America’s BIMForum – fi rst looked into BIM in 1996. While neither the tools nor the people

were in place then, his patience and persistence paid off when the company began moving forward with creating projects using Virtual Design and Construction in 2006. “I heard John speak, and i t was easy to tell how serious he was about going forward with (BIM),” said Laura Handler, Tocci’s Virtual Design and Construction Manager. “We probably hit the same problems everyone else hits. Some days, it just seemed like nothing worked. But John was always there providing support for the group and reminding us that what we’re doing is critical to the company’s advancement.”Dan Klancnik has been in on the ground fl oor of implementing the virtual design process twice – once at Milwaukee’s C.G. Schmidt and now at Walsh Construction Group. There are vast differences in getting the technology rolling at a regional contractor and making it w o r k at a national contractor as he’s d o i n g n o w , but Klancnik notices at least o n e crucial similarity between the two.“In both cases, it started at the top with a n executive understanding the value of BIM and making a commitment to it,” Klancnik said. “ I t ’ s a big investment and big investments start from the top, so i t has to come from a high level in t h e company.“It’s critically important to have t h a t support, because if you implement BIM, you’re going to be spending money. Between the costs up front and the costs to fi x some things early o n , t h e money can sound sort of outrageous, which is why that support from the t o p i s absolutely necessary to be successful.”

COMPETITIVE ADVANTAGE AFTER OVERCOMING OBSTACLESA change in philosophy made a switch to virtual construction necessary for Hill Mechanical Group, which started working with computerized elements in 2003. Almost immediately, being ahead of its competition from a technological standpoint gave Hill an edge, according t o President Robert Krier.“”We essentially decided that we needed to move from

fabrication to manufacturing,”

Krier said. “Long before the acronym BIM was around, I

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Volume 13, Issue 2 July 2009

As Contractors Seek Stimulus Projects, Questions Remain About What’s Out There And How Quickly They Can Benefi t

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Also In This Issue...Cutting Costs...The Smart Way

Pages 2, 14

Safety First, Last, And In Between

Pages 10-13

Good Grief: Steps To Take Against A Grievance

Pages 4-8

Up In The Air?While the ongoing credit crunch has some

contractors questioning where their next job will come from, one of the perceived solutions to the steep decline in business growth has produced more than its share of questions.

When the American Recovery and Reinvestment Act of 2009 became law in February, the AGC of America was optimistic about the potential for jobs created or saved by the $130 billion set aside for construction related projects. Illinois offi cials saw reason to celebrate, as well. At a press conference announcing that the administration had approved 2,000 transportation projects to be funded by the stimulus, President Obama released a list that included 249 of those projects in Illinois.

If you’re wondering when your company will start to see a share of the work or see something change, you aren’t alone. As industry expert Dr. Thomas Schleifer reminded Builders Association members in April (see related story on page 14), the stimulus may provide some help, but not nearly enough to save contractors in Chicago and elsewhere from cutting back and making some tough decisions about the future.

Recovery.gov, a website set up to help contractors fi nd information on the stimulus and seek opportunities created by it, lists the estimated economic impact on Illinois as 148,000 jobs in the next two years. As funds

from the stimulus have started to fl ow into the Illinois Department of Transportation and other agencies industry members and community leaders have expressed concern that the jobs funded by the stimulus don’t appear to be benefi tting Chicago contractors or minority fi rms.

Highway projects seem to have had the easiest time getting going, as many of them met the “shovel-ready” status desired for projects funded by the ARRA. The General Services Administration (GSA), which hosted a number of Association members at a Forum explaining its construction program late last year, received an added boost from the stimulus both in Chicago and nationwide. In addition, the GSA received $750 million to renovate and construct Federal buildings and $4.5 billion to convert existing Federal buildings to high-performance “green” models.

As a result of the stimulus, the AGC reports positive impact, including notices from members nationwide that work related to the ARRA has prevented layoffs and caused new hires. Through the Stimulus section of its website, the AGC is seeking comments and information from members who have seen these kind of benefi ts.

See Fedbizopps.gov for more information on stimulus jobs, and look for more on the ARRA in future issues of The Builder and The Builder Blast.

2 T H E B U I L D E R

100 Ways To Cut CostsConsider Where Your Company Wants To Be In The Future When Cutting Overhead Today

Financial Feature

see IPD, page 18

BuilderThe

The Builder is published periodically by the Builders Association, a trade association of com-mercial, industrial and institutional contractors

and affiliated industry firms dedicated to quality construction in the Chicagoland area.

2009 Board of Directors

ChairmanJohn Russell

W.E. O’Neil Construction Company

Vice ChairmanR. Lynn Treat

Ryan Companies US, Inc.

TreasurerHoward Strong

The George Sollitt Construction Company

Immediate Past ChairmanJ. David Pepper

Pepper Companies

Builders Association StaffHave a construction-related problem or

question? You may find it helpful to speak direct-ly to the individual who has primary responsi-

bility for a particular area.

Al Leitschuh, PresidentIndustry Relations, Strategic Planning

Mike Schultze, Vice President

Government Relations, Labor Relations, Builders Foundation

Denise Herdrich, Director of Labor Relations

Labor Issues, Membership Recruitment

Kristin Garcia, Director of Client RelationsEducation, Safety, Membership Retention

Andy Cole, Communications Manager

Stacey Kelly, Project Manager

Industry Liaison Activities, Special Projects

Davina Ware, Administrative CoordinatorOffice Management

Tim McPhillips, Accounting

LeeAnn Maton, Communications Intern

Benjamin JohnstonJames McHugh Construction Company

Leon LaJeunesse

Custom Contracting, Ltd.

Michael MozalJoseph J. Duffy Company, Inc.

Mark Rowland

ISEC, Inc.

Greg ScurtoScurto Cement Construction, Ltd.

Builders Association 9550 W. Higgins Rd., Suite 380

Rosemont, IL 60018 (847) 318-8585 www.bldrs.org

Prepare To Reduce Your

OverheadFocus on output, not activitySlow down to do it rightCut paperwork to zero and redesignTrain field managers to recognize and solve problemsPublicize mistakes that cost moneyWhat gets measured gets doneDon’t cut people, cut tasksDon’t expect a quick fix

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BY GLENN H. MATTESONFMI

Now more than ever contractors are searching for ways to cut costs. How you go about cutting costs is just as important as where you look for those cuts.

For example, too often the immediate reaction to the need for trimming costs is to eliminate positions. Unfortunately, eliminating people usually means stifling your company’s ability to do more work.

Another typical cost-cutting move is to charge out overhead to projects or to require job-site offices to do work previously done in the home office. While this may make the home office look more profitable

temporarily, it rarely saves money in the long run.

Instead of taking these short-term steps to cutting costs, begin a systematic examination of your expenses in the office and in the field. Focus on structural improvements, such as reducing turnover, minimizing rework, consolidating overhead functions and increasing input from all of your employees.

Use the following list to generate thinking on possible new areas for cost reduction. All 100 items won’t be applicable to your company, but they provide a good place to start a thorough examination of your expenses.

See COSTS, page 16

Get Teed-Off For Future Industry LeadersFoundation News

Hit the links to help students hit the books by attending or sponsoring the Builders Foundation Golf Outing.

