Single Insurance Policies that Insure All Parties on a Specific Construction Project Offer Benefits and Risks

With the use of wrap-up insurance policies on the rise for commercial construction projects, many contractors and subcontractors have questions about how these policies work and what unique concerns and questions they present.

Generally, wrap-up insurance refers to single insurance policies written to insure all parties involved in a specific construction project—providing coverage for the job-site risks of the owner, construction manager, general contractor, contractors, subcontractors and design firms—instead of the individual parties each purchasing and carrying their own insurance policies. Wrap-up insurance policies are most commonly used on very large commercial or public projects. Many project owners and general contractors have found that using these policies is an effective risk-management technique for handling loss exposures related to single and multiple-site construction activities.

With wrap-up insurance, the cost and extent of coverage are generally within the owner’s control.

With wrap-up insurance, the cost and extent of coverage are generally within the owner’s control.

Benefits

There are two primary types of wrap-up insurance policies: Owner Controlled Insurance Policies (OCIPs), in which the project owner is the primary sponsor, and Contractor Controlled Insurance Policies (CCIPs), which are controlled by the general contractor. Additionally, owners and general contractors can cover multiple projects under a single program in Rolling Controlled Insurance Policies (RCIPs). Typically, wrap-up insurance policies include general liability, workers’ compensation/employer liability, excess liability and builder’s risk as standard coverages, but many owners also add coverage for project environmental liability and project design team errors and omissions.

The benefits of using wrap-up insurance are numerous, especially for the owners or contractors who sponsor them. A successful wrap-up insurance program can significantly reduce risk for owners or contractors, giving them more control over insurance coverage for all the parties and avoiding unpleasant surprises about the extent of coverage parties have. Under the traditional model, owners or general contractors establish minimum insurance requirements for subcontractors and require them to furnish a certificate of insurance specifying coverage areas and limits. However, because all insurance policy terms differ slightly, there is no guarantee that a given subcontractor’s insurance will be adequate, or still in force, at the time of a loss. Furthermore, contractors and subcontractors normally have to build their insurance costs into their contract costs, and this increases bid amounts.

With wrap-up insurance, the cost and extent of coverage are generally within the owner’s control. When sub-contractors no longer have to increase their bids to factor in insurance costs, owners claim they can utilize the cost savings to fund the costs of the wrap-up insurance. And the potentially more streamlined process for handling claims can make prospective litigation less time-consuming and costly.

Risks

OCIPs and CCIPs, of course, come with their own set of risks and drawbacks for owners, contractors and subcontractors, and the parties who are asked to enroll in these policies do not always look upon them favorably. Some subcontractors and contractors have found that enrolling in wrap-up insurance policies is administratively burdensome and that the resulting decrease in volume of insurance purchases for their companies can increase the costs of other insurance they must purchase. Additionally, subcontractors should make an effort to understand the limits of coverage; it may differ from the coverage in the policies they have been accustomed to using. This should be done at the procurement stage, before a project begins, and not later, after project contracts have been signed.

Those investigating the level and limits of coverage will want to determine how responsibility for any injuries, losses or damage will be addressed and confirm that the responsibility is outlined in the building contract or the written wrap-up policy. One potential source of misunderstanding is builder’s risk coverage. Often, builder’s risk insurance is carried by the builder. With wrap-up policies, owners and general contractors may be particularly concerned with the scope of the builder’s risk coverage. For example, if a wrap-up policy excludes property damage occurring during construction but the builder’s risk policy excludes faulty workmanship, a potential gap in coverage would exist. The wrap-up insurer might take the position that it won’t pay for what is essentially a builder’s risk claim. To prevent such an outcome, owners may find they need to add coverage to the builder’s risk policy to cover faulty work or at least repairs.

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Emerging Trends in New LLC Acts

Although the Limited Liability Company (LLC) is still a relatively new form of unincorporated business structure, LLCs are now outpacing newly formed corporate filings in most states and are quickly becoming the predominate form of new business entities across the country. The appeal of the LLC is obvious; it combines the corporate- style limited-liability benefits to its owners with the pass-through taxation benefits of partnerships. With these benefits, it is no surprise that contractors across the country are now choosing LLCs in lieu of corporations or partnerships when selecting their business structure.

