GOVCON GIANTS PODCAST MICROSOFT OFFICE USER

Eric Coffie: 00:00 Episode number 17,

Alex Hernandez: 00:01 Working hard and, and really our company, I, I think you'd ask any one of my employees and they will tell you that historically they've know that I always worked harder than them. So, you kind of lead from the front, you know, because people take that cue off of you and they know and it, and it sort of drives the business. I mean, look, they're not going to work. They're not all owners in the business. So, at some level, you know, they're not going to work as hard as you, but at least it does help drive them cause they know you're not out fishing on a Friday while everyone else is back at the office working. I mean, they know you worked all weekend and, and they, and they know that they're, you know, they're succeeding and they're growing because their health and do that. And so, I think that to me has been a big difference.

Speaker 3: 00:40 Welcome to the Govcon Giants podcast, federal contracting for people on the outside. Looking at if you are here to learn how to win a piece of a pie without getting your face smashed in, then you've tuned in to the right place. Now the giant that not only walks the walk but talks the talk your host Eric Coffie.

Eric Coffie: 00:59 Welcome to the Govcon Giants podcast. I'm your host Eric Coffie. If this is your first time joining us, thank you for listening. Every Tuesday we feature an interview with a world-class person who helps to serve our war fighting efforts in the federal arena via contracting procurement, supplier or industry leader. Make sure to subscribe for regular updates and you can see all the show notes from this episode and past at our website, govcongiants.com/podcast and now today we bring you Mr. Alex Hernandez. Alex Hernandez founded Hernandez consulting & construction in 2005 and currently serves as the CEO and chairman of the board, Hernandez consulting construction as a project management firm and general contractor specializing in design, construction, design build, and real estate development. Under Alex's leadership, the firm has grown exponentially and now actively operates in a large portion of the United States. The firm has been named to the INC 500, 5,000 list six times and Alex was named Louisiana's 2017 Small Business Person of the Year. Prior to serving as Hernandez consulting instruction.

GOVCON GIANTS PODCAST MICROSOFT OFFICE USER

Eric Coffie: 02:01 He was an executive at city group where he worked in the areas of global operations and infrastructure. Alex began his career as a Captain in the US Marine Corps, specializing in logistics operations. He sat on the board of directors for the Veterans Services of America and Tulane Alumni Association. He's also managing part of the New Orleans Redevelopment Fund and Albert Architecture. He holds both a BA cum laude and an MBA from Tulane university. In this episode we discuss things like how did you learn about government contracting? As a child, he started off as a Navy Sea Cadet. He began his career cleaning up projects, teaming arrangements, raising capital for his firm, and is a high intensity for working.

Alex, first of all, thank you for being on here today. It was great seeing you at the SAME conference and I'm, so we're happy to have you on the show and could you just tell us a little bit about your business and how you got to started.

Alex Hernandez: 02:50 Yeah, sure. So, you know, our business primarily is in, government contracting, construction, or general contractor. We do a design, design build, project management, to about 80% of our business is, call it federal and let's say about 20% is non-federal. You know, we started the business back in 2005, after a Hurricane Katrina hit, you know. I was originally from South Florida, had gone to New Orleans, to Tulane on an ROTC scholarship. You know, prior to going into the military. So, I already kind of knew New Orleans, and I saw an opportunity there after Katrina with a lot of the devastation to, to get involved to start a contracting business. It was something I'd always kind of wanted to do on the entrepreneurial side. And, you know, it’s kind of took a number of years to really, get it going, build a bond the line, get the past performance and just really kind of grow the business from there.

Eric Coffie: 03:56 Oh, interesting. So, you're not originally from New Orleans?

Alex Hernandez: 03:58 I'm not number originally from, from Miami, South Florida. So, yeah, it was kind of going to go on to college and, you know, like I said, Tulane offered a really great Navy ROTC scholarship there. They kind of made it an easy, easy decision for me to go to New Orleans now.

GOVCON GIANTS PODCAST MICROSOFT OFFICE USER

Eric Coffie: 04:16 And so, you had the scholarship, you went to lane, you knew New Orleans, and then after that you went and worked for a production company.

Alex Hernandez: 04:23 Well, you know, after that, I actually, you know, I was commissioned as a Second Lieutenant in the Marine Corps. Went into the Marines, I was in there for about four and a half years. Some of the production company stuff was something I was just doing it on the side. So, this is an entrepreneurial venture with a few friends. And you know, we kind of did that, but you know, after getting out of the military I actually went back to Tulane to get my MBA. And when I did that is when I really got introduced more into kind of, entrepreneurial, new venture creation and ended up going still to work in banking in New York after I graduated to do the mortgage, kind of traditional, banking route thinking that's what I kind of wanted to do.

Alex Hernandez: 05:09 And after doing that for about three years, I just realized, I was like, you know, I really want to do something more entrepreneurial, something you can kind of control your own a destiny and build a business. And then, and then Katrina hit it was really like, you know, to me it was, yeah, I was already thinking about that. I'm trying to figure out what I was going to do. And then, you know, Katrina happens and it's in New Orleans. So I actually, you know, being born and raised in Miami, lived through Hurricane Andrew in Miami and saw a lot of the kind of growth and opportunity that came out of what was really a disaster, but, but still, you know, created a lot of the growth and I feel in many ways it's a lot of what is Miami today is because Andrew happened. So, they redid all the building codes and everything.

Eric Coffie: 05:49 So that's how a Downright got started, remember Downright construction. They started during Andrew. Yeah, they started that way. But then know that actually, so you had somewhat of a strategy going into this.

Alex Hernandez: 06:03 Correct. I wasn't fully sure it was going to be construction. I just knew there's a lot of devastation. There's going to be opportunities. It's going to be a lot of needs for a lot of different things. And really our initial work was more into disaster

GOVCON GIANTS PODCAST MICROSOFT OFFICE USER

recovery, a clean0up type arena, logistics coordination, which is what I had done in the military. So, you know, it was, it was a good kind of transition for me. And you know, our, our first contracts were really just being kind of third and lower level tiered subs on some of these projects to do clean-up work. And that was sort of how we got started for the first few years. And you know, it wasn't sexy or glamorous what we were doing. I was literally clean-up work and, and uh, but it was, you know, it was a good way to start building the business, building past performance, experience and translating that into, you know, bigger and better projects down the road.