Since 2003, the Golf Outing has been the sole fundraiser for the Builders Foundation scholarship fund, which has provided more than $80,000 to help area students finance their educations. Past recipients have earned degrees in Construction Management or Construction Engineering at prestigious universities throughout the Midwest, and several have gone on to work for Builders Association members. The Foundation received a record number of applications this year and was able to provide renewable $3,000 scholarships to five selected students.

The Builders Foundation would like to thank the following companies for their

support:Verizon Wireless (Event Sponsor)Operating Engineers Local 150 (Golf Shirt Sponsor)Valenti Builders, Inc. (19th Hole Cocktail Reception Sponsor)GradeBeam (Golf Ball Sponsor)McShane Construction Company (Course Refreshment Sponsor)Pepper Construction Company (Course Refreshment Sponsor)Ceco Concrete Sponsorship (Lunch Sponsor)Rabjohns Financial Group (Hole-In-One Sponsor)Installation Specialists (Hole Sponsor)Capitol Consulting Group (Hole Sponsor)

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Chicago Laborers District Council (Hole Sponsor)Clifton Gunderson LLP (Hole Sponsor)The George Sollitt Construction Company (Hole Sponsor)Just-Rite Acoustics (Hole Sponsor)Warady & Davis LLP (Hole Sponsor)

Join us July 29 at the Makray Memorial Golf Club in Barrington. Register online at www.bldrs.org.

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3V O L U M E 1 3 ; I S S U E 2

Scenic Makray Memorial Golf Club in Barrington has played host to the Builders Foundation Golf Outing the last three years.

4 T H E B U I L D E R

Labor News

Handling A Grievance Filed Under Your Labor Agreement

BY RICHARD L. SAMSONOgletree, Deakins, Nash,

Smoak & Stewart

Most if not all of Chicagoland’s construction labor agreements permit employees as well as the signatory union to file grievances over disputes they have with the contractor. Most of these labor agreements contain a familiar procedure leading to a joint labor management hearing and eventually, under certain circumstances, to neutral arbitration of the dispute.

But any contractor who has been around long enough realizes that even the smallest complaint from an employee represented by a union can result in a grievance being filed. More importantly, most contractors also realize that what may seem to be a small matter at first can develop into something much larger — particularly if back pay or work assignments are at issue. That’s why understanding the rights and obligations of both the contractor and the union when a grievance is filed is vitally important.

Knowledge Is Your Best FriendPerhaps the most important advice is

also the most obvious: know your contract. These three simple words of advice necessitate (among other things) knowing the exact steps of the grievance procedure. Most of the area’s labor agreements contain detailed steps for how a grievance must be filed, including who the employer has to meet with and when, as well as the time limits within which a grievance must be filed. Contractors should familiarize themselves with those details because that knowledge will help inform how to tailor the employer’s response to the grievance at each step of the process.

Unlike a formal lawsuit in court, grievances and arbitrations typically do not allow for discovery (the process of learning all the facts supporting the other side’s case). Unsurprisingly, labor arbitration is often called “trial by surprise” or the final frontier of “Perry Mason.” The only real opportunity to find out the nature of the

Richard L. Samson is Shareholder at Ogletree, Deakins, Nash, Smoak & Stewart in its Chicago office. He has represented management and many construction contractors in labor and employment matters for over 20 years, including numerous grievances.

claim along with the supporting facts and the arguments being advanced by the union is in the grievance procedure itself. The steps of that procedure, therefore, take on added importance. Use them wisely — discover exactly what evidence the employee or the union is relying on to support the claim, as well as the theory of the alleged contract violation.

Probing during the grievance procedure assists the contractor in several ways: First, it enables the contractor to determine if it actually did something wrong. If the contractor did make a mistake, the best time to find out is the initial stage of the grievance procedure, rather than waiting for the hearing before a joint labor management committee or an arbitrator. Second, the procedure allows the union to determine whether the grievance truly has merit.

If the contractor has a good case, it should use the grievance procedure to try to convince the union to drop the grievance. At the very least, the union will know what it may be up against when it evaluates whether to pursue the case further. Lastly, full and frank discussion of the grievance helps to “put all the cards” on the table so the contractor can fully evaluate the strengths and weaknesses of its case and help it prepare for arbitration if the case goes that far.

Getting The Information You Need

Using the grievance procedure to its full advantage also means considering whether to make information requests of the union. In a bargaining relationship, the law requires the parties to produce information that will enable the other side to evaluate its position in a grievance.

Information requests must be responded to within a reasonable time period after they are made (unlike a subpoena, which is used for an actual arbitration hearing and need only be complied with at the hearing itself). Determining what a “reasonable period” is varies with the circumstances, but if requests are made promptly, parties

can obtain information while the grievance is making its way through the procedure.

Although the union is most often the one making such requests, an information request made by the contractor to the union in the right case and under the right circumstances can help the contractor evaluate the grievance — and hopefully point out to the union where its case is weak.

Time Limits Have MeaningAs the case winds its way through the

grievance procedure, the contractor also must pay attention to the time limits that the contract sets out for several things: when grievance meetings must be held, when the employer’s response is due, and most importantly how much time the union has to advance the grievance to the next step if the employer denies the grievance.

If the contractor has any procedural objections to the grievance (for example, that the grievance was not initially filed within the time limits for filing a claim) the answer to the grievance at all steps of the procedure needs to include those objections. Many arbitrators often rule that if such objections were not raised in the grievance procedure they are waived by the time the contractor gets to arbitration. Following that same line of thought, and

5V O L U M E 1 3 ; I S S U E 2

Labor Newsto be on the safe side, any substantive objections to arbitration — that the matter is not grievable, for example — should also be noted in the answer in each response.

Strict adherence to the time limits set in the contract for filing grievances and for the pursuit of grievances through the steps of the proper procedure is also important. If a contractor has a history of being lax in this regard, an arbitrator also may find that it has lost its right to apply the time limits in later cases when it tries to do so. Some agreements to mutually extend the time limits may be prudent and inevitable, but they should be the exception rather than the rule, and the reasons for them should be appropriately documented.

Adhering to the strict time limits of the grievance procedure also forces the union to be timely with its cases so that the contractor is not dealing with old disputes that have been “hanging around.” Old grievances have a habit of creating numerous problems for employers not only because back pay may be involved, but also because witnesses may become unavailable, memories may fade or important documents may get lost.

Should We SettleParties often settle grievances before

they reach the later stages of the procedure. Many times the decision to settle has nothing to do with the merits of the case. Even with a good case, contractors simply realize that the risks of proceeding forward with the grievance do not justify the costs if they can resolve the matter through a reasonable solution or at a reasonable price.

But if the contractor is considering settlement, it should pay careful attention to the prepared settlement documents. Particularly in cases where the dispute could arise again, the contractor must ensure that the settlement agreement recites several stipulations — that the contractor is not admitting to a violation of the contract, that it is preserving all of its rights and defenses, and that the settlement is not precedential and cannot be used in any future proceedings.