Every state has now adopted an LLC act, but these acts vary significantly from state to state. Despite the growing popularity of the LLC structure, many states are still operating under old acts implemented more than 20 years ago, and many of these acts have not been significantly revised. Instead, they have been amended on an as-needed basis in an attempt to keep up with emerging LLC developments and case law. This has created piecemeal and disorganized acts governing LLCs.

To solve these problems, states across the country have been extensively revising their LLC acts or implementing completely new acts. Currently, 11 states and the District of Columbia have formally enacted new LLC acts based on the Revised Uniform Limited Liability Company Act (RULLCA). These states include Alabama, California, Florida, Idaho, Iowa, Minnesota, Nebraska, New Jersey, South Dakota, Utah and Wyoming. In addition, South Carolina has been considering adopting the RULLCA. Other states, like North Carolina, which hasn’t officially adopted the RULLCA, have enacted new LLC acts and looked to states that had already adopted the RULLCA for guidance.

These new LLC acts are reshaping the LLC landscape. Contractors of existing LLCs and those wanting to form LLCs should be aware of the potential impact changes to their state’s LLC act can have on their company. Contractors need to be aware that the LLC act they initially filed under—and have been operating under—may now be significantly different or may no longer even be applicable. Failing to review newly revised or implemented acts may lead to unintended or adverse consequences, especially in states that are already operating under a new LLC act.

While a state-by-state analysis of new LLC acts is beyond the scope of this article, there are several trends emerging from states that have already enacted new LLC acts. These trends may soon be universally applicable and it is beneficial for the contractor operating or considering an LLC to be aware of them.

The Operating Agreement

Arguably, one of the most significant and widespread trends emerging from the new LLC acts is that many of the acts are eliminating the requirement that the operating agreement be in writing. Under many of the old LLC acts, an operating agreement was commonly defined as a written agreement between its members. Under many of the new acts, however, an operating agreement can now be a written, oral or implied agreement between its members. This is a broader definition of what qualifies as an operating agreement and essentially allows any type of agreement between members to become part of the operating agreement governing the LLC.

Although this change provides greater flexibility within the business because companies no longer need to adhere to a strict operating-agreement structure requirement, it also opens the door for increased internal litigation. Under these new LLC acts, internal disputes among members are likely to increase when operating-agreement terms are ambiguous or when members claim there was an oral or implied operating agreement.

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To Lease or Buy Equipment

As the economy continues to improve, more construction businesses are making capital investments to fuel their growth. When business owners and managers consider acquiring equipment, they often think of their payment option as a “lease versus buy” decision. In any economic environment, when preserving owner or shareholder capital is an important goal, financing equipment through a lease or loan will enable your business to preserve its cash.

Whether you finance equipment through a lease or loan, each has its advantages. In evaluating your options, it is important to look at each alternative to determine which will best balance usage, cash flow and your financial objectives. To help determine the most appropriate option, consider the following questions:

1. How long will the equipment be required?

Generally speaking, if the length of time the equipment is expected to be used is short term (36 months or less), leasing is likely the preferable option. Equipment expected to be used for longer than three years could be a candidate for a lease or a loan.

2. What is the monthly budget for the equipment?

As with any ongoing business expense, consider the monthly cost for a piece of equipment and how it fits into your budget. In general, leasing will provide lower monthly payments.

3. Will the equipment become obsolete while it is still needed for the operation?

Protection against obsolescence is one of the many benefits of equipment leasing because the risk of obsolescence is assumed by the lessor. Certain lease financing programs allow for technology upgrades and/or replacement within the term of the lease contract.

4. Is the equipment going to be used for a specific contract or can it be used for other projects?

Often, the business objective of equipment is for it to be revenue-producing. If a piece of equipment has limited use within a specific contract and won’t be used for other projects, it’s not ideal for it to be idle while you continue to make payments on it. It makes sense to stop the equipment expense when the income from it ceases, which you can do with a lease.

5. How much cash would be required upfront for a lease and for a loan?

Leasing can often provide 100 percent financing of the cost of the equipment, as well as the costs for transportation, delivery, installation set-up, testing and training, and other deferred costs (sales tax). Loans usually require a down payment and don’t include the other cost benefits. Ask how much of a down payment is needed and assess the availability and desirability of allocating company capital for that down payment.

