., Suite 300
Charlotte, NC 28209
Mid-Atlantic Region
p: (704) 365-6213
mma-midatlantic.com
NHC bonds more projects than any other
agency. Our knowledge and customized
solutions allow us to provide more
options, stronger negotiating power, and
the right terms and conditions to meet our
CONSTRUCTIONEXEC.COM
customers’ needs.
NIELSON, HOOVER & COMPANY
8000 Governors Square Blvd., Suite 101
Miami Lakes, FL 33016
p: (305) 722-2663
f: (305) 558-9650
nielsonbonds.com
91
 SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
2018 Directory of Surety Bonding Professionals
ARIZONA
Offering surety, property and
casualty, and risk management
programs designed specifically for
the construction industry.
INSURICA / MINARD-AMES
INSURANCE SERVICES
East Gateway Center
4646 E. Van Buren St., Suite 200
Phoenix, AZ 85008
Mike Specht
p: (602) 273-1625
e: mike.specht@insurica.com
insurica.com
ARKANSAS
Offering surety, property and
casualty, and risk management
programs designed specifically for
the construction industry.
1501 Mart Dr.
Little Rock, AR 72202
INSURICA RISK SERVICES OF
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
ARKANSAS
Brad Johnson
p: (501) 666-6653
e: brad.johnson@insurica.com
insurica.com
CALIFORNIA
At Gallagher, we wear only one
hat: “The Hard Hat.” Building
surety programs for contractors
is our specialty. We do more than
help protect your business. We
92
STATE LISTINGS
help build it.
GALLAGHER &
COMPANY CONSTRUCTION
PRACTICE GROUP
1255 Battery St., Suite 450
San Francisco, CA 94111
Brian Cooper
p: (415) 288-1620
f: (415) 391-1882
e: brian_cooper@ajg.com
ajg.com/construction
Offering surety, property and
casualty, and risk management
programs designed specifically
for the construction industry.
Additional California offices
located in Lake Isabella, Lindsay,
Livingston, Palmdale, Paso Robles,
Porterville and Tulare.
INSURICA / WALTER
MORTENSEN INSURANCE
8500 Stockdale Hwy., Suite 200
Bakersfield, CA 93311
Ron Burcham
p: (661) 834-6222
ron.burcham@insurica.com
insurica.com
COLORADO
CCIG is based in Greenwood
Village, Colorado, and employs
a team of 95 professionals
delivering a wide range of surety,
business, and personal insurance
products and services.
CCIG
5660 Greenwood Plaza Blvd.,
Suite 500
Greenwood Village, CO 80111
Tom Patton
p: (720) 330-7922
e: tomp@thinkccig.com
thinkccig.com
FLORIDA
NHC bonds more projects than
any other agency. Our knowledge
and customized solutions allow us
to provide more options, stronger
negotiating power, and the right
terms and conditions to meet our
customers’ needs.
NIELSON, HOOVER &
COMPANY
Miami
Nielson, Hoover & Associates
8000 Governors Square Blvd.,
Suite 101
Miami Lakes, FL 33016
Charles J. Nielson
p: (305) 722-2663
e: info@nielsonbonds.com
Orlando
Nielson, Mosholder & Associates
4380 St. Johns Parkway, Suite 110
Sanford, FL 32771
Laura Mosholder
p: (407) 330-3990
e: lmosholder@nielsonbonds.com
Tampa Bay Area
Nielson, Wojtowicz, Neu &
Associates
1000 Central Ave., Suite 200
St. Petersburg, FL 33705
Kevin Wojtowicz, Jack Neu
p: (727) 209-1803
e: kwojtowicz@nielsonbonds.com,
jneu@nielsonbonds.com
Palm Beach
Nielson, Rosenhaus & Associates
220 Congress Park, Suite 100
Delray Beach, FL 33445
Brett Rosenhaus
p: (561) 454-8210
e: brosenhaus@nielsonbonds.com
Pensacola
Nielson, Hoover & Company
810 Scenic Highway, Suite B
Pensacola, FL 32503
Daniel Oaks
p: (850) 912-9940
e: doaks@nielsonbonds.com
nielsonbonds.com
GEORGIA
NHC bonds more projects than
any other agency. Our knowledge
and customized solutions allow us
to provide more options, stronger
negotiating power, and the right
terms and conditions to meet our
customers’ needs.