Take The Joint Hearing Seriously

If the grievance cannot be resolved in

the early stages of the grievance procedure, most area construction agreements require that it be advanced to a hearing before a joint labor and management grievance panel. Although these are sometimes also known as Joint Grievance Committees, Labor Management Committees or Joint Arbitration Boards, they all have a number of important things in common. They must be comprised of an equal number of members from management and labor, and, more importantly, the findings of the joint panel are final and binding on the parties unless the contract specifies otherwise. If the contractor loses before the joint panel, there is no recourse to arbitration. Significantly, the courts have treated the decisions of joint panels with the same deference given to arbitration awards, meaning that a joint panel decision is as difficult to overturn on an appeal to the courts as an arbitration award is.

The consequence of that latter point is critical and requires that an employer confronted with a joint panel hearing treat it seriously. The employer must be prepared to go in front of the panel on the day of the hearing with all its witnesses and documents substantiating its position on the grievance. Contractors are advised to get a copy of the rules that apply to the joint panel’s hearing and review them. If you need an extension of time or postponement,

ask for one in writing BEFORE the actual hearing date (and in the time required by the panel’s rules). Document everything and don’t be reluctant to ask the identity of the management representatives on the panel, and to talk to them before the hearing date about your case. You can be sure that the union is doing the same with its representatives.

Ultimately, if a contractor doesn’t present its case correctly or fully to the joint panel, it can easily lose the grievance no matter how good the case may be. And, if the case involves a significant amount of back pay and/or the reinstatement of a discharged employee, or a reassignment of work from one union to another, the harm can be substantial. Therefore, if the case warrants it, contractors should consider consulting with an attorney to assist in the preparation of the case. Attorneys are generally not permitted to present the case before the joint panel, but are permitted in the hearing room to offer guidance and suggestions to the contractor.

Arbitration Of The GrievanceMany times, even though the employer

has a good case, it’s unlikely that the union will vote in favor of denying the grievance. In that event, the contractor should at least

See LABOR, page 7

6 T H E B U I L D E R

Answers To Your Labor Questions

Labor News

Keeping Track Of The Paper TrailProper Documentation Key When

Trade Union Brings Grievance

This is the fourth in a series of best practices articles written by the Builders Association’s Director of Labor, Denise Herdrich. The Builders Association is one of the few in Chicagoland with a full-time Director of Labor.

Questions about labor should be directed to Denise at 847.318.8585.

BY DENISE HERDRICH

Most unresolved labor disputes do not result in strikes. Instead, the union fi les a grievance against the employer. In most cases, a strike over a grievable issue would be illegal.

Grievances are fi led for a variety of reasons, most of which are valid concerns for at least one of the parties involved (the employer, the union, individual employees). Be aware that the grievance you are handling for your company could have serious ramifi cations to other parties, including other contractors. What may not seem all that serious to your company could have a serious impact on an industry wide basis and have much greater signifi cance.

The grievance board consists of an equal number of management and labor representatives.

Grievance proceedings are very much like court cases. Each party has a point of view to prove in front of the grievance board and the winning party is usually the one who has done the most extensive and thorough preparation.

If the board deadlocks, the matter can be taken to arbitration and tried again. The arbitrator’s decision is fi nal and binding.

Procedures For Protection Throughout the entire process, but particularly at the joint

committee hearing and/or arbitration levels, the union is represented by highly skilled and experienced representatives. It typically documents all cases and prepares a strong case in favor of fi nding a violation. The single most important factor in winning a grievance is keeping consistent, accurate records on each employee.

As big an inconvenience as a grievance may be for contractors, especially during busy summer months, attendance at the pre-grievance meeting and the hearing itself is an absolute necessity if the contractor expects to prevail. The joint grievance committee can make a determination only on the facts presented to it, and if the contractor is absent, the “facts” will be one-sided.

Pre-Grievance MeetingGrievance procedures normally require that a meeting be held

between union offi cials and company representatives, and both parties be represented by individuals who are authorized to settle the grievance. At this meeting you will be made aware of the facts that the union contends constitute a violation of the agreement.

Attending The Grievance Hearing If the pre-grievance meeting does not resolve the grievance, a

hearing will be scheduled before the joint grievance committee. Again, under committee rules, a case may be decided even if one party fails to attend. Without the employer being present

and prepared, the committee cannot consider the employer’s set of facts. Failing to attend the hearing, therefore, is the fi rst step toward disaster.

The contractor members of the committee are understanding of contractors interests and will interpret the contract from a management perspective. A different approach can be expected of the union members of the committee. However, the committee as a whole has no power to change the meaning of intent of the contract and will vote according to the facts.

Attendance at the hearing without proper advance preparation is the second step to disaster. Following the checklist below may be of some assistance in the preparation of a case before the committee:

Describe what was unique about the project that caused the incident.Defi ne efforts that were made to resolve the situationWas the labor contract or area practice on this matter reviewed?What relevant documents or witnesses exist that may be important for the joint committee to consider?

If there is any ambiguous portion to your presentation or factors that are not understood, it is recommended that you get in contact with people knowledgeable about the contract and area practice. The contractor must be prepared to present his arguments, witnesses and supporting documents.

After The Committee HearingAfter hearing all of the evidence, the committee retires to

executive session and decides the case. When the committee is unable to reach a majority decision and a deadlock occurs, the union and the employer each have the option of pursuing the matter to binding arbitration. In some important cases that impact the entire industry, both parties will want an arbitration decision. Arbitration hearings are more formal than proceedings before the joint grievance committee. Contractors who are parties to cases which advance to the arbitration level should retain an attorney who is experienced in such matters.

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Labor News

Summary PointsA grievance is only a claim that the company has violated a provision of the labor agreement. Investigate each grievance to determine the actual facts. If the contract provision is not clear, contact the Builders Association for an interpretation. If there has been a violation committed by the company, try to reach a settlement with the Union.Advise the Association of the grievance to obtain help and advice in presenting your case.The Grievance Committee is willing to advise contractors regarding the grievance, but you must attend the grievance hearing to keep a decision from being reached without your input.Keep good records regarding discharges, suspensions and layoffs including payments. Keep good records of warnings for violations and send copies of letters to the Union.Keep the business agent informed on warnings, employee qualifications and any personality conflicts between employees and company management.Each company should issue rules which specify company policies on the job site. All employees should get a copy of the rules and sign an acknowledgment that they have read and understand them.Be sure to attend pre-grievance meetings and make sure you understand exactly the basis and facts of the claimed violation.Be sure to use the Builders Association as a resource.

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LABOR, from page 5hope that the management members of the panel vote in favor of the contractor, resulting in a deadlock which triggers the union’s right to seek neutral arbitration.

Most contracts also set forth the time limit for when the union must seek arbitration after a joint panel deadlock. The contractor again should hold the union to those time limits. Failure to do so could mean that the defense is waived and could spell trouble for trying to enforce them in future cases. While the timeliness issue will have to be resolved by the arbitrator, the contractor should nonetheless raise its objections in its correspondence with the union on the issue.

Once the matter is moved to arbitration, having the advice of legal counsel is always recommended. Arbitration is a formal hearing akin to a trial. While the rules of evidence applicable to the courts do not automatically apply to arbitration (unless the labor agreement says otherwise) most arbitrators apply some level of evidentiary requirements, particularly in discharge cases. The union is likely to use an attorney to handle the case. Even if it doesn’t, the odds are that the business representative who handles the case for the union will almost certainly have more experience handling arbitrations than a company representative.