6. Can the company use the depreciation or would the company get a greater benefit from expensing the lease payments?

The tax treatment of the financing arrangement is an important consideration in choosing between a lease and a loan. A loan provides you with the depreciation tax benefit; with a lease, the lessor owns the equipment and realizes the tax benefit, which is usually reflected in a lower monthly rent payment for your business, as well as the ability to expense the payment.

In many instances, if your business cannot use the tax benefit, it makes more sense to lease than to purchase through a loan because you can trade the depreciation to the lessor in exchange for better cash flow.

7. How will a working capital facility be impacted?

Many businesses have an aggregate line of credit through a bank that they can use for inventory purchases, improvements and other capital expenditures.

Depending on the lending covenants, it is often possible, as well as preferable, to preserve your bank working capital by leasing equipment through an equipment finance provider.

8. How flexible does your business want the financing terms to be?

A lease can provide greater flexibility because it can be structured for a variety of contingencies, whereas, with a loan, flexibility is subject to the lender’s rules.

If your business has continuing use for the equipment at lease termination, extended rentals, purchase options, trade-ups and return options are available. The lease term allows your business to match all expenses to the term of the equipment’s use, including income-tax expense, book expense and cash expense. Most importantly, as mentioned previously, the expense stops when the equipment is no longer required.

With the current low-interest-rate environment, now is a good time to finance equipment, in general, through a lease or loan. Again, the benefits of the type of financing is dependent on a number of variables and not necessarily the economics alone.

9. Do you anticipate the need for additional equipment under your financing agreement?

If your business is planning for growth, you can enter into a master lease that will allow you to acquire multiple pieces of equipment under multiple schedules with the same basic terms and conditions. This provides greater convenience and flexibility than a conditional loan contract, which must be renegotiated for additional equipment acquisitions.

10. Who can help me evaluate what’s best for my business?

Whether you finance equipment through a lease or loan, each has its advantages. When making the decision between a lease and a loan, it is highly recommended you consult with your accounting professional, as well as draw on the resources of your equipment financing provider, to enable you to secure the best possible terms for your lease and/or loan.

These are some of the key considerations that should go into the lease versus loan decision-making process. Find a lease/loan comparison and online tools.

Asking Many Questions Helps Property Managers Prepare Reroofing Budgets

Property managers are challenged with three basic decisions for their existing roof systems: Should they repair, maintain or replace their roof system? The proper execution of each phase of the roof condition will determine the longevity of a roof system. Every roof is different and requires detailed evaluation and analysis for budgeting and decision-making purposes.

The bottom line is: What is your desired outcome for your roof and what is your budget? How can you extend the life of your roofing asset and reduce the cost of ownership?

For the purpose of this discussion, we’ll focus on reroofing.

UNDERSTAND YOUR OPTIONS

If you decide to replace your roof, you have to analyze the expense of a new roof, as well as the total investment cost during the lifespan of the roof. Ask yourself these questions and work with your roofing contractor to better understand all options.

    ▪▪ What’s best for my roof, climate and budget?
    ▪▪ What do I want from my roof, other than no roof leaks?
    ▪▪ Should I prepare a one-year budget or a multi-year budget?
    ▪▪ Do I want energy-efficient solutions (improved R-values), daylighting solutions (reduce my electric bills, qualify for energy rebates) and/or safety enhancements (meet or exceed OSHA standards)?
    ▪▪ What operation, service or product is underneath my roof? Product and installation decisions are made differently for roofs over food-processing plants, semiconductor plants or hospitals, for example.
    ▪▪ What three things are most important for my new roof, other than price? (Roofing materials, manufacturer of product, weather, pollution, warranty, maintenance, aesthetics, contractor’s safety requirements, return on investment, energy efficiency, roof traffic or other concerns, for example.)
    ▪▪ What is the value of the roof system as a long-term cost of ownership and not just based on initial price?
    ▪▪ Can we reduce the capital budget by removing expensible items, such as labor for the removal of the existing roof and the cost for disposal of the old roofing materials?