NIELSON, HOOVER &
COMPANY
Atlanta
Nielson, Ward, Gann & Associates
119 Maple St., Suite 220
Carrollton, GA 30117
Ed Ward, Danny Gann
p: (770) 830-7775
e: eward@nielsonbonds.com,
dgann@nielsonbonds.com
Savannah
Nielson, Blome & Associates
49 Park of Commerce Way,
Unit 202
Savannah, GA 31405
Marilyn A. Blome
p: (912) 233-6260
e: mblome@nielsonbonds.com
nielsonbonds.com
MARYLAND
Centennial Surety is one of the
largest bond specialists in the
region. Through our extensive
bonding network, we can service
contractors of any size.
CENTENNIAL SURETY
ASSOCIATES
251 Najoles Rd., Suite H
Millersville, MD 21108
Michael E. Schendel
p: (410) 888-9110 X205
(301) 725-1855
f: (301) 725-2430
e: mike@centennialsurety.com
Reggie Jarvis
p: (410) 888-9110 X213
e: reggie@centennialsurety.com
centennialsurety.com
MINNESOTA
As a national surety specialist,
Goldleaf Surety provides a wide
range of bonding capacity for all
sizes and classes of work and is
licensed in all 50 states.
GOLDLEAF SURETY
SERVICES, LLC
3246 East Highway 7, Suite 150
P.O. Box 466
Montevideo, MN 56265
Lori Olson
p: (888) 294-6747
f: (320) 226-3154
e: lori@goldleafsurety.com
goldleafsurety.com
NEW JERSEY
A leading insurance, risk
management, and employee
benefits brokerage and consulting
firm. Offers customized
programs designed to align with
organizational goals and drive
bottom line growth.
CONNER STRONG & BUCKELEW
40 Lake Center Executive Park
401 Rte. 73 N.
Marlton, NJ 08053
Travis Shaffer
p: (267) 702-2180
f: (856) 685-2213
e: tshaffer@connerstrong.com
connerstrong.com
NEW YORK
A leading insurance, risk
management, and employee
benefits brokerage and consulting
firm. Offers customized
programs designed to align with
organizational goals and drive
bottom line growth.
CONNER STRONG & BUCKELEW
2 Old Slip, Suite 32B
New York, NY 10005
Travis Shaffer
p: (267) 702-2180
f: (856) 685-2213
e: tshaffer@connerstrong.com
connerstrong.com
NORTH CAROLINA
NHC bonds more projects than
any other agency. Our knowledge
and customized solutions allow us
to provide more options, stronger
negotiating power, and the right
terms and conditions to meet our
customers’ needs.
NIELSON, HOOVER &
COMPANY
Charlotte
Nielson, Colley & Associates
2115 Rexford Road, Suite 310
Charlotte, NC 28211
Art Colley
p: (704) 362-3991
e: acolley@nielsonbonds.com
Asheville
Nielson, Wojtowicz & Associates
66 Elizabeth Place
Asheville, NC 28801
Kevin Wojtowicz
p: (828) 505-7431
e: kwojtowicz@nielsonbonds.com
nielsonbonds.com
OKLAHOMA
Offering surety, property and
casualty, and risk management
programs designed specifically for
the construction industry. Additional
Oklahoma offices located in
Lawton, Norman, and Tulsa.
INSURICA
5100 N. Classen Blvd., Suite 300
Oklahoma City, OK 73118
Dillon Rosenhamer
p: (405) 523-2100
e: dillon.rosenhamer@insurica.com
insurica.com
PENNSYLVANIA
A leading insurance, risk
management, and employee
benefits brokerage and consulting
firm. Offers customized
programs designed to align with
organizational goals and drive
bottom-line growth.
CONNER STRONG & BUCKELEW
Two Liberty Pl.
50 S. 16th St., Suite 3600
Philadelphia, PA 19102
Travis Shaffer
p: (267) 702-2180
f: (856) 685-2213
e: tshaffer@connerstrong.com
connerstrong.com
TEXAS
Offering surety, property and
casualty, and risk management
programs designed specifically
for the construction industry.
Additional Texas offices located
in Amarillo, Arlington, Austin,
Baytown, Houston, Pampa, San
Antonio and Tyler.