Arbitration can be a unique experience for a contractor who has never been through one. As with any trial, preparation is key. A thorough, working knowledge of the facts and legal theories of the case are crucial to the defense of any grievance. In light of the fact that most labor agreements explicitly state that the arbitrator’s award is final and binding, this preparation becomes even more important. Options are extremely limited if the arbitration is lost. Like joint panel decisions, arbitration awards are extremely difficult to overturn on appeal, so in many respects the arbitration is truly a “one shot deal.”

ConclusionOf course, the best situation for a contractor is to not have any

grievances filed in the first place. However, knowing the terms of the contract, paying careful attention to the details of the grievance, fully exploring the nature of the case in the grievance procedure, understanding the union’s theory, and sticking with the contract’s time limits all will help in the defense of the grievance if it has to move forward.

Labor News

Bricklayers Cut Back Wage PackageEarly summer is labor negotiation

season in Chicagoland, and the Builders Association’s Denise Herdrich has been keeping members constantly updated on development.

Bricklayers District Council No. 1 agreed to a one-year extension agreement with a wage package increase of $3.25 last year. The agreement was modified in an uprecedented action by Bricklayers District Council President James Allen, who decreased the wage package from $3.25 to $2.75.

“Since I became President five years ago, my goals have been simple – work hard to get the best wages, benefits and working

conditions for my membership, while protecting work opportunities by trying to make sure the contractors’ businesses remain viable and profitable,” Allen said in a letter to associations. “I am hopeful this step will accomplish those goals.”

The Plumbing and Mechanical Contractors Authority of Northern Illinois (PAMCANI) met with Plumbers and Pipefitters Local 501 June 19 and reached a deal on a three-year pact that has been ratified by the Union. The agreement calls for pay and benefit increases of $2.50 the first year and $2.75 each in the second and third years. Local 501 membership had previously rejected what management

called its “best, last and final” offer.

In other labor negotiations impacting area contractors:

Ironworkers Local 1 (Cook, DuPage, Lake) has reached a three-year agreement with economics of $2.76, $2.75 and $2.85. Ironworkers Local 63 (Cook, DuPage, Kane, Lake, McHenry) reached an agreement including increases of $1.50 (effective June 1), $1.25 (January 1, 2010), $2.75 (June 1, 2010) and $2.85 (June 1, 2011). Foremen will receive an extra 25 cents effective June 1, 2011.

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8 T H E B U I L D E R

(Above, left) McShane Construction Company representatives Jim McShane and Vic Bishop accept a Safety Excellence Award from the AGC of America. (above, center) Jack Aldworth of William J. Scown Building Company accepts a Best Of Class Award from Builders Association Board Chairman John Russell of W.E. O’Neil Construction Company. (above, right) Association President Al Leitschuh presents Tessler Construction Company’s Safety Recognition Award to Ron Tessler. (right) A group shot of Safety Recognition Award winners for 2008. Read more about the Safety Awards and the Spring Meeting later in this issue, beginning on page 10.

9V O L U M E 1 3 ; I S S U E 2

Editorial

AGC Chief: EFCA Would Harm Both Union, Non-Union ConstructionSTEPHEN E. SANDHERR

Chief Executive Officer, AGC of America

Thanks to Sen. Arlen Specter’s change of party, prospects are improving for the Employee Free Choice Act, or Card Check.

Democrats expanding majority means passage of “compromise” legislation is significantly more likely. While such a compromise may sound reasonable, there is nothing to stop congressional leaders from reverting back to much of the original Card Check language after that first crucial Senate vote.

Ironically, if Card Check-by-another-name were to pass, one group that stands to be hurt the most is union workers, especially construction workers, in states like Pennsylvania where region-wide collective bargaining is relatively common.

That is because whatever is ultimately enacted is sure to retain requirements that federally-appointed arbitrators set pay and work rules if employees and employers cannot complete a contract within 120 days. While the intent of that provision is to ensure that newly unionized businesses don’t delay negotiations, the ramifications for union construction workers are severe.

Having Washington-appointed officials set contract terms for companies would make it harder to maintain collective bargaining through area agreements. Those area agreements set wages, hours, and work rules for union workers for a variety of firms in a given region. The agreements also allow union members to work for different employers during their career because their health and pension benefits remain portable and reliable.

Newly unionized employers forced into arbitration are likely to have wages and benefits different than those in the area agreement. If those are less than what is in the area agreement, the ability to seamlessly

move from one employer to the next will be undermined. Union workers will instead be forced to choose between staying with a single company even when there is no work or reduced wages and disrupted benefits contributions.

A final bill will lead to increases in jurisdictional disputes that delay employment opportunities for union workers. The bill may encourage unions that are successful in organizing workers to claim work on a multi-craft basis. This will inevitably lead to multiple unions at a single job site claiming that particular work, and the pension contributions that come from it, belong to them.

These kinds of disputes traditionally lead to work stoppages that idle union workers and threaten the long term viability of any manner of projects. Worse, because these delays and disputes lead to increased costs in fields like construction, private owners would be more likely to avoid using union contractors with Card Check than they are today, needlessly punishing union construction workers.

Many union leaders and many union firms also are under the mistaken impression that the card check bill will bolster union pension funds. The theory is that if more employees are organized in the industry, there will be more pension contributions made into union funds that will help stabilize them in an uncertain investment environment.

However, employers whose workers are organized under Card Check are likely to maintain their own benefits plans during the negotiations for that first contract. Since there is no guarantee that arbitrators will force employers to contribute to union plans if existing benefit programs are found to be adequate, the legislation may actually weaken union pensions, instead of strengthening them.

Backers of Card Check, or the inevitable

Associated General Contractors of America Chief Executive Officer Steven Sandherr, shown here at the Builders Association’s Annual Meeting in 2006, wrote this editorial for the Washington Examiner.

For more on Card Check and to learn what you can do to help the AGC look out for you, visit www.agc.org, click on Advocacy and view the Legislative Action Center.

“compromise,” should be careful of what they ask for. The price for a quick boost to national union enrollment is simply too high for construction workers. After all, if new and existing unionized workers get caught in jurisdictional disputes, see new risks to their pension contributions or can’t enjoy the benefits of area agreements, no good will come of making it easier to unionize.

10 T H E B U I L D E R

Schumacher, Awards Put Focus On SafetySpring Meeting

Keynote speech Explains Economics Of Sound Safety PoliciesBY LEEANN MATON

Award presentations and straight talk about safety took center stage at the Builders Association’s Spring Meeting, held May 27 at the Hyatt Rosemont.

Safety Committee Chair Paul Flentge of Pepper Construction Company presented the Builders Association’s Safety Awards. Five Best of Class Awards and 20 other Safety Recognition Awards honored companies for their dedication to developing and promoting safety on their job sites. (See sidebar for a complete list of winners).