DO YOUR RESEARCH

Work with your roofing contractor to prepare a comprehensive plan for reroofing. The National Roofing Contractors Association and Building Owners and Managers Association International also are excellent resources.

Have your contractor review the best options for your building related to insulation type and amount; drainage condition and requirements; roofing membrane type/thickness; and safety requirements, such as roof hatches, guard rails, skylight screens and walk pads. Look at the slope of the roof to avoid standing-water problems. Are your gutters, downspouts and drains properly sized for adequate water drainage?

Budget numbers should be based on actual costs using measurement tools and Roof Life Index (RLI) tools. When budgeting for a capital project, there can be changes between the time the budget is set and when the project is installed. Materials and/or labor prices can increase. Damage to a roof can increase due to age, weather or other circumstances. Work with your contractor to lock in pricing for repair work during the interim months until the reroofing project begins.

Consider a thermal scan to define the extent of any compromised insulation.

Review local and national building codes for R-value and wind-uplift requirements. Check with your insurance carrier to determine whether the roof replacement system meets its requirements for roof assemblies.

It takes research, planning and capital to install a new roof system. Your roofing contractor is an excellent partner in reviewing your roofing needs, your budget considerations and maximizing the investment in your roofing asset.

Do Your Past Commercial Projects Qualify for an Unused Tax Deduction?

IRS Section 179D has permitted qualifying buildings to receive tax deductions for energy efficiency since 2006. In general, roofing professionals have been unaware of this tax break and, as a result, have not taken advantage of it. Here’s a look at the 179D tax deduction, some reasons why it has been overlooked, and, most importantly, whether there is still time for you or your clients to retroactively claim Section 179D.

WHAT IS 179D?

Enacted under the Energy Policy Act of 2005, Congress added Section 179D as an “energy efficient commercial building deduction”. It was intended to serve as an incentive for the public and private sector to build energy-efficient buildings. Overall, the provision allows for a tax deduction of up to $1.80 per square foot for buildings that meet certain energy-usage reduction criteria. More importantly, the section allows for a “partial deduction” of $0.60 per square foot for three individual categories: interior lighting; HVAC and hot-water systems; and building envelope, including the roof.

A variety of different factors go into determining whether the roof system will meet the energy-savings criteria. In the northern climate zones, roofing systems with increased insulation values, as well as vegetative roofing systems, are going to have potential to exceed the energy-saving criteria of 179D. In southern climate zones (which typically include Florida, Texas and southern portions of Alabama, Arizona, Arkansas, California, Georgia, Louisiana, Mississippi, Oklahoma and New Mexico), cool roofs and insulated systems typically are good candidates to qualify for the energy-saving targets established in 179D. So why have relatively few roofing contractors made use of the provision? At least part of the answer has to do with how the provision was introduced and the lack of expertise available at the time to provide the necessary third-party verification.

For a building envelope to qualify for the deduction, the IRS requires a software simulation to model the annual energy cost savings for the building compared to a theoretical reference building. This study has to be completed and inspected by an independent engineer. However, when the tax provision was initially enacted in 2006, there wasn’t a single firm in the nation that was structured to offer this IRS-required service.

To make the tax incentive more accessible, the IRS developed a simplified “energy analysis,” referred to as the “Interim Rule” for partially qualifying lighting improvements. This adjustment proved effective for the lighting industry whose contractors and engineers quickly developed the necessary verification services to demonstrate compliance with the provision’s requirements.

While lighting contractors benefitted from the new tax code, contractors who worked on the building envelope were left outside. When Section 179D was introduced, the building envelope had to produce a nearly 17 percent reduction of combined energy use from the building’s HVAC and lighting systems. This proved to be a difficult target and, in 2008, the IRS issued a notice that reduced the requirements to 10 percent with the hope of stimulating use of the 179D incentive in the building envelope industries.

WHAT DOES THIS MEAN?

Once the lower 10 percent threshold was permitted by the IRS, engineers and tax specialists recognized the benefits that had been available to other industries were now accessible to roofing contractors. While a few roofing companies have benefitted from millions of dollars in tax savings through Section 179D, many millions of dollars remain unclaimed by roofing companies that have installed new roof systems.