INSURICA
2400 N. Glenville Dr., Suite B125
CONSTRUCTIONEXEC.COM
Richardson, TX, 75082
David Winans
p: (469) 443-3488
e: david.winans@insurica.com
insurica.com
93

SPECIAL SECTION:
CONTRACTORS’ GUIDE TO SURETY BONDING
2018 Directory of Surety Bonding Professionals
CPA FIRMS
Castellano, Korenberg & Co. CPAs
specializes in providing audit,
accounting, tax and consulting
services to businesses and
their executives operating in the
construction, manufacturing,
distribution and real estate
industries.
CATELLANO KORENBERG
& CO., CPA
313 West Old Country Rd.
Hicksville, NY 11801
Daniel Castellano
p: (516) 937-9500
e: dcastellano@ck-co.com
castellanokorenberg.com/
One of the nation’s largest
construction accounting practices,
CohnReznick serves contractors
across all major construction
segments helping clients manage
cash flow, capital requirements,
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
bonding, jobsite integrity and
performance benchmarks.
COHNREZNICK LLP
23 Christopher Way
Eatontown, NJ 07724
Jack A. Callahan
p: (732) 578-0700
e: jack.callahan@cohnreznick.com
cohnreznick.com
Our team’s extensive construction
industry expertise provides
specialized financial reporting,
tax planning, consulting and
94
SURETY ADVISORS AND CONSULTANTS
transaction planning services
designed to position clients for
financial success.
ELLIN & TUCKER
400 East Pratt St., Suite 200
Baltimore, MD 21087
Todd Feuerman
p: (410) 727-5735
e: tfeuerman@ellinandtucker.com
ellinandtucker.com
KWC is a team of accountants
and trusted advisors providing
services uniquely tailored to the
construction and specialty trade
contractor industry.
KWC CERTIFIED PUBLIC
ACCOUNTANTS
5270 Shawnee Rd., Suite 250
Alexandria, VA 22312
Jeff Creskoff
p: (703) 642-2700
f: (703) 750-9258
e: jeff.creskoff@kwccpa.com
kwccpa.com
McCarthy & Company, PC, is a
leader in construction accounting.
The firm is well respected by
sureties for providing value-added
services and quality financial
statements.
MCCARTHY & COMPANY, PC
454 Germantown Pike
Lafayette Hill, PA 19444
Marty McCarthy
p: (610) 828-1900
e: marty.mccarthy@mc-cpas.com
mcc-cpas.com
Are You
Workin
approach extends to a broad
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to efficiency, value and client
AIA Contract Documents are the service since 1978.
nearly 200 forms and contracts PECKAR & ABRAMSON, P.C.
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AMERICAN INSTITUTE OF p: (202) 293-8815
ARCHITECTS f: (202) 293-7994
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Washington, DC 20006 pecklaw.com
Monica Devamanoharan
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e: aiacontractdocs@aia.org
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and Servic
DISPUTE RESOLUTION
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surety bond industry, empowers
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Given the complexities of departments with the ability
construction, the need for dispute to respond and issue bonds
resolution may arise. AAA provides immediately.
guidance in preventing, managing eSURETY™
and resolving disputes—setting 101 Marketside Ave.
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procedures in the construction Ponte Vedra, FL 32081
industry for more than 40 years. p: (321) 441-9820
AMERICAN ARBITRATION f: (904) 395-1611
ASSOCIATION e: sales@esurety.net
120 Broadway, 21st Floor esurety.net
New York, NY 10271
p: (212) 716-5800
e: aaaconstruction@adr.org
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 BUSINESS
DEVELOPMENT
How to Win Tomorrow Today
BY ERIC HERDMAN
C
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
onstruction executives are
plagued by an environ-
ment of relentless demands
coming from every direc-
tion—from unpredictable
changes and an email inbox
filling up with other people’s
priorities to clients, customers and
coworkers demanding attention
and resources. It can be exhausting
and stressful.
Construction leaders who want
to win tomorrow need to invest
their time wisely today. Winning
96
tomorrow means gaining control
over daily schedules, completing
the most important tasks (MITs),
becoming more effective leaders
and getting ideal projects at pre-
cisely the right time. It’s having
excellent people on the team doing
the right things, having enough in
the pipeline to retain a consistent
talent pool, showing enough profit
to further invest while supporting
the family and the organization,
and doing it without feeling
overwhelmed.
But staying in the rut of wait-
ing to see what fires flash today
isn’t strategic, nor is it sustainable.
Instead, construction executives
headed toward really winning their
tomorrow must master five skills.
Respond, Don’t React
It’s not enough to let the day
unfold, reacting to schedule
changes, personnel challenges and
new business opportunities without
carefully considering the long-term
ramifications of decisions. Reacting
ABC’s Upcoming Events
FEATURING:
Long Beach, Calif.