John Schumacher, of Assurance Safety Consulting, gave the keynote address. In his presentation, – “The True Cost Benefit of Safety: Is the Effort Worth It?” – Schumacher explained that implementing measures to promote safety could carry big financial benefits. Schumacher urged contractors to treat the cost-benefit measurement of safety practices “like you treat your financials.”

“Look at the money you could be saving,” he said, after explaining how better-than-average Experience Modification Rates (EMRs) and low incident rates could save contractors substantial amounts of money in the long run. “It’s the same money. It’s a matter if you want to work for it or if you want to save it through strategic safety programs.”

The EMR, a numerical rating based on a company’s three-year history of incidents, helps determine a company’s workers compensation costs, which Schumacher indicated could have a sizable impact on the bottom line.

“If you have some bad cases, it really does stay with you,” he said. “I look at this like high school – if you get a reputation it’s going to stick with you for at least three to four years.”

Although Shumacher’s presentation mentioned that a 1.0 rating is an average EMR, he said he preferred to see companies he works with have an EMR around .8

or .85. His presentation also focused on incident and severity rates, as well as the often-unseen indirect costs of injuries.

“In some cases, you’re looking at hundreds of thousands of dollars if you can click your experience mod [EMR] down a little bit,” he said.

“What I challenge everyone in this room to do is compare yourself to industry averages” with regards to injury rates, he added. He issued a challenge for companies to “try to get better.”

In terms of incidents, his presentation demonstrated that, as he put it, “frequency breeds severity.”

“The difference between a near-miss and a serious case is luck, and you can’t control luck,” he said. “It’s about affecting how people work.”

Indirect cost of losses, which Schumacher said companies don’t often measure because they don’t want to see the cost, nonetheless clearly makes a difference. He estimated that these costs – including investigation time, legal costs, loss of production due to morale, damaged equipment, and more – often measure between two and 10 times the amount of direct costs of incidents.

Schumacher concluded his presentation

by encouraging companies to implement effective safety programs. Currently, he said, programs are often “a series of random activities that are set in place without regard to goals or results,” and focus on OSHA compliance rather than actual loss.

“I like to flip that,” he shared, saying that companies should focus instead on the goal of loss prevention. “If you do that, the OSHA compliance with naturally follow.”

Bob Smith of the Levy Company was recognized for his accomplishments during 10 years as Chairman of the Safety Committee (see page 11). During that time, he helped the association develop a partnership program with OSHA and instituted collaborative roundtable forum events which allow contractors to share solutions to safety problems.

Although Smith mentioned that discussing safety issues at the meeting was like “preaching to the choir,” he said that “we have too many people who aren’t here, who don’t get it.”

To learn more about the winners of the Builders Association’s Safety Awards, or to view a copy of Schumacher’s keynote presentation, please visit www.bldrs.org.

Twenty-five companies received safety awards from the Builders Association for their commitment to developing and promoting safe working practices in 2008 (see p. 15). John Schumacher of Assurance Safety Consulting delivered the Spring Meeting’s keynote speech, explaining how spending money on goal-oriented safety programs can actually save companies money in the long run. Schumacher can be reached at jschumacher@assuranceagency.com.

11V O L U M E 1 3 ; I S S U E 2

Spring Meeting

BY LEEANN MATON

For Bob Smith, promoting safety in the construction industry isn’t just a good idea, it’s a duty.

“There’s a moral obligation you have to promote a safe work site,” said Smith (right) at the Spring Meeting.

Smith, who describes himself as “passionate about safety,” is the Safety Director of the Levy Company, where he’s worked since 1992.

He also acted as chairman of the Builders Association’s Safety Committee for ten years. As he received an award from Association Chairman John Russell for his accomplishments with the Safety Committee, he praised the contractors awarded for their commitment to safe workplaces, but cautioned them to remain vigilant of the “moral responsibility.”

“Judging by the number of award winners here, we’ve done a good job,” Smith said to those assembled, including representatives from the 25 companies who earned Builders Association Safety Awards for demonstrating strong safety practices in 2008. “It’s an ongoing battle, but we’re preaching to the choir.”

However, Smith was concerned with the “too many people who aren’t here, who don’t get it,” as he put it. “What we have in this room is the potential to make safety even more important, to take it to the next level.”

As Safety Chair, Smith helped to institute contractor safety forums, which bring together association members four times a year for a roundtable discussion. The collaborative environment allows companies to learn from peers about how to handle safety problems, with the goal of implementing the best and safest practices across the industry.

According to the most recent fi gures from the U.S. Bureau of Labor Statistics’ Census of Fatal Occupational Injuries, around 1,200 construction industry workers suffered fatal occupational injuries in 2007.

The census also found that although this number had declined slightly from the year before, construction still caused the most fatalities of any private sector industry, and that workplace deaths in the subsector of building construction rose 11 percent from 2006.

Smith stressed that contractors need to get into the habit of mentoring and training their colleagues, coworkers and peers in order to promote safety in order to make a difference on the industry. He helped start one such program – the Builders Association’s Safety Partnership with the Occupational Safety and Health Administration (OSHA).

The partnership allows member contractors to avoid fi nes for minor OSHA violations found on a job site, as long as

the violation is resolved right away. It’s also defi ned by Bronze, Silver and Gold levels of membership, encouraging already strong safety programs to improve.

The Partnership has grown from nine companies to 21. Smith takes pride in the fact that the Partnership established cooperative ties with the goal of making construction sites safer places to work.

“You’ve got to think of OSHA as your friend,” Smith said at the meeting. “They have the exact goal we do – to keep people from getting hurt.”

Safety Award Winners, 2008Best of Class Award

Bulley & Andrews, LLC (Over 500,000 work hours) Climatemp, Inc. (250,001-500,000 work hours)

Ryan Companies US, Inc. (70,000-250,000 work hours) William J. Scown Building Company (Less than 70,000 work hours)

Custom Contracting, Ltd. (Most Improved)

Safety Recognition AwardAirtite Contractors, Inc.

Case Foundation CompanyContinental Electrical Construction Company, LLC

Falk PLI Engineering & Surveying, Inc. Frank H. Stowell & Sons

Glenn H. Johnson Construction CompanyGrove Masonry Maintenance

Joseph J. Duffy CompanyLawdensky Construction Company

The Lombard CompanyMcShane Construction Company

Monson-NicholasPepper Construction Company

Tessler Construction Company, Inc.Thatcher Foundations, Inc.

Tyler Lane ConstructionUjamaa Construction, Inc.

Valenti Builders, Inc.W.B. Olson, Inc.

W.E. O’Neil Construction Company

10-Year Chair Of Safety Honored At Spring Meeting

Safety News

Top 11 Focus Four Citations (2008)

Cheating Death

Focus Four Presenation Lays Out Simple Steps

To Avoid Construction’s Biggest Mistakes

In 20 years as a construction safety professional, Jim Goss has heard all of the numbers before. That doesn’t, however, make them any easier to digest, or any less tragic.

“Construction workers are five percent of the workforce,” he said. “However, we account for 57 percent of all workplace injuries in the country, 21 percent of all fatalities and 19 percent of all worker’s compensation claims.

“Change has to come, and it has to come from the AGC members.”