Eric Coffie: 06:58 And that, that's what I was going to ask. So, you originally started out as a second and third tier sub on projects and then you started building the past performance. He started building up cash flows and bonding, things like that. Okay. Okay. And that would you say, cause I know you found it were founded in 2005 was that from say 2005 to like 2008, 9, 10?

Alex Hernandez: 07:21 Yeah, you know, I'd say, you know, you know, Katrina hit 2005, I mean, 2006 was kind of more forming the business, getting things set up, getting registered, you know, with the federal government and, and just starting to, to go out there and market. And, you know, it really was until probably the latter part of 2006 where we started picking up, you know, our first kind of clean-up contracts. I mean the cleanup effort in New Orleans went on for a couple of years. Um, so really like, 06, 07, so going in and cleaning up residential neighborhoods, cleaning up ravines and things like that. And you know, started picking up, you know, it's, call it around 2008, 2009. We started to get other contracts from, you know, within the Army Corps, maybe go renovate one of their other offices, but kind of really small projects, we are talking, like 50,000, 75,000.

Alex Hernandez: 08:15 Just simple things to start to start getting a little bit of past performance. Yeah. Basically. And then I'd say around 2009 is when we really had, you know, our bonding line initially kind of established. Um, you know, cause it's hard to get a bonding line unless you've been in business for a couple of years. Yeah. So, so that was, you know, you really kind of have to get through that tough period of, of um, you know, without really having a bonding line unless you have a lot of capital and then you could

GOVCON GIANTS PODCAST MICROSOFT OFFICE USER

probably find a faster way to do it. But, and then, you know, really our next contracts were, um, were in the VA arena and that was right around the time and, you know, we, and we were, I'd say at the right place at the right time when, the VA really started pushing their Service Disabled Veteran Owned Small Business Program.

Alex Hernandez: 09:03 Which was one of the certifications we qualified for. And I'd say we were probably one of the first firms to go through that process of getting certified. And, um, and when they started coming out with those contracts, you know, we started teaming up. Initially it was some larger firms and some teaming arrangements, uh, to be able to go after them or, you know, we brought in our bonding piece that they would help, you know, sub bonds, some of their portions of the work. You know, and, and that's really where we, I would say really kind of turned the corner from, you know, sort of doing small projects, small projects. And then we won. I'd say our first large project was like a $4 million, new construction for the VA. It was for a mental health facility. You know, I'd say that was probably around 2010. Okay. Where we, where we won that first kind of big contract and then it really kind of took off from there.

Eric Coffie: 09:59 Okay. Okay. Okay. Well now that's interesting. You know, it's, you go through and you answer all my questions in one response. Well, obviously you've been featured a lot of places. I see you winning a world award, so you've, you've done this a few times. But let me ask this. Did you, I'm going to ask something kind of off the cuff here since you, I know you said you had ambitions to start your business a long time. Does that go back to say like childhood? Like did you ever have a candy route or baseball cards or paper route or anything like?

Alex Hernandez: 10:30 You know, that's a, that's a good question. That's funny. I actually didn't, and um, I really, you know, growing up I was really kind of really liked the military and I was involved in this organization called the, the Navy Sea Cadets, which is sort of like a Boy Scouts, but more really focused to the Navy. And I started out when I was 11 and all I wanted to do is be in the military. So, like it did that, that would do these summer trainings and actually was every anything but wanting to be an entrepreneur. And you know, when I graduated high school and

GOVCON GIANTS PODCAST MICROSOFT OFFICE USER

you know, I was initially thinking about going to the Naval Academy in West Point and got into those, those service academies. And, you know, really at that point started to think about, you know, what, there's more to the world and just doing, going into the military, even though I still wanted to serve, decided ROTC would be a good route where hey, you can still go to college, get sort of the private university experience, , but then still, you know, kind of serve your country.

Alex Hernandez: 11:26 And I would say it was really in college where I probably started to realize there was another world out there where, you know, there was, especially around then is right when the.com boom was initially happening, you know, the first time. So that was all you were hearing about, you know, all these, these companies being built. And I'd say that was probably my junior, senior year of college. So, it really started, it started. Yeah, it started to get your entrepreneurial, you know, feeling kind of going. And that's probably then that I would, would say. And from there it's always stuck to me.

Eric Coffie: Okay. Okay. Now, when you first got started, I'm assuming you didn't have a whole lot of money.

Alex Hernandez: 12:19 That's correct. Um, you know, I mean, I did, you know, I was lucky in that, um, you know, having served in the military for, oh, you don't have a four or so years and then going into banking for about three years, you know, I was able to save money during that time.

So I mean, it wasn't a ton of money, but you know, I probably by the time I probably had about a $100,000 saved up, you know, between, you know, that time frame and, and that's, you know, it was kind of enough to take the plunge, you know, and I did, you know, I quickly put a business plan together. you don't have to, I didn't do it in the, I didn't do a capital raise right out the gate. I kind of wanted to get the business established, use my own capital to sort of, and sweat equity for the first year or two to just prove what I wanted to do, you know, as opposed to come out with a business plan before you've really even started this stuff. So, and I, you know, I had already started to pick up some contracts, so it made it an easier sell to, to then go out to some investors, an angel investor.

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Alex Hernandez: 13:04 And I raised, probably about, he was about $300,000 on my, on my kind of like sort of capital raise and, and Louisiana actually had a really good program called the a Angel Investor Tax Credit program. And a lot of different states have programs like this. You've got a research and a lot of people don't realize it. Um, say it again. Angels called the Angel Investor Tax Credit Program. And what it was is basically anybody that would invest in your business, we get a tax credit on their Louisiana return for doing it. Um, and at the time, I want to say it was like maybe 35% of their investments. So, if someone put in a hundred grand, they are getting at least 35 grand back as a tax credit, which they would earn over, they would get over five years. So it wasn't, it wasn't like a huge return, but it was something that helped you sell it.