2019 National Board Meeting National Craft Championships
March 24–28
ABC Nashville, Tenn. Education for ABC Members Excellence in Construction®
CONVENTION 2020
March 23–27 Professional Development for Awards
Chapter Staff Careers in Construction Awards
Grapevine, Texas
2021 Association Excellence Awards Construction Management
Gaylord Texan
March 7–11 Competition

FEATURING:
Washington, D.C.
2019 National Board Meeting ABC Legal Conference
ABC June 23–27
LEGISLATIVE Legislative Day Diversity and Inclusion
WEEK Washington, D.C. Summit
2020 Congressional Visits
June 14–18
Free Enterprise Alliance Young Professionals
Reception Symposium

CHAPTER 2019
Seattle Forum for ABC chapter staff executives to
PRESIDENTS July 30–Aug. 1 enhance their association management
MANAGEMENT skills, share effective chapter and business
CONFERENCE Minneapolis
2020 practices, and network with peers.
July 28–30

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 BUSINESS
DEVELOPMENT
is spontaneous; it’s without thought
or focus. It’s stressful, and it’s cost-
ing even the best construction firms
time, energy, relationships, person-
nel and control.
Responding is strategic. It’s con-
trolled. It’s smart. It’s focused, and
it helps ensure a targeted outcome.
Responding means setting the
organization’s sights on a specific
niche, an ideal project, an auda-
cious financial goal, a desired level
of excellence for key personnel, or a
premier degree of customer service
or expertise.
Responding entails making deci-
sions with consideration to guide
the entire team toward the defined
destination. Even in a seemingly
unpredictable environment,
responding can create calm focus
for solid decision-making.  The three questions that distin-
Strategically Define and
Communicate a Clear Outcome
A team that chooses the path of least
resistance may not steer the ship
to the right port. Instead, winning
leaders will strategically identify the
desired port, communicate that port
to the team and then let them do
their jobs. Equip them with adequate
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
resources, appropriate training and a
clear destination, and then step aside
so they can do their work. Revisit
often enough to know they are on
course. Then let them use their
expertise, training and experience to
guide that ship to the destination.
A poor result often is a result of a
poorly communicated outcome.
Choose Effective Over Busy
Winning the construction game
means choosing effective (E) tasks
over busy (B) tasks. It’s easy to get
caught up putting out the latest fire
98
Leaders who try to accomplish
everything are likely to
accomplish little.
or greasing the squeakiest wheel.
However, E tasks will generate
the greatest ROI, and B tasks will
generate the greatest stress.
High-performing construction
executives choose E over B because
they are as dialed into where their
time goes as they are to where
their money goes. B tasks can give
a person a short-term feeling of
accomplishment, but they fall short
of getting great results. B tasks
simply create the illusion of getting
things done.  izes on late-day energy spurts.
guish E from B are:
• Is doing this task worth the
time it takes to do it?
• Could this task be delegated to
someone else to either cost less or
to increase that person’s skill set?
• Does this task move the needle
on the progress toward a
strategic goal?
Schedule MITs
The daily to-do list is a leader’s
most important tool and should
include two MITs. Leaders who try
to accomplish everything are likely
to accomplish little. By contrast,
those who focus on two MITs daily
see greater quality results.
The most effective time manag-
ers choose MITs for the following
day during the last 90 minutes
of their workday. This prevents
the early morning anxiety from
tainting their daily planning and
decision-making.
Master Energy and Focus
Contractors that get the most out
of their day learn to master both
their energy and their focus as
they prioritize. An early bird takes
advantage of the quiet morning
hours, grabs a cup of coffee, and
tackles the tasks requiring heavy
cognitive load and tough decision-
making. Emails and returning calls
can be scheduled in lower energy
cycles later in the day. For night
owls, the opposite regimen capital-
Extra effort made to focus on
one task at a time—minimizing
distractions, notifications and
interruptions—elevates productiv-
ity from frantic to full-speed ahead.
That means shutting off the phone,
muting computer notifications,
closing the door and letting voice-
mail do its job. The most powerful,
effective leaders in every industry
know when to disconnect from the
distractions of the rest of the world,
and they do it.
Winning tomorrow today takes
an investment of time, energy and
resources. It doesn’t just happen.
It requires a strategic approach
utilizing high-performing tools to
communicate, plan and focus.