Goss – Senior Vice President of Construction Safety Management, Inc. in Getzville, New York – was one presenter for the AGC of America’s Focus Four Safety Training. The free seminar was presented at DePaul University’s O’Hare Campus, and was designed to help construction companies avoid the four issues that most frequently cause death on a jobsite:

FallsElectrocutionsStruck-bysCaught-betweens

“We’re killing 1,200 people per year, and it’s no accident that OSHA inspects us 54 percent of the time,” Goss said. “They should inspect us and we have to be aware of what needs to change in our industry. While we’re sitting in this classroom, four people are going to die in our business. This is about saving lives.”

The program was developed and funded with the help of the OSHA’s Susan Harwood Grant. Despite special emphasis by OSHA and targeted enforcement programs, the Focus Four have been responsible for over three-quarters of the construction-related

••••

deaths in the United States in the last decade.

Goss and co-presenter Bob Emmerich of Safe-Con, LLC went through the major hazards in each category and named ways attendees could avoid them. One over-arching theme was the importance of construction companies to stay vigilant and establish a culture of adhering to safety standards within each company.

While the safety of its workers should be a compelling enough reason to focus on eliminating these hazards, presenters went over strong financial reasons to do the right thing. Bureau of Labor Statistics numbers indicate that 85 percent of all OSHA citations and 90 percent of all fines are related to the Focus Four. The presentation noted that the average lost-time accident costs a company close to $38,000.

Companies may want to treat safety information as proprietary and closely guard any facts surrounding a lost-time or fatal incident. Goss believes it’s important

for companies to share information and for safety professionals to get as much information as they can from instances where things have gone wrong.

“There’s a tremendous amount of information out there,” he said. “We should share that information, and learn from the mistakes of others. No one should die from the mistakes that we make.”

For a copy of the presentation or more on this program, contact Builders Association Director of Client Services Kristin Garcia at 847-318-8585.

Jim Goss, Senior Vice President, Construction Safety Management, Inc.

12 T H E B U I L D E R

13V O L U M E 1 3 ; I S S U E 2

Kroeschell, Inc.3222 N. Kennicott Avenue, Arlington Heights, IL 60004

312.649.7980; www.kroeschell.comContact: Greg Salzman, Asst. Treasurer

For 130 years, Kroeschell, Inc. has been a recognized leader in mechanical and electrical engineering, as well as industrial outsourcing. The company is a commercial and industrial contractor and design/builders for: HVAC; Piping; Plumbing; Electrical; and Analog/digital control systems. Kroeschell also specializes in temperature controls, engergy management, plant operations and 24-hour mechanical maintenance.

Lakewood Carpentry Services, Inc.1540 Hannah Avenue, Forest Park, IL 60130

708.771.2150; Contact: Glen Zawadzki, Vice PresidentLakewood Carpentry is a metal stud, drywall, acoustic ceiling

and carpentry company that specializes in commerial, retail and industrial projects.

Medina Builders, Inc.17W050 Woodland Avenue, Bensenville, IL 60106

630.595.8476; Contact: Richard Medina, PresidentMedina Builders is a carpentry service company, specializing in

casework, millwork and solid surface installations.

Rose Paving Company7300 W. 100th Place, Bridgeview, IL 60455

708.459.5515, www.rosepaving.comContact: Cynthia Berryman, Controller

Rose Paving Company has specialized in parking lot maintenance since 1974. With headquarters in Bridgeview, convenient satellite locations and a network of partners around the nation, Rose Paving is able to work closely with you and deliver unique solutions.

Stanton Mechanical Inc.170 Gaylord, Elk Grove Village, IL 60007

847.824.9901, www.stantonmechanical.comContact: Jim Stanton, Owner

Stanton Mechanical specializes in repair and replacement of plumbing, sewer, water mains, pumps, traps and HVAC equipment. We are proud members of the Pipefitters Local 597, Plumbers Local 130 and Boilermakers Union Local 1.

New MembersAdvent Systems., Inc.

435 W. Fullerton Avenue, Elmhurst, IL 60126630.532.5230, www.adventsystems.com

Contact: Robert C. Rodriguez, Project ManagerAdvent Systems, Inc. is an electronic systems contractor,

handling security and management systems, network cabling, noise masking, sound/paging, audiovisual and service/support.

AutodeskW74 N1050 Montgomery Avenue, Cedarburg, WI 53012

262.387.0148, www.autodesk.comContact: Patrick Sharpe, Key Account Executive

With Autodesk integrated design creation and building information modeling tools, building professionals can optimize resources, control costs and minimize the risk of errors. Nine million professionals in 185 countries are using Autodesk products to save time and money.

Automatic Building Controls, Inc.3315 Algonquin Road, Suite 550, Rolling Meadows, IL 60008

847.385.2250, www.ab-controls.comContact: Glenn Smith, Chief Operating Officer

Automatic Building Controls is an HVAC temperature controls contractor that designs and installs building automation systems using certified field engineers, union electricians and LEED AP designers.

Brown & Momen, Inc.823 E. Drexel Square, Chicago, IL 60615

773.493.3743; Contact: Ernest Brown, PresidentBrown & Momen, Inc. is a general contractor and construction

manager specializing in program managment construction claim, municipal work and the self-performance of carpentry work.

Code Red LLC325 W. Huron, Suite 712, Chicago, IL 60654

312.492.4843, www.coderedcpr.comContact: Ben Wollitz, Vice President of Sales

Code Red is one of only six National Training Centers for the American Heart Association and provides CPR/AED/First Aid and blood borne pathogen training.

Fettes, Love & Sieben4325 N. Lincoln, Chicago, IL 60618773.935.7260; www.flsplumbing.com

Contact: Scott Hoffman, Vice PresidentFettes, Love & Sieben is a union plumbing contractor, located

in Chicago and presently employs approximately 50 tradesmen, including plumbers, laborers and operating engineers. Our scope of work is commercial, residential, industrial piping, process piping, remodeling and design-build plumbing.

Association News

We Want To KnowHave a project you’d like to see featured or a subject you’d like to see written about in The Builder or The Builder Blast? We’re always open to suggestions! Contact Communications Manager Andy Cole at 847.318.8585 or acole@bldrs.org.

14 T H E B U I L D E R

Association News

Reversing The RecessionSchleifer Tells Contractors Market Troubles Don’t Have To Dictate Their Business Practices

Dr. Thomas Schleifer (left) has delivered his presentation on

prospering in cyclical markets from coast-to-coast, and brought his in-

sights to BA members in April.

Since late 2008, pundits and prognosticators have given long-winded opinions on the current credit crunch, when it might end and what businesses should do in the meantime. While the issue is complicated enough to use a lot of words, it can also be summed up in two.

“It sucks,” said Dr. Thomas Schleifer, who has delivered presentations around North America detailing how construction companies can prosper even in a crisis. “I know it sucks. It may be tempting to just load up on cheap work and take enough to get through it. “Even now, though, there are things you can do to help improve your profit margins, and that’s the key. If you can keep your profit margins healthy, you can not only survive these market changes, you can do well.”

Schleifer’s presentation – Prospering In Cyclical Markets – provided Builders Association members with a blueprint for staying profitable even as numbers for the industry as a whole continue to sink. He outlined basic strategies contractors can take to keep profit margins at their current level.