Private and government buildings that meet the criteria are eligible for the tax incentive. To date, most of the tax deductions have originated from government-owned buildings. Congress recognized that government entities cannot themselves benefit from tax deductions, so they allowed the deductions to be allocated to the designer or contractor of the energy-efficient system.

RETROACTIVE OPPORTUNITY

The provisions for Section 179D were in effect from 2006 through the end of 2013. Congress approved extensions in 2006 and then again in 2008 and there is bipartisan support to continue the extension through 2015 at least, although legislation to do so is still pending. (See “The Future of Section 17D”, below.) This means current and future qualifying projects seem likely to be eligible to claim this tax break.

Here’s the important part: For work completed before 2014, there is still an opportunity to claim the tax break but time is running out.

For public projects, a study can be performed for pre-2014 projects to see if you can receive the government-allocated deduction. However, the IRS only allows you to amend open tax years, generally three years from the filing date, so it is better not to wait.

For private projects, the building owner can claim deductions in the current tax year, meaning no amendment is necessary for eligible buildings all the way back to 2006. While you may not directly benefit from this tax deduction, it can be useful information for your commercial clients and may help with bidding future projects, assuming the tax deduction is extended.

The Section 179D tax deduction has been historically underused by roofing contractors. To change this, the IRS has modified the requirements to make it more viable. Also, the industry now has the third-party engineering firms required to verify eligibility. Bottom line: There are still opportunities for contractors who have performed energy-saving roof installations to realize significant tax savings.

THE FUTURE OF SECTION 179D

Section 179D is included in the Senate Finance Committee’s EXPIRE Bill. It includes a two-year extension, as well as expands the deduction to the designers of nonprofits. The House Ways and Means Committee held a series of hearings about tax extenders this year. Chairman Camp of Ways and Means had indicated it was unlikely he would extend as many provisions as the Senate EXPIRE Bill. To help support Section 179D, review a Suggested Letter written by Energy Tax Savers Inc., a provider of Energy Policy Act tax services. You can personalize and send the letter to your representatives and members of the Senate Finance and House Ways and Means committees, as well as tweet your support with suggested Twitter handles and hashtags.

Local Branding Can Trump National Competitors

The marketing game can certainly be complex. With hundreds of tools, thousands of options and one big learning curve in between, it’s easy to be inundated.

Throw in some big conglomerate-sized competitors and it’s downright daunting.

Nevertheless, local contractors actually have an advantage. They are in an incredible position to build the very best of brands. All they need to do is start!

SEE THE OPPORTUNITY: A BIG BRAND

Why do people choose big-name brands over competitors? Because they know what to expect.

The bar is set pretty low for blowing customers out of the water with service, quality and efficiency. However, when you can create a truly great customer experience, people will remember it. Customers tend to expect greatness to come from those companies that put forth an appealing and professional image. Their branding gets remembered. And the brands that get remembered are usually the ones that succeed.

A major flaw that many small businesses and contractors fail to recognize is that their brand is not memorable. Maybe they use initials for their company name or have bland truck-wrap designs. Maybe their website looks like it was made in 1995 or their brochure is full of grammatical errors. Whatever the case may be, there is always room for improvement.

A big brand excites and reassures. It doesn’t lead to skepticism or distrust. You can beat out the bigger companies when it comes to delivering personable, reliable and memorable service in your community. You just need to get your visual presence to reflect that.

So how do you make that happen?

PROFESSIONAL LOOK, PERSONAL FEEL

Customers want a service that’s human and personalized. But they also want an outfit that looks the part. The challenge is how to blend the two.

If you think aspects of your service, like tidy uniforms, clean service equipment and a slick-looking company truck, don’t matter, you’re severely missing out. Thoughtful service can help get your company’s reputation in good standing. Yet it’s only when you’ve got a brand that matches your high-quality service that you can expect to crush the competition.

Put customer woes to bed by taking hold of your brand and getting a professionally designed logo. The degree of aesthetic quality and industry-appropriate imagery will position your name as an immediate authority.

UPDATED AND INTEGRATED

Does your website and digital presence reflect your most current services and information? In 2014, this is a must!

You lose customers when you default on your brand promise by providing misleading information or not living up to expectations. Ignorance of an error is no excuse; customers will be disappointed and frustrated when certain expectations are not met. This is business.