Alex Hernandez: 13:52 You know what, hey look, there's some the worst case scenario, you know, you lose all your money, you're going to get your write off plus 85% and all of a sudden now they're really only losing the third as sort of in a worst case. And I think it helped. It certainly helped in my valuation, you know, when we were discussing, you know, at that point of time and, and, and trying to take in the investors. But, that, that was definitely helpful to know. And that's something I think a lot of folks don't do enough. I talked to a lot of small business owners out there and, you know, they want the bonding line, they want all this stuff. But it'd be, I mean, unfortunately you can't do it without some capital. Right? Absolutely. Yeah, that's what I was thinking.

Eric Coffie: Yeah. You need it.

Alex Hernandez: 14:35 And, and it really, a lot of times it's, you got to go try to raise some money, I think. And, I mean, luckily for me, I did work in banking, so I had a little bit of a leg up of kind of understanding how you do and, and then I know for some business owners, you know, they may not, they have not had that opportunity or didn't come get an MBA. Do you, where you studied some of that. So, I knew the concepts. Okay. So it wasn't, it wasn't totally foreign for me to go out and do it.

Eric Coffie: 14:57 Okay. Okay. So, you were well equipped going into this?

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Alex Hernandez: 14:59 I'd say so. I mean, I, I think well equipped at some level and, but you know, when I wasn't well equipped on was, I didn't come. I mean even though we ended up becoming a construction, um, primarily construction management business, I, I didn't come from a construction background. So that's definitely something that, um, you know, has had, I wouldn't say it was held us back, but it's, it's allowed me to focus more on what I'm good at, which is, you know, running the business, you know, the, the finance, the accounting, the marketing, the sales and you know, I've brought in other people on our team that have, you know, the vast construction experience and of, you know, basically help round out where I wasn't strong. So I mean that's something, you know, we had, I had to do overtime cause it wasn't, you know, initially when it was just me as an employee, you know, it's Kind of hard to, to do that type of work.

Eric Coffie: 15:50 So, that's a great, that leads me into my next question. When you first started, were you dealing with friends and family just get started? Like most of micro-businesses.

Alex Hernandez: 15:59 As far as dealing with friends and family companies started off the ground. Like as far as with their help or that they, they, I, I was doing work for them.

Eric Coffie: 16:07 No, no. Like with their help. Like it's like did you hire it? Were those like your main hires? Like

Alex Hernandez: 16:11 Oh no. You know, I, I think, and I actually wasn't because, and it was probably because I was in New Orleans. I think if I would've started my business in Miami, I probably would, were most of my family was, I'd probably, that would have happened. But since it was in New Orleans and actually even though I knew some people in New Orleans, most of the folks I knew I went to school with and left graduate after they graduated. So, post Katrina, I really, most of the folks in my business actually are new hires. Just like not, yeah. So, which I know is not the norm, but I think it was more, it was more unique aspect of mine cause I located the business somewhere where I didn't have any family living in. And actually, a lot of my friends were in other parts of the country.

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Eric Coffie: 16:54 Yeah, that's definitely a unique situation. Um, but you know, what I've experienced and I've taught people is if you go into, from my experience, if you go into an industry that maybe you don't know as well, um, you have to hire better quality people and I think it makes you more of a leader and a manager. I spent what I've seen as opposed to people that, let's say you knew construction or people that I know, know construction and you may have friends like this, they ended up doing the physical work themselves and being stuck in that grind, that cycle. Right.

Alex Hernandez: 17:25 I agree. I agree. I think that's something that that actually was more by accident than by design because I couldn't do it as a hire for that. I was able to a lot more focus on the business and grow in the business and as opposed to, hey, well we lost somebody, I'm going to go be the superintendent on that site, which I have seen I know a lot of all the time and they get, you know, you get bogged and for the next six months you're running a project as opposed to running the business. Yeah, definitely.

Eric Coffie: 17:54 Okay. Making sure now, you got 8a in 2008 where did that, you know, again, we had this, a little bit of this conversation at the SAME meeting in Miami and I told you that most of the days, you know, when they come into the, they don't know how to work it, they take years to ever get a contract. And you said that wasn't your case.

Alex Hernandez: 18:13 Yeah, I would say, I mean, it was, we definitely had great success in the 8a program. I would definitely say that we didn't have it until we were about halfway through. And, and part of it was, we had already at the time, um, we were ready before we got the 8a. We were already HUBZone and Service Disabled Veteran Owned, and we were having pretty good success, especially in the SDVOSB program with the VA. And we were so busy that we really just did it need, I mean, I'm sure the 8a was helpful at the time when we were maybe winning some of the contracts where they saw where it was really SDVOS set aside, but they see that you have a hub zone and the a second another box. Exactly. A lot of times you don't realize that that's really what's getting you sometimes the contract because they want those other quotas filled.

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Alex Hernandez: 19:00 So, and I'm sure that was helpful, but, um, I, you know, it wasn't really till about halfway through the 8a program where we were already kind of at some certain agencies doing some other work and then they decided to, hey, you know, your 8a, oh, we can sole source something to you. And then for the next call it, you know, from year four to, you know, till we graduated, they really took off. I mean, we probably did upwards of $40 million of 8a sole source work. Um, maybe even more than that by the time it was done. I think last time we, we counted. But, um, so yeah, I w and if I did, you know, probably start marketing it a little earlier, we probably would even have more success. Um, but again, it wasn't, we didn't really even have the capacity and they were so busy with, with those, the other set asides. Yeah. Right,

Eric Coffie: 19:49 Right, right, right. You know, I s I see that as a challenge. How did you, um, going back to the hiring, at which benchmarks did you start bringing in like senior leaders? 5 million, 10 million, 15. How did you do determine and, you know, how did you think through that process?