In particular, he cautioned against a company taking too many jobs a company wouldn’t normally do just to pay the bills and discouraged contractors from looking at work stemming from the stimulus package as a cure-all.

“The stimulus may very well be the bane of our existence as contractors,” Schleifer said. “There’s a lot of talk about the good it will do for the industry and we seem to be convinced that it’s going to rescue us. It will help some, but it’s really too little, too late. We can’t depend on it.”

Schleifer compared the amount of work a contractor has had in recent years to water in a bucket. With the downturn evaporating a good portion of that bucket, he stipulated that the stimulus is capable of putting some water back in, but not enough to get a contractor to the level it was at before the downturn. The same would be true of work stemming from Chicago’s Olympic bid.

Rather than depend on those outside factors, Schleifer suggested trimming workforce and resources now to the level a contractor thinks it can cover two or three years from now, depending on when the downturn ends.

“It’s awful to think about letting go of good people,” he said. “At the same time, if you think that two years from now you’re going to have three-quarters of the workload you have today, you’re better off getting to a three-quarters staff now. The stimulus and the Olympic work might improve your margins, but they aren’t going to save you from doing what you have to do.

“You have to constantly be working to increase productivity and improve your balance sheet. Your credit ratings are going to be based on your balance sheet.”

A strong plan for the future is important to any business, but it’s even more important during an economic slowdown. Schleifer told attendees how plotting a course for viability until the end of

the recession can position them for greater success when the market does rebound.

“Nowhere is it written that just because the market’s bad, you have to lose money. It’s important that you do what you need to do to keep your profit margins healthy.”

15V O L U M E 1 3 ; I S S U E 2

The exterior of the Illinois Holocaust Museum & Education Center in Skokie, constructed by Bulley & Andrews, LLC. The museum opened in April and is dedicated to preserving the memories of those lost in the Holocaust, as well as teaching visitors about genocide in today’s world.

Member MilestonesMcShane Construction Company

recently completed the first phase of Senior Star at Weber Place in Romeoville. This phase includes 77 Memory Care apartments in a two-story facility encompassing 44,354 square feet. The second phase will be a three-story facility containing 271 independent living and assisted living apartments. McShane is also completing three seperate libraries, a health case area, two spacious dining rooms and an indoor pool at this facility, which is designed to enrich the lives of active seniors.

Builders Association members served as General Contractor on three of the four projects that won 2009 Merit Awards from the Chicago Building Congress. W.B. Olson, Inc. was a winner in the under $10 million category for Holy Family Lutheran School, Pepper Construction Company won best Rehab project for the Palmer House Hilton and Bulley & Andrews, LLC was honored in the New Construction-Suburbs category for its work on the Jewish Reconstructionist Congregation Synagogue.

Berglund Construction Company was nominated for Merit Awards in both the under $10 million (Montgomery Village Hall) and Rehab (University of Chicago, D’Angelo Law Library) categories. Bulley & Andrews, LLC earned a nomination in the New Construction-Chicago category for the DePaul University Monsignor Andrew J. McGowan Science Building, and nominees for best Rehab project included Pepper Construction Company (Pepsico Sustainability Center) and James McHugh Construction Company (Blackstone Hotel).

In April, concrete crews from James McHugh Construction Company topped off the final floor of Aqua, one of Chicago’s newest skyscrapers. The final bucket completed the 82nd floor of the 874-foot highrise, whose bold design has already recieved international attention for its signature wave-like balconies, each unique in shape. The mixed-use building will contain a hotel, aparments, condominums and retail space upon completion.

Ten Builders Association members and their parent companies were named among the Top 400 Contractors in the nation by

Engineering News-Record Magazine. They included: Clark Construction Group (14th); Opus Group (44th); Pepper Companies (46th); McShane Construction Company (74th); Ryan Companies US, Inc. (76th); James McHugh Construction Company (83rd); W.E. O’Neil Construction Company (110th); Weis Builders (231st); Bulley & Andrews, LLC (241st); and Berglund Construction Company (353rd).

Go Global Office Suites in Northbrook – constructed by Valenti Builders, Inc. – earned a Merit Award from the National Association of Home Builders Commercial Builders Council. Valenti was recognized in an issue of Commercial Builder Magazine, and the same project won an Excellence in Masonry Award from the Illinois Indiana Masonry Council.

The Association of Subcontractors and Affiliates (ASA) recognized Bulley & Andrews, LLC as Outstanding General Contractor of the Year during its 15th Annual Awards Dinner in May. Bulley & Andrews was nominated by another ASA member before being selected by the ASA’s Board of Directors.

The much-anticipated Illinois Holocaust Museum & Educational Center, built by general contractor Bully & Andrews, LLC, opened this April in Skokie almost three years after its June 2006 groundbreaking. Built in collaboration with survivors, the the 65,000 square foot facility is the largest Holocaust memorial center in the Midwest.

It is dedicated to preserving the memory of Holocaust victims as well as combating intolerance and teaching about genocide in today’s world.

The Lombard Company is nearing completion on a renovation of a Jewel-Osco in Hickory Hills, and finished a two-story Discount Tire facility in Batavia early in 2009.

Daniel Queenan was named President and CEO of Opus North Corporation and O.R.E. Development Corporation in April after four years with the company. In his new role, Queenan oversees operations in Chicago, Milwaukee, Columbus and Indianapolis.

W.E. O’Neil Construction Company broke ground in January on Columbia College’s new 35,500-square foot media production center. On track for silver LEED certification, the production center will feature two sound stages, a motion-capture studio and an animation lab, in addition to classroom and storage space. The project will be the first new-construction academic building in the South Loop college’s 118-year history.

McShane Construction Company recently began work on a new warehouse/distribution center for Medline Industries, Inc., making the project McShane’s third build-to-suit assignment from the medical supply manufacturer. The facility will be located in Mansfield, Massachusetts.

16 T H E B U I L D E R

Financial Feature

Auto and Truck1. Eliminate business and personal combination (start with topmanagement).2. Get serious about preventive maintenance plan (evaluatetotal cost, including repair costs).3. Investigate lease-purchase options.4. Use decals instead of special paint.5. Employ part-time mechanic.6. Renegotiate with dealer each year.7. Tack on with other company for fleet purchase.8. Pay employees mileage for use of their vehicles.9. Use trailers instead of vans or pickups.10. Invest in GPS tracking systems to reduce insurance premiums and improve behavior.

Bad Debt11. Be specific in contracts; include late penalties.12. Charge interest; ask for notes on old receivables.13. Use legal resource, special attorneys.14. Purchase accounts-receivable insurance.15. Require joint-pay letters.16. Send Form 1099.

Communications17. Ask phone company to analyze costs.18. Eliminate double or triple screen.19. Issue credit cards instead of cell phones.20. Require vouchers for long-distance calls.21. Eliminate “beeper” service.22. Review cell phone use or reduce the number.23. Review need for portable e-mail.