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A Roofer’s Guide to Safely Navigating an OSHA Inspection

Almost every American can recite his or her Miranda rights. We have all seen enough cop dramas and world’s wildest police chases on prime-time television to know that when the police, FBI or other law-enforcement agencies get involved that we have the right to remain silent, and we know that everything we say can and will be used against us in a court of law. Unfortunately, many roofing contractors in the construction industry do not remember their rights when an OSHA inspector arrives at their job sites, and this can lead to hefty fines. It is very important for residential and commercial roofing contractors to remember OSHA inspectors are adversaries when they visit your job site, and they are not inspecting your equipment and interviewing the crew out of curiosity. When an OSHA inspector arrives onsite, he or she is usually there to gather evidence to issue a citation.

One of the most discouraging situations that we have seen from OSHA’s recent push for larger fines and more citations occurs when honest men and women in the roofing industry open their arms to OSHA inspectors who arrive at the job. Roofing contractors and their crews are not criminals, and most truly have nothing to hide. The majority of contractors in the industry are hesitant to take a firm stance against an apparently well-to-do government agent on their job site. However, a roofer who opens up and allows OSHA inspectors free and unlimited access to a construction site is making a costly mistake. Therefore, it is important to remember that when OSHA visits on your next project, there are a few key questions that every roofing contractor needs to be able to answer about the inspection.

WHY IS OSHA ON MY JOB SITE?

OSHA will investigate a job site for a number of reasons. Inspectors will show up if an employee has issued a complaint against you, if there is a recent fatality or if there is an imminent threat identified. However, in recent months, OSHA has been after
the residential and commercial roofing industry through a systematic targeting method. The dangers of fall-related injuries in the industry have been well-documented, and this has prompted inspectors in your area to be on the lookout for roofers. Additionally, roofers are the easiest to cite due to the fact that roofing is a highly visible construction trade and an inspector does not have to use much effort to determine the likelihood of a dangerous situation that needs inspecting.

DO I HAVE TO COMPLY? HOW SHOULD I COMPLY? WHAT HAPPENS IF I REFUSE OSHA ACCESS?

First and foremost, you need to know that OSHA has a legal right to inspect your job site. OSHA has what is called “administrative probable cause” to inspect and investigate your project. OSHA’s probable cause is more easily obtained than that of other agencies. An officer of city, state or federal law enforcement needs a much more specific probable cause to enter a private citizen’s property. When an active construction job is taking place, there is an inherent risk of danger and injury, and this gives OSHA all the administrative probable cause it needs.

This is not to say that you or your site superintendent does not have the right to deny OSHA access to the project and demand that the inspector get a warrant. The site superintendent has the option to consent to OSHA’s inspection or deny the inspector access to the project. The superintendent is well within his or her rights to tell the inspector to get a warrant. This is not an easy fix, however. If you tell OSHA to get a warrant, it most certainly will. Because of OSHA’s broad power to oversee safety within the U.S., the agency can obtain a warrant from a judge or magistrate. Once OSHA obtains a warrant for a site inspection, its inspection can become much more invasive. This means OSHA inspectors can get permission from a judge to examine documents; conduct extensive interviews; and also perform scientific tests on items, such as air quality, presence of combustible material or any other danger.

The bottom line is that it is rarely a good idea to tell an OSHA compliance officer to get a warrant. The reasoning behind this has to do with the scope of OSHA’s inspection rights under the Code of Federal Regulations (CFR). The CFR demands that OSHA’s inspection be “reasonable.” This essentially means that the agency is limited to inspect only the men, equipment and materials that are within “plain sight.” “Plain sight” is a doctrine borrowed from criminal law and the Fourth Amendment, which says that a government agent may not sample or manipulate anything that is not within his or her reasonable line of sight. If an agent violates this doctrine, it is possible all the information he or she obtained during the inspection may be suspect.

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Forum-selection Clauses and Their Impact on the Construction Industry

With the national housing market poised for slow but steady growth in 2014, U.S. contractors expect a good year for business, and the number of contracts and subcontracts for construction work is expected to increase. Many of these contracts will contain forum-selection clauses, and a recent U.S. Supreme Court ruling brings to light the importance of these clauses and coming changes in their enforceability.