Alex Hernandez: 20:07 Yeah, but, you know, we, we, we had an interesting trajectory as a business. Like when we first started, you know, right out the gate, we had, you know, especially when we're doing the cleanup work, we had a lot of employees cause we were, it was more like Labor that we were hiring. And you know, we probably were up to like a dozen employees. And then, in the last, you know, couple of years after that we actually were starting to do, but there was a, especially in New Orleans, um, one of the things after they started doing a lot of rebuilding, there was a lot of, a lot of the security systems had to be redone. So, we, we got a bit involved in sort of this security system business, which is like cameras, CCTV, access control and stuff. So, we, we built out a little bit of a niche and that for a while, um, and uh, you know, decided finally that the margins really weren't there for us, for what we wanted to do.

Alex Hernandez: 20:56 And that's when we, when we finally moved finally into the construction business, I sort of had to reinvent it. I, I went to, I mean I basically went down to one employee to me as an employee again and started and started from scratch, with the hires and just making sort of incremental hires little by little.

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You know, most of the folks that are in, in the key positions right now at my company have been with me from the beginning, um, and had sort of developed into the roles during that. That being said, we've also, you know, as we've continued to grow our business and, you know, bring on a CFO and, you know, I've recently moved into the position of being a CEO and I brought on a President, to really be more in, you know, looking over operations and, and our pre-construction and, and those areas. And then, you know, at that, at that point, I'm bringing in folks with, you know, 30 plus year’s experience, very senior level, uh, that have worked at some really big firms. And to really kind of take our company to the next level. So, I would say probably in the last four years is where we've really have gone out to light, top tier firms, um, and really bring in those, those folks in the organization.

Eric Coffie: 22:12 Okay. Okay. Okay. No, that's great. When you were starting, I know we talked about raising capital, but I mean, you know, you are on a tear man. Your trajectory from like you said, uh, you were an INC 500, 5,00- award winner, 2012 2013, 2014, 2016. I mean you were just on a tear. Um, did you do any type of joint ventures or mentor protege? I know you did something in the beginning, but as you were growing.

Alex Hernandez: 22:40 Yeah, I did. I didn't do any, we did look at the mentor protege, you know, especially in the 8a program. That's something that they really push. And we even went, we even went to Washington DC if they do a big a matter protege matchmaking thing that SBA puts on. And we went there, and we interviewed with some firms and tried to go that route. We even, you know, did some follow up with some firms that literally, that's like what they do is they, they, they are the mentor to an a, it's an 8a, they build them up to they're too big and then they get a new one and they like there's firms out there that's their business model and they've done it for years and we were kind of a finalist with, with a couple of those and it just didn't pan out for whatever reason.

Alex Hernandez: 23:21 Um, they probably decided to go with some other groups cause we were really heavy into the VA and the VA doesn't do a sole source. And I think, you know, that probably hurt us when we looked at some of those groups when they were probably

GOVCON GIANTS PODCAST MICROSOFT OFFICE USER

looking at some other firms that were doing more DOD work that tend to do more of the, the, 8a sole source for the mentor protege. So, we eventually never did it. We did do a lot of teaming agreements and did form a joint venture with another firm in south Florida called Gulf building. They were also small business, but just they, you know, they didn't have any designations. And, you know, we joint, we formerly joint venture with them and that really had this done a lot of the work in Florida and Georgia. Since that's kind of where their footprint was, we were able to leverage some of their infrastructure, um, on the construction side with the subcontractor relationships and personnel.

Alex Hernandez: 24:11 And then we were bringing, you know, the government contracting knowledge and how to deal with that because there they really didn't know how to do, you know, how to market to the government and how the paperwork works. So, it was a really good sort of joint venture of equals, which was, which is not always the norm. I think a lot of times when they do those, it's, it's a different, so it was, and we kind of grew together, at the time. And it's been great. I mean, it's still, you know, it's a joint venture we have in place now and it's still doing work for the VA and NAVFAC. Um, but the teaming arrangements I say early on were, were, were critical. There were a couple of large construction companies that, no, they weren't a formal mentor, but you know, as the teaming arrangement happened and we did a few projects, you can't help but learn from them cause there, you know, they've got done, you know, they, they've helped, you know, they, they work with us on the estimates and you kind of learned through the process.

Alex Hernandez: 25:08 And you know, there's a, you know, a couple of companies that really helped us in that arrangement. And that's something that I think it's important for. Maybe even more so than the joint venture, the joint venture. It takes so long to do a teaming arrangement can get put together fairly quickly and, and, they didn't go after things.

Eric Coffie: So, how'd you find the Gulf Port? How'd you guys find each other?

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Alex Hernandez: Oh, the company is Gulf Building. Yeah, Gulf Building. Just, just a mutual friend. Actually, one of our investors early on was friends with the president actually at the time. He was the vice president of Gulf Building. He eventually bought out his, you know, the owners of the company. But you know, when he was a VP basically connected us and you know, it was right around the time Miami took the dip in the construction market probably like around, what was it, 09 or so that it took that, you know, the really the market kind of tanked and they were lucky they went from, they were actually the time of the larger company that were probably doing, you know, 50 million and they went from 50 million to 2 million overnight, you know, and basically had to lay off a lot of people and they were rebuilding.

Alex Hernandez: 26:18 Just like a lot of firms when there's a downturn, all of a sudden look at government contracts and as a way to do that. So, they’re, you know, we are connected cause we were starting to have some success and we were looking at projects in Florida and Georgia and we just didn't have, um, you know, we didn't have the capacity. I mean, we were, we were kind of based out of Louisiana. That's where we had our, our, our employees. You that that sort of kind of was what brought us together.

Eric Coffie: 26:45 Interesting. You know, I've, I saw that, with some other companies in south Florida that were doing school board work, when the economy tanked, they went from, like I said, 50 million to 10 to basically nothing, um, school board dried up and all those contracts try to, during that same timeframe, you know. Um, I see that you've done work at NAVFAC, the Corps of Engineers and the VA. What would you say are some of the differences in working with those different respective agencies?