Depreciation24. Keep equipment longer (freeze capital expenditures with dates).25. Move to slower depreciation schedule in unprofitable years (but not vice versa) to “show” increased profitability.26. Overhaul existing equipment or facilities instead of purchasing.27. Review with a qualified CPA the opportunities in the new ARRA stimulus plan: a. Bonus depreciation of 50 percent; b. Section 179 depreciation; c. General depreciation.28. Accelerated write-offs will be allowed beginning in 2009.

Insurance29. Get quotes with comparable specifications and review annually; consider self-insurance in some areas.30. Ask for help from insurance company to improve safety and reduce cost of workers’ compensation.31. Examine workers’ compensation classifications.32. Look for possible overlapping coverage.33. Group medical coverage (perhaps including life and disability): a. Look for larger group to be a part of (association plans are usually less expensive); b. Build benefits that you

really want; c. Consider portion employee paid.34. Liability, casualty coverage: a. Increase deductibles; b.Check for areas in which you are over-insured (reduced inventories).35. Park unused vehicles, remove tags and terminate insurance.

Interest36. Reduce working capital needs; reduce inventory, work in progress, accounts receivable, retainage; negotiate improved accounts payable.37. Negotiate interest rates; shop for variable down rates.38. Maintain current cash-flow projections to evaluate least borrowing amounts and time.39. Return borrowed money to bank when possible, not just at end of term (keep small balances).40. Consider reduction in volume (dropping work of marginal profitability) to reduce working-capital needs.41. Eliminate company credit cards.42. Eliminate “miscellaneous” account.

Professional Fees 43. Don’t get audited statements unless bank or bonding company absolutely requires them; try an unaudited statement and see what happens (consider qualified opinion).44. Ask accountant what information is needed and have your clerk assist for significant reduction in cost.45. Use an accountant who understands contracting (not necessarily a CPA). A local accountant can be just as good as a national firm, and you might get more individual attention by a senior accountant at a lower cost.46. Use consultants that can outline what they are going to accomplish, how and at what price; check references; help them gather information so you don’t pay their rates for something someone in your company can do.

Rent47. Lease unused space (or sublease).48. Consider a smaller building (or even larger at lower cost per square foot).49. Renegotiate rent with alternative of moving.50. Get indefinite lease with six-month cancellation instead of fixed-period lease.

Repairs and Manitenance51. For office maintenance, services are often less expensive than having a janitor; consider part-time, after-hours maintenance person.52. Consider capitalizing major repair items for profit and loss help (if it extends life).53. Delay projects until people are available from jobs for good use of unapplied time.54. Do it yourself, if possible.55. Eliminate shop.

Salaries-Management56. Pay moderate salaries; pay bonus for extraordinary results.

COSTS, from page 2

Financial Feature57. Consider reducing total management team (number) before dollars.58. Consider stock bonuses instead of cash; they are deductible and there is no cash outlay.59. Cut earnings or fringe benefi ts (deferred compensation, auto provided and club memberships, etc.).60. Cut managers fi rst.61. Pay bonuses to fi eld fi rst, executives last.

Salaries-Office62. Cross train to eliminate temporary employees.63. Schedule time off, vacations during slow periods.64. Consider personnel reduction and salary increase to remaining employees.65. Encourage time off without pay; four-day week.66. Don’t use clerical staff as “gofers.”67. Use temporary help, such as retirees, for peak loads.68. Give compensation increases on merit, not cost of living.69. If hiring, consider veterans or “disconnected youths.” Tax credit is now allowed in the American Recovery and Reinvestment Act.

Shop Supplies and Small Tools70. “Sell” tools to employees for cost.71. Charge for replacement.72. Put identifying mark on major tools; keep records.73. Pay higher wage to fi eld employees who furnish their own tools.74. Centralize tool storage, install check-out system and cut number of tools owned by the company.75. Create a separate company owned by your employees and then sell/give tools and supplies to it.76. Implement tool bonus program.

Taxes-General77. Minimum inventories reduce taxes in states with personal property taxes.78. Challenge property valuations.79. Eliminate unused operating licenses.80. Close out dormant corporations to cut franchise taxes.81. Reduce number of vehicles,

therefore,

tags. Request refund for unused tag life.82. Deduct all meals and entertainment expenses for employees the full rate, not 50 percent.83. Proposed 460 regulations include Home Construction Contract Exemptions where any contractor working on residential units or developments can apply the completed contract method of accounting versus percentage of completion. Defers tax obligations.84. Take advantage of 10 percent solar-energy tax credits available through 2016. Use qualifi ed energyeffi cient products.85. Take a 30 percent or up to $2,000 tax credit on solar panels.86. Take a 30 percent or up to $2,000 tax credit on solar water heater (no pools or hot tubs).

Taxes-Payroll87. Defer hiring employees until after January 1 to reduce FICA.88. Police unemployment claims to keep experience rate low.89. File termination form with employment commission if employee quits or you fi re with good cause.90. Make sure you take what’s called the Section 199, Domestic Production Activities Deduction—6 percent of all W2s for production labor deduction in 2007-2009 and 9 percent in 2010.

Warranty/Callback91. Institute quality-control program.92. Require employees who caused mistake to make repairs.93. Reduce warranty period.94. Process warranty claims promptly.

Warehouse and Yard95. Consider reduction in personnel by letting job employees work in warehouse or yard when not on job.96. Cut inventories or equipment to absolutely necessary items to reduce handling plus insurance, interest, etc.97. Use graduate students in industrial engineering to evaluate space needs.98. Investigate high-density stacking and storage systems.99. Check with vendors about value and utilization of material.100. Set up check-out system; positive control.

ConclusionWhen you set cost-cutting objectives,

consider long-term factors, such as your company’s anticipated growth. Set challenging, but realistic, goals that take into account both your internal and external limitations. For example, consider the capability of your personnel, space and equipment limitations, and the timing of anticipated work.

Remember that effective cost reduction must be part of your company’s culture. Reducing cost is everyone’s responsibility every day. Consider establishing cost-cutting teams and reward those teams for cost savings.

Lastly, keep in mind that everything you do communicates your attitude toward cost reduction. You can’t sell these cost-cutting strategies to your staff if you don’t serve as a role model.

Reprinted with permission from FMI Corporation, 919-787-8400. For more information, visit www.fminet.com or call Kathryn Robinson at 919-785-9211.

V O L U M E 1 3 ; I S S U E 2 17

Calendar Of Events

SEPT. 15-18Effective Time

Management Program 8 a.m. - 12:30

p.m.

July 29, 2009Makray Memorial

Golf Club, Barrington

Builders Foundation Golf Outing

Registration and sponsorship information at www.bldrs.org

Dec. 3, 20093-6 p.m.

The Drake Hotel, Chicago

Annual Meeting

Sept. 15, 2009Hilton Garden Inn, Des Plaines

Fall Meeting

Information on program and registration available soon

Aug. 13, 2009Chicagoland Construction

Saefty Council

Contractor Safety Forum

Contact Kristin Garcia at 847.318.8585

18 T H E B U I L D E R

Aug. 24-Sept. 1, 2009MasterGraphics, Rolling Meadows

Revit Level I: For Contractors$1195 per Association member;

Register at www.bldrs.org

19V O L U M E 1 3 ; I S S U E 2

To fi nd out more, contact Kristin Garcia at 847.318.8585 or visit www.bldrs.org