Eric Herdman is a productivity expert
and speaker with Laurie Richards
& Associates. For more information,
email eric@laurierichards.com
or visit facebook.com/groups/
resultsandoutcomesgroup.
ABC Introduces Two New Programs
ABC Introduces Two New Programs
to Simplify Hotel & Housing Needs
to Simplify Hotel & Housing Needs
 LEGAL
Master Agreements Simplify the
Contract Review Process
BY CAITLIN SWEENEY
A
contractor and owner that
work together typically have
their attorneys negotiate
their agreement before a
job starts. When the same
contractor will be hired to
construct multiple projects, the par-
ties can benefit from an agreement
that establishes common terms and
conditions applicable to all work.
This prevents additional contract
negotiations and is where AIA
Master Agreements come in.
The attorneys will review all the
major risk-shifting provisions and
create a baseline (the master agree-
ment) for future projects between
the parties.
This master agreement solidifies
general contract provisions, such as
indemnity, insurance requirements,
waivers of consequential damages,
or stipulations for working with
hazardous materials, that will apply
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
to each work order.
Use of a master agreement plus a
work order creates a contract. This
contracting method allows multiple
scopes of work to be issued quickly
without the attorneys re-negotiating
the contract. Generally, the work
order is straightforward enough that
the parties can complete it them-
selves. It will address the scope of
work, price, time and other project-
specific details.
Most AIA agreements are meant
for use on a single project, and an
100
agreement concludes when the
work has been fully completed and
final payment has been received.
On the contrary, a master agree-
ment is effective for one year and
renews automatically, unless either
party provides 60 days notice of its
intent not to renew.
When a new project comes
around, the parties can simply add
a work order under the umbrella of
the original master agreement. The
master agreement helps contractors
and owners streamline the con-
tract review process and spend less
money on attorney fees.
Owner/Contractor
Master Agreements
A121–2014, Standard Form
of Master Agreement Between
Owner and Contractor, where
work is provided under multiple
work orders, is intended for use
when the contractor’s scope of
work will subsequently be spec-
ified through the use of one or
more work orders. This contract
document only provides the
common terms and conditions
that will be applicable to each
work order. Use of A121 plus a
work order creates a contract that
includes both the terms and the
scope of work.
A121-2014 is coordinated for
use with A221–2014, Work Order
for use with Master Agreement
Between Owner and Contractor,
which provides the contractor’s
scope of work, contract time,
contract sum and other terms per-
tinent to the specific work order. It
is intended for use when the owner
and contractor have entered into
a master agreement setting forth
the common terms and conditions
applicable to all work orders.
A221–2014 is not a standalone
agreement and must be used
in conjunction with a master
agreement.
Contractor/Subcontractor
Agreement
A401-2017, Standard Form of
Agreement Between Contractor
and Subcontractor, establishes the
contractual relationship between
the contractor and subcontractor.
It sets forth the responsibilities
of both parties and lists their
respective obligations, which are
written to parallel AIA Document
A201–2017, General Conditions
of the Contract for Construction,
which A401–2017 incorporates by
reference.
Caitlin Sweeney is a marketing
and education specialist on the
global innovations team at the
American Institute of Architects.
For more information, email
aiacontractdocs@aia.org or visit
aiacontracts.org.
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 COMMUNITY
OUTREACH

Deep Roots, Strong Ties and Big Plans

BY MAGGIE MURPHY

Kinsley Construction
insley Construction, Inc. is a
modern-day master builder
with deep family roots.
Headquartered in Central
Pennsylvania, with offices in
Baltimore and Hagerstown,
Maryland; metro Washington, D.C.;
and Eastern Pennsylvania, the com-
pany works with clients throughout
the Mid-Atlantic region.
Kinsley delivers building solu-
tions through preconstruction,
construction management, general
contracting and design-build ser-
vices, but the firm’s most rewarding Kinsley Construction’s #BuildYork initiative is focused on supporting the city’s revitalization efforts.
line of work is its dedication to
bettering communities.