Alex Hernandez: 27:18 You know, it's, there's definitely some differences. I want to be politically correct. So what I, I'll say, but, um, you know, definitely the, the Army Corps and NAVFAC is a bit more professional in their construction arena and the more speaking to like, to my experience on the construction side, because that's what they historically have done. I mean, that's what the Army Corps was created for, right, was to do big public works project. Same thing for NAVFAC is to basically build the basis and do that stuff. The VA was built to treat veterans. It wasn't to do construction. So, I would say, you know, the VA with the

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amount of, of growth that they've had in their facilities and, and, and, you know, a lot of their aging facilities, probably got in over their head on the construction management. And I'm not saying anything, people don't know.

Alex Hernandez: 28:12 I mean, obviously now the Army Corps handles any construction projects for the VA over $100 million there. There's a reason why that happens. So, um, so that in essence is the difference. You know, I would say when you're dealing with those, those agencies, they're obviously both very demanding and for good reason, you know what I mean? They're, they're, they're trying to be good stewards of public dollars and all that stuff. Yeah. but you know, when you deal with the Army Corps and now fact, they tend to, I would say pay a little bit more for the services and they, and they allow for more supervision in order in order to do that. So, a lot of times on, on a NAVFAC job, you have at least two to three required supervisors on a project, on a VA job.

Alex Hernandez: 29:02 You basically, they're, they're good with one and the problem is as you probably really need two or three, but, but your competition is only going to price it once so you have to price it at one or you're not going to win the work. So, I think that's where there's some differences when you're doing work with different agencies is understanding what they're willing to pay for. And you know what that means. So that, that's been something that, you know, you know, we've, when we serve as a different agencies, we kind of approach it a little differently.

Eric Coffie: 29:30 You know, that brings me to an interesting question. I know that the Corps of Engineers, sole source does the VA sole source.

Alex Hernandez: 29:36 They used to, I mean, they used to back when the SDVOSB program was just getting started. They like to, they like to use the 8a sole source if you were also an SDVOSB and actually they would eight sole sources for the 8a, but not anymore. Now it really, the only agency, the VA can sole source too, or company they can sole source to is an SDVOSB. But even then, they don't like doing it because they know there's enough competition. So, they'll, they'll usually compete it, but they actually have, they do have the legal authority to sole source as an SDVOSB. They, they can't sole source.

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Eric Coffie: 30:12 Wow. Yeah, I was wondering. Well, yeah, I know they, um, the rule of two, the, yeah, the kingdom where Jane and where, yeah. So, I'm familiar with that. What about HUBZone’s? Have you ever received any HUBZone’s sole sources?

Alex Hernandez: 30:24 Um, I have not, but I definitely know that it's been the difference maker on some 8a sole sources. Um, and I've had the contract say that like, you know, your HUBZone, you know, your HUBZone’s, you know, one of the reasons you got this, you know, because it was between you and this other firm and you had the HUBZone. And I got to say that's something that, you know, even on the VA side, I probably didn't realize the power of it until I was, I was at a VA conference and I was sitting next to a contracting officer. I won't, I won't say what, what visit it was for, but, um, he was like, oh, you just want a contract at our, at our VA. And I was like, oh, okay, let's try it. We just, I kind of figured out who he's with and I was like, and he's like, he was like, yeah, you know, thanks to you we made our HUBZone quota.

Alex Hernandez: 31:09 Yeah. I was like, wow. And I was like, here's a VA person saying that. He's like, yeah, he's like, we were, and he's like, everybody actually came in $1 million over budget. Um, and he's like, we went out and got more money because you were HUBZone. Wow. Even though it was an SDVOSB set aside. Oh Wow. So, like that's when you're really like first time I saw, I was like, wow, right here, here's an agency that it's not even the set aside. And they actually went out and got more money to make sure they can get it awarded so that they can meet their goals. You know, you just never know.

Eric Coffie: 31:43 Yeah. And when you said that kind of in the beginning of the conversation, right, that you sure that the 8a played a larger role, but you know, you didn't always know what was happening behind the scenes. Exactly. Right. And we've heard that before and also, you know, the VA doesn't, from what I understand now, they don't even actually, like you said, put anything else except service disabled out. So, I don't know how they meet any of their other benchmarks.

Alex Hernandez: 32:07 Because people have multiple yeah. That's how they do it. So, I mean, every time they award something to us, I mean, we're

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not 8a anymore, but we still are HUBZone. But you know, when we were 8a, they were, they were getting triple quotas right there. So, I think that's how they are. They're meeting them. Obviously, a lot of agencies are not hitting their HUBZone’s. That's the one that's really gotten hard to meet.

Eric Coffie: 32:27 Right, right, right. Uh, well it's actually an interesting cause I was, I interviewed the director for the HUBZone council and we, that was part of the conversation that we were having on our call. So, I saw it last the last time I found some information on you 2017 you guys were about 43 million, correct?

Alex Hernandez: Yup. Yup.

Eric Coffie: Um, how 2018 look?

Alex Hernandez: Yeah, we were around 50.

Eric Coffie: Okay. Okay. Okay, nice. Now in the beginning we talked about the Angel Investor tax credit program. Do you see, is that like what they're doing now with the new opportunity zones?

Alex Hernandez: 33:04 Uh, well, no, that's a little bit different. I mean, Angel Investor Tax Credit Program for the, for the at least that I know a few other states. I want to say Michigan has it and I know a few other, there's not a ton of states that have it. It's just more like a state program, just like they use like they have, they have, some states will do things where they'll, they're, they're trying to increase, uh, the workforce in their states and they do workforce rebates. If you hire a certain number of people and things like that. It's more like, it's more like a state program to, to attract capital and to help build small business within their state. The um, um, the qualified opportunities zones, which is something we've, we've actually gotten into in a big way is really kind of something different.