WHAT IS A FORUM-SELECTION CLAUSE?

A forum-selection clause is a contractual provision in which the parties establish the place for specified litigation between them. These clauses have become increasingly common in construction contracts, particularly with general contractors who do business in two or more states. Often, general contractors have a form subcontract agreement they require or ask all subcontractors on a particular project to sign. If general contractors work in multiple states, forum-selection clauses can help them make potential litigation less costly and easier to manage by guaranteeing the litigation will take place in the company’s home state, where its executives and attorneys likely work.

An example is a general contractor based in New York but working on a North Carolina project and entering into a roofing subcontract with a North Carolina roofer. The general contractor can present the subcontractor with a forum-selection clause mandating any legal claims arising from the subcontract may only be brought in a New York court. For a North Carolina contractor, finding counsel and filing suit in New York will likely be more difficult and costly than doing so in North Carolina, especially when evidence and witnesses are located in North Carolina. In this example, the forum-selection clause makes litigation more predictable and cost-effective for the general contractor and also decreases the likelihood the subcontractor will actually be able to sue, so it most likely favors the general contractor.

To protect local contractors, many state laws have declared out-of-state forum-selection clauses unenforceable in construction contracts. These states include Arizona, California, Connecticut, Florida, Illinois, Louisiana, Minnesota, Montana, Nevada, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Utah, Virginia and Wisconsin. Additionally, state laws in Nebraska, Rhode Island, South Carolina and Texas make forum-selection clauses unenforceable in certain circumstances that sometimes, but do not necessarily, encompass construction contracts. In the first category of states, local contractors have been able to file suit locally despite forum-selection clauses because courts in these states can apply the state laws and disregard the clauses. However, the U.S. Supreme Court’s recent decision on these clauses will severely limit the reach of these laws and will ensure that forum-selection clauses are enforced in many more cases.

CASE BACKGROUND

In December 2013, the U.S. Supreme Court issued a unanimous decision in the case of Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas. The court held that defendants in federal court can use forum-selection clauses to transfer their cases to the state specified in the clause, even if the suit is brought in a state with a law deeming these clauses unenforceable. Essentially, forum-selection clauses may be enforced by a venue transfer motion.

The case involved Atlantic Marine Construction (AMC) Co., a general contractor based in Virginia. AMC won a federal contract from the U.S. Army Corps of Engineers to construct a building at Fort Hood, Texas. AMC subcontracted with J-Crew Management, a local Texas company, to perform some of the work. AMC’s contract, which J-Crew Management signed, included a forum- selection clause dictating that any legal disputes between AMC and J-Crew Management arising from the contract had to be brought in state or federal court in Norfolk, Va.

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Improve Your Relationship with Condo Associations

Is your roofing company struggling to make ends meet, or are you searching for new ways to make your company thrive? I think at some time in every business owner’s career they come to a point where they realize that just being “good” isn’t good enough in today’s competitive marketplace unless your service or product is truly niche.

In the roofing industry, let’s be honest, there are quite a few of us out there. In my neck of the woods it’s not difficult to find two-dozen or more competitors. This is why my firm has to come up with ways to set ourselves apart from the pack. One of the best ways to do this is by improving our business relationship with condominium associations and board members, as well as property managers. These relationships have led to us not only being the first contractor called when there’s a problem at a building, but we also have received a number of referrals.

There are many ways to build relationships with condo associations and management companies, and I can almost guarantee that if you do it right your company will see gains like never before.

Network

To get your foot in the door, search the Internet for “condo management associations”. In my area of southwest Florida, the Falls Church, Va.-based Community Associations Institute is active. We joined the group and attend its chapters’ networking events. Groups like these are where condo managers decide on their “favorite” contractors. They talk to each other; “word of mouth” is a huge marketing tool. If you want to be on their minds, you need to be on their invitation list for these meetings. Once these relationships are built, managers won’t be looking for cheap bids anymore. You put yourself closer to the driver’s seat for potential negotiations.