Kinsley’s commitment to com- through education, training and Employees are encouraged to
munity stemmed from the beliefs health services. Kinsley recently participate in community events
founder Robert (Bob) A. Kinsley implemented a new initiative, and give back when they can. Each
and his wife, Anne Kinsley, prac- #BuildYork, that is focused on year, staff participates in various
ticed since the company’s inception supporting the city’s revitalization organizations’ volunteer days,
in 1963. It has always been a part and honoring the company’s deep National Night Out, American
of the company philosophy to give roots, strong ties and big plans for Red Cross blood drives and more.
back to the communities where its its hometown. Their efforts are recognized in the
employees live and work. Bob and Through the years, Kinsley has internal employee newsletter, social
CONSTRUCTION EXECUTIVE | NOVEMBER 2018

Anne believed that “if the commu-
nity supports you, then you should
support the community”—a message
passed down to their five sons who
now work together to lead Kinsley.
The top two organizations
Kinsley supports regularly are the
United Way and the Appell Center
for the Performing Arts in York,
Pennsylvania. Employees provide
monetary donations as well as vol-
unteer for events like United Way’s
Day of Action.
They also support major
organizations who help people
built strong ties with clients as well
as other businesses and non-profits
in the area. The #BuildYork ini-
tiative is focused on how Kinsley
and its employees can help make a
positive impact in the community,
on and off the jobsite. Employees
support and volunteer for more
than 100 local organizations, which
is something they’re very proud of
and thankful for.
While the #BuildYork initiative
is currently centered on the York
office, Kinsley plans to implement
it company-wide.
media posts and blog posts on the
buildyork.com website.
Kinsley is managed by second-
generation family executives, and
a total of 15 family members are
among the firm’s more than 1,300
employees. Robert Kinsley remains
involved in all aspects of the com-
pany on a daily basis.
Maggie Murphy is digital editor of
Construction Executive. For more
information, email murphy@abc.
org, visit constructionexec.com or
follow @ConstructionMag.

102
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What are the signs of a quality HR manager/department in terms of making
employees feel valued?
GERRY DUFFY
OFFICE MANAGER/HUMAN
RESOURCES
Bowdoin Construction Corp.
Needham Heights, Massachusetts.
A quality human resources depart-
ment begins with basic human
kindness. Employees need to feel
like they belong and that they are
more than a number, a corporate
representative on a jobsite or a body
seated behind a desk.
We endeavor to understand and
empathize with every situation,
realizing that we don’t always know
what an employee has dealt with
before leaving for work or what
they may face when they return
home—all of which can impact job
performance.
CONSTRUCTION EXECUTIVE | NOVEMBER 2018
With an open door policy,
we can better understand each
employee as an individual and
make the necessary accommoda-
tions to see that their needs are met,
whether it’s through an Employee
Assistance Program or just sitting
down for a cup of coffee.
Knowledge also is key as it relates
to health care, benefits, personnel
issues, transitioning into a new
position or onboarding. If we don’t
have an answer, we will find it
even if it takes all day just so our
employees know they are valued.
104
CHARLES D. BATES
DIRECTOR OF HUMAN RESOURCES
MEP Holding Company
Edwards Electrical & Mechanical
E-Solutions
Indianapolis
Knowledge, communication and
integrity are the signs of a quality
HR leader.
Employees are the most import-
ant assets in the company. Having
strong knowledge and understand-
ing of human resources and the
operational functions of the com-
pany shows employees that we are
committed to them, their progress
and their achievements.
It is vital that HR communi-
cates effectively with employees
throughout the organization, from
apprentice to the president. They
want human resources personnel
to be approachable, solid com-
municators who listen carefully to
their questions and concerns, and
provide guidance when needed.
Employees want to be treated
with dignity and respect. If an
investigation was to take place,
human resources should patiently
listen to both sides of the story, uti-
lize the facts while avoiding hearsay
and being discrete. This will build
employee trust and help create a
better work environment.
TEENA HESTER
SENIOR VICE PRESIDENT/HEAD OF
PEOPLE & CULTURE, AMERICAS
Lendlease
Charlotte, North Carolina
While HR does many things that
impact the employee experience
and hopefully make them
feel valued—such as offering
competitive benefits packages,
creating a framework for flexible
working, and helping drive a
culture of diversity and inclusion—
helping our managers be better
managers is at the top of the list
for me.
The people in these leadership
roles are the ones employees look
to for guidance, support, a pat on
the back and to help develop them
for whatever they aspire to be. Also,
there inevitably are times when
business decisions may negatively
impact our employees, and it is
critical to have the right people in
these roles to help employees navi-
gate most effectively.
We have spent a lot of time
coaching our managers on what
they can do to best meet their
employees’ emotional needs. We’ve
put together a toolkit of proven
techniques that our leaders use to
help make their people feel valued
and cared for.
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