Alex Hernandez: 33:51 I mean, that's just, um, that's that, that's for anywhere in the US and, and that's based off of census track data. There are certain locations that qualify as qualified opportunities, owns a lot of HUBZones locations. Let's say. There's probably a pretty good overlap, between hubs, let's say. What's a considered a HUBZone and what would be considered a qualified opportunity

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own. And that's created, um, a really unique opportunity and way for people to attract capital. If you're starting a business, if you're trying to grow a business and you're located in a qualified opportunity zone, there's some really great tax benefits, um, for those investors, especially if they have a capital gains or if you're in the real estate development business. And that's where we've actually done a lot is on the real estate development side. Um, and that's something we started around 2013, more as a diversification tool.

Alex Hernandez: 34:38 You know, I mean we were pretty heavily on the federal contracting and we want it to, to diversify our business a little bit and start developing some of our own projects basically for us. Cause you know what I mean, It's, it's great and all to build a facility for the VA, but you go in, you build it, you know, a lot of hard work, 18 months later you're gone and yeah, you got your money and you moved on, but that's it. You still have that same headache and work. You can go through review, build that for yourself. You now own the asset. You know, so it's, so we've started to see that as an opportunity in a good way for us to actually, you know, instead of pulling out our profits and, you know, going and spending that on something silly. Yeah. We've been, we've been reinvesting it into real estate and that, and it's actually created, you know, depreciation to help, you know, offset some of our income taxes as well as historic tax credits is another one that, that it creates.

Alex Hernandez: 35:34 We do a lot of historic renovation work in Louisiana and that's another, that helps you against your federal tax returns. So, um, you know, it's been, that's been a great way to grow. And then also it's an asset. It's an asset on your balance sheet, which helps your bond in line. Yeah. So it's, it's kind of like a great strategy we've used, uh, and then was it qualified opportunities on stuff to come out? I mean, it's, it's, it's wonderful. I mean, a lot, a lot, a lot of New Orleans is in a qualified opportunity zone, so it's, it's great.

Eric Coffie: 35:58 Well, you know, it's interesting, I didn't know that you started that in 2013. That's the, the working in that or do I redevelopment stuff? I didn't know that. So That's interesting.

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Alex Hernandez: 36:08 Yeah. Yeah. I mean we were doing some projects for ourselves. Um, you know, on occasion, you know, in between the kind of keep our crews busy, you know, we'd pick up a property and renovate it and then rent it out and stuff. And then in 2013 we actually, I mean we started a new entity called the New Orleans Redevelopment Fund and we actually went out and raise capital from investors and, and we're actually, we're starting our third fund right now based around qualified opportunities zones. So, so we've actually gone out raised capital to go do that cause at some limit, you know, there's only so much you can pull out of your own business without affecting your bottom line to do these projects. So we would, we'd pull out a little bit to be, you know, sort of a sponsor investor in the projects, but then we go out and raise other investor capital for the projects.

Eric Coffie: 36:51 And, and again, same question. How did you learn about this raising capital? Do these things?

Alex Hernandez: 36:57 Uh, you know, like I said, I earlier, um, you know, getting the MBA in finance and I worked in, in banking for a few years, just enough to, you know, know enough to be dangerous I guess. You know, I also had a business partner of mine specifically on more on the real estate side. That I went that I went to a college with a Tulane and we served in the military together. When I got out, he actually, he stayed in an investment bank in the, I left, you were actually roommates in New York, I, you know, started the business and he stayed in banking for a number of more years. And when he got out, know he wanted to do something entrepreneurial and he's, we've partnered up, so he's, he's worked with me on helping raise capital and he's even got more experienced. So, you know what, I'd probably tell people out there if that's something they're looking at, it's just a matter of finding the right partners. You know, that if that's something that you're, you don't know how you go raise money, well there's people out there that know how to do that and, and you can, you know, team with them and work with them on doing some of that.

Eric Coffie: 37:57 Okay. Okay. No, that, that makes a lot of sense. That makes a lot of sense. We've talked about a lot of positive things. Any pitfalls, horror stories, thing that you could share that you had to overcome that where you weren't so sure about yourself,

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where there was difficulty? I know the very beginning, that's probably more true than..

Alex Hernandez: 38:16 Every day. It's every day in the beginning. I mean, that's, that's a, you know, the first, the first few years, you know, I mean, it's easy to forget, but they weren't easy. You know, it was tough. It was, it was just also tough work, what we were doing at the time. I mean, disaster recovery, you know, you're, it's nice. Yeah. It's just, it's, it's tough work at the, I mean, there weren't, there really wasn't a lot of infrastructure in New Orleans. Things are still coming back online and, and really even some of the workforce that you're using, you know, when you're doing disaster cleanup, I mean, you're not getting, you know, unfortunately you're not getting professionals. I mean that they're not going to want to go through cleanup and, you know, sawing down trees and stuff like that. I mean, so you're, uh, it was, it was tough, you know, even from an HR standpoint, management standpoint, payroll standpoint.

Alex Hernandez: 39:00 So that was very difficult. You know, I, I would say, I, I kind of mentioned at one point, you know, in our business we had to make a pivot, um, from some of the stuff we were doing at the time, even though it was getting this by, it was also kind of holding us back, and you know, also had, you know, I have had a few good people on the team at that point, but we also had a few bad apples that I had brought on and you know, it really, you know, probably set us back a year or two with what we were trying to do. And, and sometimes you don't realize that as a business when you ask for like a horror story, you don't realize you have, you know, we sort of have a terrorist within your own organization, you know, that is everything you're trying to do is maybe undermining what you're trying to do.

Alex Hernandez: 39:46 And it may be intentional or it just may be the type of person it is. But the important thing is to realize it as soon as possible. And, um, you know, it probably took me a while to realize that when I did, you know, we had to make some personnel changes and, and like I said, I literally took the business down to me, the single employee after a few years in business and just started from scratch again, just trying to get the right people, you know, the right people on the bus. And I at the time, real life. So they kind of hired what I thought was experience, but it probably

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really wasn't the right experience. And I don't know that I necessarily recommend this to everybody, but I decided to actually just hired people with very little experience straight out of school for very smart, very good attitude, willing to learn, willing to do anything, you know, that you ask them to do and just grow with the business.

