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Contractors: Don't Ignore Your Chief Financial Officer

It's a frightening truth. Construction company failures are often unpredictable and, in most cases, the accounting people saw it coming. The chief financial officer of a business often plays multiple roles, including steward of the company's assets and strategist in the use of funds and credit. After 30 years researching the causes of construction-business failures and participating in the resolution of hundreds of distressed firms, I came to the conclusion that there was another role played by the CFO: ignored.

The problem: When a construction CFO sounds the alarm, no one may be listening. Some CFOs are isolated or considered a necessary but unimportant function of the business. In discussing the issue with contractors, I've been told: "They don't know anything about construction."

And a common response from the CFO is: "And you don't know anything about accounting or finance."

A construction company has three primary functional areas: get the …

The Heat Is On! 6 Tips to Beat the Summer Heat

The long, hot days of summer will be here before we know it. In fact, most of the United States is expected to be hotter than normal June through August 2017, according to the National Weather Service's Climate Prediction Center.

That means heat safety should be top priority in any industrial work environment. To keep your talent safe and productive, employers must educate employees and supervisors alike about the potential dangers of heat stress and heat stroke.

Managing the Risk

Heat stress occurs when the body in unable to regulate itself by sweating and the core body temperature rises to critical levels. Heat-related illnesses occur when the body is not able to lose enough heat generated by physical work and external heat sources. It is a medical emergency that can lead to cramps, exhaustion, stroke and in severe cases, death. In 2014, 2,630 workers suffered from heat illness and 18 died from heat stroke and related causes on the job, according to OSHA.

The good news is that he…

Additional Insureds

Additional insureds are typically required on Commercial General Liability (CGL) policies of prime contractors and subcontractors. An owner may require the prime contractor to name them as an additional insured on their CGL policy. Similarly, a prime contractor may require the roofer to add the prime as an additional insured on the roofer’s CGL policy. When either of these situations take place, the additional insured (whether it be an owner or the prime contractor) receives two primary benefits. First, the additional insured receives added coverage without having to pay the insurer directly, because only the named insured is required to make payments on the premium; however, the cost of additional insured is usually passed on to the customer. Second, generally, an insurer may not pursue a subrogation claim against any additional insured because an insurer cannot sue its own insured for indemnity (although there are exceptions). In other words, if a customer was partly at fault for a …

Trump's Infrastructure Plan to Include Prevailing Wage Requirements

Prevailing wage rates are often higher than contractors, especially smaller ones, would normally pay. Advocates of prevailing wage say it levels the playing field during the bidding process, keeping contractors from lowering wages as a way to trim the overall cost of the project. Opponents, on the other hand, argue that the union wages used as the regulation's benchmark don't always fall in line with regional pay rates.

Last year, National Association of Home Builders First Vice Chairman — now Chairman — Granger MacDonald testified before the House Financial Services Subcommittee on Housing and Insurance that Davis-Bacon prevents smaller construction firms from competing for some federally funded projects.

Chao's indication that Trump's massive infrastructure plan will include Davis-Bacon wage rates is sure to draw pushback from Republicans and many construction industry groups, such as the Associated Builders and Contractors, who have consistently lobbied for the repe…

Metrics and Employment Agreements Address Productivity Issues

Short of monitoring employees in the field, it can be difficult to know if they are working to the highest level of productivity. Contractors should consider employment agreements for their employees that spell out expectations and include performance metrics tied into bonuses. In the case of salespersons, it is somewhat easier to know how much of their time is productive as their compensation is directly tied into the number and dollar volume of jobs sold. The salesperson’s employment agreement should specify whether he or she earns a salary plus commission or commission only.  Developing annual sales goals for the team is the best metric to evaluate productivity and whether each person is performing optimally. With multiple members on the sales team, it will be easy to identify underperformers and address the issue. It’s much harder to monitor productivity of other employees, such as installation crews, project managers, and field supervisors. This is where performance metrics that ti…

High Demand and Limited Supply Drive Construction Labor Costs Up

The law of supply and demand is one of the basic drivers of construction economics. It is integral to cost and profit for any construction business from materials suppliers to on site labor and contractors. Labor supply is closely tied to the demand side of the curve and the supply of skilled craftsman is fast becoming an issue that will drive the cost of labor up until a solution can be found. Today we are witnessing the long-term results from those programs that encouraged more students to go to college and discouraged students from taking those courses that lead to the building trades. A recent article in one of the Houston area community newspapers pointed out just how difficult the labor supply issue is becoming in Katy located on the west side of Houston and one of the fastest growing suburbs in the region. As the article titled, “Katy’s cost of construction” reports, “Fewer technical students, undocumented labor play role in ongoing labor shortage.” The article is a good overview o…

OSHA Suspends Rule Requiring Firms Report Injury and Illness Data Electronically

The Occupational Safety and Health Administration just delayed the compliance deadline for a rule requiring employers submit worker illness and injury data electronically to the agency.

The Labor Department on Wednesday suspended an Obama-era rule requiring that companies electronically report their injury and illness records, a move that effectively keeps these records from being publicly disclosed for the immediate future.

Several business groups, including the Associated Builders & Contractors, Associated General Contractors of America and the National Association of Home Builders, had challenged the 2016 Occupational Safety and Health Administration rule in court and lobbied the administration to jettison it on the grounds that it could unfairly damage the reputation of some of their members.

Companies have been required to maintain worker injury and illness logs since 1971, and between 1995 and 2012, OSHA had required about 180,000 establishments in high-hazard industries suc…