If you personally don’t have a profile on LinkedIn, you’re missing a HUGE opportunity to network on America’s largest social-networking platform for professionals. Join LinkedIn for free and, if you own a company, be sure to build your company page, too. Then search for groups in your state or city that relate to property managers or condo associations. Most importantly, don’t just be a fly on the wall in these groups. Comment on other members’ posts and share your knowledge. This is how you add value and what makes your company unique. Being active online will increase activity toward your website; by the way, you should have a website worth sharing.

Don’t Sell; Educate

When joining these groups, don’t just sell yourself or your company because people are tired of being sold. Instead of touting how great your company is to every property manager you meet, try finding out their pain-points and objections and then educate them about how your services will make life easier for them. This is HUGE!

We recently asked approximately 50 building managers via email what frustrated them the most in dealing with contractors. We received informative answers that will help our business. Consider the following frustrations building managers cited:

  • Long response times: 25 percent
  • Taking too long to perform tasks: 25 percent
  • Not returning phone calls: 25 percent
  • Not following HOA rules/regulations: 15 percent
  • Dirty contractors and vehicles: 10 percent

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Four Tips for Great Leadership

In the past three and a half years, Saratoga Roofing & Construction of Oklahoma City has grown from $6.5 million in annual revenue and four employees to a company earning $50 million with 265 employees. To what do we attribute this phenomenal growth? Great leadership.

It has been said: “A good leader inspires people to have confidence in the leader. A great leader inspires people to have confidence in themselves.” Being a great leader takes commitment, confidence and clarity. The old-school method of employing scare tactics—“If you don’t do what I tell you to do, then there’s the door!”—doesn’t cut it anymore in today’s business world. Besides, if you still subscribe to the “It’s my way or the highway” way of thinking, you’re going to alienate everyone who works in your company or organization and nothing will be accomplished. During my career, I have experienced owners and/or leaders who used authoritarian leadership and, in my opinion, they will not make it during the next decade.

Denver Green, Saratoga Roofing & Construction’s president, shares four reasons why Saratoga will continue to be a successful company during the next decade:

1) We continuously work to set a clear direction for our teams. Clarity will always lead to desired results. If you aren’t clear about where you’re going, do you think your team will be? As a leader, my role is to be the visionary who paints the picture for them to follow. If our leaders aren’t clear about the necessary steps our staff needs to accomplish goal, then a lot of time is going to be wasted running around in circles. Our consultant, Masterthink, ensures every company executive has a clear goal with action plans tied to dates and people who are accountable for executing the goal. If needed, we draw a roadmap on paper outlining the full process, starting with the objective and detailing what each person is responsible to complete. The better your directions are, the easier it will be to meet the goal.

2) I work hard to make sure my actions match my intentions and visions. As the leader, I always need to know what I envision being the final outcome of the project/task we’re asking our employees to execute. Do you want to “wow” a client with an exceptional product presentation? Can you see the final project completed? What does it look like to you? Are you excited about this task? The level of my commitment and enthusiasm needs to come across loud and clear to our team. If I’m “ho hum” about the outcome, then guess what? That’s the attitude that will be adopted by members of my team. Some of us are “big picture” thinkers. We forget about all the details that lead to the big picture, but as the leader of Saratoga, I can’t allow myself to let those last-minute details slide. If I do, then the final outcome will definitely not be to our liking.

3) Creating a cohesive team has been a real key to our success but also a big challenge. I must have confidence in my team and their abilities. Knowing who fits in where on our team is crucial to creating success. We know it is critical to assign the “right” people to the “right” tasks. If one of our employees doesn’t like dispatching but loves to work on data entry, then we assign him or her that job. Knowing the strengths of each member of our team is crucial in achieving a successful end result. Forcing someone to take on duties he or she absolutely hates creates resentment, and resentment slows down the entire project or leads to poor performance. Our company utilizes the online assessment tool StrengthsFinder as a means to understand
the strengths of our employees so we can maximize their abilities and strengths to the fullest extent.

4) Work smarter, not harder. I know we have heard this phrase a million times, but it bears repeating. Learning to delegate the workload to the right person will lift some of the weight of turning in a top-notch end result off your own shoulders. My role is to be the visionary—not the micro-manager. I model what it means to be a leader and a follower and, in turn, I take great pride in inspiring and creating great leaders for the future.

As a member of the Saratoga Roofing & Construction team, I can truly say this is the “Saratoga Difference”.