Alex Hernandez: 40:37 And that's what I brought on board first and the culture. Exactly. Yeah. The culture. And you know, my next call it three or four hires are all still with me today. And they're all, like I mentioned, very key positions. And, you know, they're probably, they're all in their 30’s and they're in positions that they probably, they could not leave us and go somewhere else that how senior they are and my company because they just wouldn't be, haven't have the years of experience that someone would expect. But they stuck with me, they've proved themselves and now they're doing great. And I've got, you know, because of that, some very loyal folks and I'm very loyal to them and then we, and then from that we've built the team, you know, and then we've brought in some additional experience, you know, some of the trolley gray hair experience that, especially in the construction arena, you know, you want that in your, in your company folks that have sort of been there, seen it done. It has seen bad things happen and can, and can help you through those. Um, and, and I've had that round out the team, but they, they've, again, this kind of fit into our culture.

Eric Coffie: 41:39 Wow. Wow. What made you stay with it? Which when it was done those times, was there someone that gave you encouraging words? Was it a book you read? Was it a quote you saw?

Alex Hernandez: 41:46 Uh, well, yeah, I mean, you know, being in the military, I don't, I don't think, you know, especially in the Marine Corps, they tell you quitting. Quitting is not, is not really an option, it is not allowed, you know. My wife has been a great partner through the business. It has probably helped that, specially early on she has had a good, stable job that allowed me to um, continue fighting to, to continue fighting. I think that's key. I've, I, you know, I've seen people, you know, the spouse is, you know, the spouse takes the, takes the steady job, so the other one to kind of take the risks and everything like that. Exactly. And that, that

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makes a big difference. And then, and then just had a, I would say kind of a core group of friends that, you know, that I was in the military with that also had gone on to be successful all in different careers, you know, between law and MBAs. And I like that, that, that we kind of all support each other, you know, in their careers. And even when we were having some tough times, you know, I support them and theirs and their times of need, they give me moral support when things are down, and you kind of you get through it together, so,

Eric Coffie: 42:58 Right now, no, uh, uh, any type of entrepreneurship organizations or groups, anything like that to a part of?

Alex Hernandez: 43:04 Um, yeah, you know, I look SBA is, was very helpful. I mean, I know not every SBA office is the same, um, especially with funding and everything. But you know, being that New Orleans had so much disaster recovery and, and governmental work, you know, especially after Katrina, the SBA office there has been really helpful and they kind of give you a bit of a networking training. And I took advantage of a lot of those things, especially early on. And I, I think a lot of people don't, you know, I mean, everything from the, yeah. Everything from the webinars to, you know, a lot of people ask me, well, how did you learn this? I'm like, you got to teach yourself, but there's opportunities out there and, and, but it requires you to, you know, not be lazy about it and go, go reach out to the SBA, go to their trainings that they offer, do all the free webinars.

Alex Hernandez: 43:55 I mean, I did them all, you know, and even to today, I have new employees start, you know, we try, there's certain, SBA 7j, free trainings that are standard protocol is they haven't worked in government contracting. Everyone takes government contracting 101 Webinar. I want them to know, I don't care if you're the receptionist or, or a project manager, you need to have some basic knowledge of what we're going, you know, outside of just whatever your specialty is. So we, we as an organization has sort of embraced some of that training and everyone's sort of come in through that. You know, there's one, there's a book that we used to be required reading isn't any more, but it was, um, what was it called? Uh, it was like Government contracting Made Easy. It was like one of those like, you know, when those for dummies book. Yeah. So that

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was a really good book and I used to be, for the longest time, everybody, you know, was reading that when they came in, I, they, they were hired and here read this book and I'm going to quiz you on it later, you know, uh, just so that they can kind of understand the lingo and what we're doing.

Eric Coffie: 44:56 Wow. Wow. Um, what do you see, and I know we're running at a time now, what do you see is the challenges that some of the small business are facing? I know you're out there, you see them, you talk to them often. What do you see as like a recurring theme of how, you know, if they're facing some challenges, and I mean, not from the government side, like what things that could they be improving upon to make them stronger so that let's say they can become a subcontractor of yours.

Alex Hernandez: 45:23 Yeah. You know, look, I would say I find, and I was a victim of it as well, and it probably held us up for a few years. Uh, from our development was we weren't totally sure what we wanted to do. We were just kind of like, look, we can do anything. And I get that a lot of companies, they're aggressive, they want it, you know, it's like, Hey, I want to be a sub for you. I get that all the time. What w you know, and I'm like, okay, well what do you do? What do you need? I'm like, okay, well then that's the wrong answer and I get it. Cause I, I, that was my answer, but I can tell you that that was the wrong answer at the time because even when you talk to a federal agency and you go in there like, well you can go, we can do these 45 things.

Alex Hernandez: 46:01 And they're like, no, no, no, but what do you really do? Cause they don't want you to like sub it to sub it like usually on as a sub. Like it's like what do you do with your own forces? And even if you've got to reach out to like, you know, a temp Labor Agency for the Labor, I mean, that's fine, but like, you know, what, what, what do you have the actual knowledge to do if it's painting, demolition, dry wall and actually have that. And I could tell you we didn't do that, but if we had, we probably would. I have gotten to where we are now, maybe a year or two faster. We sort of, it, you know, that that was something. So I would definitely say figure out what your niche is and then actually figure out what niche is needed out there.

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Alex Hernandez: 46:42 You know, not every, you know, and it depends on what market you're in. Maybe you're in a market where there's a lot of plumbers, well then don't, don't say plumbing's your specialty, go pick up another. Maybe it's, maybe it's demolition that that market needs. And if you're trying, if you're trying to figure out what it is, it's kind of study your own market. Um, I can tell you right now is a good time to be in the space. I mean, everyone's busy, you know, market's doing well, constructions, booming, governments still, you know, spending a lot of money. So, um, it's definitely a good market to be in to try to grow a business.

Eric Coffie: 47:14 You know, I was going to ask you that because Is which you mentioned earlier, which I've seen the same trends. When the economy is down, everyone goes to the government side. It's when the common is booming, the government seems to be lacking in the need and more people get more and more work. More contract.

Alex Hernandez: 47:27 Correct. Yeah. It's hard. I mean, we do, I mean, we currently operate in 12 states and so I can tell you, I get a good little microcosm feel of every one of those markets. And I can tell you the trend overall is people don't want to do government work. I mean, you know, we're a, we're working up in the northeast right now where we've picked up a few a MATOC, IDIQ, you know, for different VA's up there. Um, and we're, and we're struggling finding subs. They're like, Oh, Government Work Davis Bacon, bonding. I'm full. I've got enough private work that doesn't require that northeast working. Uh, I mean, we're in Massachusetts, Vermont, Pennsylvania.

Eric Coffie: 48:06 Yeah. I have some firms up there that I'm working with. They do 2011 a year that they can sub, they can do some sub stuff. I mean, they're, they've got bonding, they've got capacity, they got capital. Good. You've got, we've got my email, so just shoot me, shoot me the contacts, I'll shoot you the context. So that's great. Okay. Any last words for small business guy getting started? I'm wanting to get into this arena. Any words of advice and wisdom you could share?

Alex Hernandez: 48:36 Um, you know what I mean? I think the biggest thing, um, that people don't, you know, I don't know it, at least it's from my vantage point there. Look, there's no handouts in this space,

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right? I mean, and the government contract, even the set aside, there's plenty of competition even within those things. I mean, you really have to just go out and get it. Um, and, and work really hard. I mean, that was, that was probably one of our differentiators. And, and you know, I, I worked very hard and I had my employees work very hard. And when I mean work hard, I mean like 7 days a week, 16 hours a day or like everybody says, I work hard. I worked hard for 40 hours this week. Now that's, that's not hard. That for a long time, say it again, 16 hours a day. That's what I had to do for a long time to get to where we were.

Alex Hernandez: 49:19 I'm not, I don't do that now, but there were several years there that that's the level of effort that was being done and it was working till midnight regularly, you know, cause you're wearing multiple hats. And I did my own QuickBooks for a long time. You know, when you're wearing a lot of hats and that's, when do you get to that? You know, you get to keep it up the books on the weekends and stuff like that. So that, that's, that's what it takes. I mean, especially in this market, in any market really. I mean there's always, there's always, even when the market's good, there's, there's more companies out there. So, you still have the competition. Um, and then when the markets last, you got companies shut down. But I mean you've got, you've got competition there. So, I don't think it ever goes away.

Alex Hernandez: 49:58 So definitely, uh, working hard and, and really our company, I think you'd ask any one of my employees and they will tell you that historically they've know that I always worked harder than them. So you kind of lead from the front, you know, cause people take that cue off of you. And they know and it, and it sort of drives in business. I mean, look, they're not going to work. They're not all owners in the business. So at some level, you know, they're not going to work as hard as you, but at least it does help drive them cause they know you're out fishing on a Friday while everyone else is back at the office working. I mean, they know you worked all weekend and then they, and they know that they're, you know, they're succeeding and they're growing because you're helping through that.

Alex Hernandez: 50:37 So I think that to me has been a big differentiator cause I've seen a number of businesses out there that has kind of

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struggled and I don't know, you know that it have it sounds like, yeah. You know, you may be talked to them and you send them an out of office reply. I mean I don't actually, ironic I'm going on vacation next week and it's actually the first time I'm going to use my out of office reply for a week in 13 years of business. And that's because I now have a president and he's in a reason one a little bit more of the day to day and I've gotten to that point. But before that there was no such thing as an out of office reply in today's Day and age, if you really want to grow your business. That's a, that's a luxury. I mean eventually you want to get there, but I can tell you that I didn't have that for a long time.

Eric Coffie: 51:20 Wow. Wow. Now Alex, listen, thank you so much. You've been great. This everything that I thought it would be.

Alex Hernandez: 51:27 I hope this really helps somebody, a hire some people grow their business. And, uh, and actually there was one last thing I wanted to say I didn't say which is very important to me is I hire veteran. Historically when we were smaller, we were one in three military veteran. We're probably now one in four, 25%, but you know, only 1% of the population is really military veteran. That has been a big success for, especially if you want to do government work cause they speak the lingo. The government likes to see that, that you've got military veterans and I can tell you that I have very rarely have had to fire or let a military veteran go. They show up day one with some of the basic skillsets that you want in any employee.

Eric Coffie: 52:13 You know, that's interesting because a lot of veterans ask me about jobs and I see that they were concerned about getting jobs. But you know, what I've found is the companies that do construction or do federal contracting want veterans.

Alex Hernandez: 52:25 Oh, yeah, yeah, yeah. I do know that in some industries certainly like you know, maybe if it's marketing or IT, maybe they don't, they don't like to see that cause they think you're coming with a rough past but certainly in construction, I mean that at least our company that you're, you, you, you come to the top of the pile of, you have a military background.

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Eric Coffie: 52:41 Wow. Wow. That's great to know. That's great to know. Well, Alex, thank you so much for your time today. We appreciate you. Okay,

Alex Hernandez: Good talking to you.

Eric Coffie: 52:48 Same here.

I want to thank Alex for agreeing to be on our show. After running into him at a recent SAME conference down in Miami, he agreed immediately onsite to do it one on one with me out. This story inspired many people out there and not to quit and to continue the fight because it is well worth the effort in the end. As he said, when dealing with a time during a crisis, others would have given up, he'd learned that in the u s Marine Corp said quitting simply was not an option. Thanks for listening to our show today. For all show notes, book recommendations, transcripts from this episode and past.

Visit us at govcongiants.com/podcast