5 Minutes to Wellness: Are Your Feet Happy? Check Your Shoes!

5 Minutes to Wellness: Are Your Feet Happy? Check Your Shoes!

5 Minutes to Wellness: Are Your Feet Happy?  Check Your Shoes!

By Dr. Micheala E. Edwards

Today, it’s not unusual to spend more than $100 on a pair of tennis shoes. But are you sure that your shoes are the right ones for you? The way that your feet respond to external forces directly affects your walking and running gaits. Wearing improper shoes can cause increased joint shock, which is interpreted in the body as joint pain that grows from the bottom up (ankles to the knees, then to the hip, and then in the neck). Achy joints may be caused by broken down or worn out shoes. They can also be caused by wearing improper shoes for the activities that you are doing. Therefore, it is imperative that you have the correct shoes on your feet.

Different shoes should be worn for different purposes. For example, you wouldn’t benefit much from wearing a sprinting shoe (track spikes) when walking a mile. A wrestling boot will not give you much support while on the basketball court. First, know what your goals are when selecting a shoe to wear:
• Do you want motion control?
• Do you need a shoe for more stability when walking/running?
• Do you need more support for your ankles?
• What about the cushioning inside of the shoe?
• Are you looking for a high-performance shoe?

You should ask yourself each of these questions before purchasing a pair of tennis shoes. A good shoe salesman should be able to make suggestions on the best shoe for you when you describe your needs for the purchase. Once you’ve made your decision and begin to wear your new tennis shoes, it’s important to maintain proper care of them so that you can obtain optimal results:
• Keep your shoes dry at all costs (wet midsoles decrease shock absorption by 40-50%)
• Always untie your shoes when removing them to avoid breaking down the heel counter/Achilles box
• Add insoles for additional cushioning when necessary (running shoes lose 30-50% of their cushioning in the first 250 miles of wearing the shoe)
• Inspect your soles for discoloration or material deterioration (avoid shoes that may be on sale and have a long shelf life with yellow soles)
• Replace all shoes after 400-600 miles to avoid leg and ankle fatigue

It’s also important to know when to replace your tennis shoes depending on their purpose. Even the best shoes will have some breakdown of their materials and may cause achy joints and injuries in the long run. Know when to replace your tennis shoes according to how often you wear them:
• 10 miles per week or fewer: Replace every 12 months
• 15 miles per week: Replace in 8 months
• 25-30 miles per week: Replace in 4-6 months

A lot of thought should go into your tennis shoe purchase. Be sure to ask plenty of questions and inspect your shoes before you purchase them. Buying the correct type of shoes will help prevent unnecessary aches, pains and injuries, and will guarantee a more comfortable experience when walking or running.

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2013 TMV, LLC (Triune). Any and all rights reserved. 

 

Why Bonding Capacity Is As Good As Gold

Why Bonding Capacity Is As Good As Gold

Why Bonding Capacity Is As Good As Gold

By Brady Cox

For contractors, bonding capacity is as good as gold.  It enables the company to pursue new projects with the confidence that their surety will back the contracts when the need arises. This is the source of increased revenues and greater profits!

How is available bonding capacity calculated? First, a bonding line is determined, consisting of an aggregate (total) amount and a single per-job limit.  The aggregate is then decreased by different factors that consume the line. What can be done to minimize this effect, so bonds remain available for your company? Let’s look at how the numbers are developed and how they can be appropriately managed.

Both bonded and unbonded work is included in the analysis. Here’s the math:

Aggregate capacity amount minus

  • Undecided bids (full contract amount)
  • Low but unawarded bids (full contract amount)
  • Projects that are awarded, signed, or just started (full contract amount)
  • Remaining costs to complete on open contracts

Equals the available bonding capacity.

So how can agents help their contractors preserve this vital asset?

  1. Prompt reporting of bid results – When bid bonds are issued, the entire estimated contract amount is deducted from available capacity, not the bid bond amount.  The capacity is not restored until the “not low” results reach the underwriter.
  1. Updated Work In Process (WIP) schedule:
    • Surety underwriters and accountants determine a contractor’s “current work load” based on the costs they must incur (such as labor and materials) to complete their open contracts.  When there are no remaining costs to incur on a project, it is considered completed.  The WIP schedule shows revised “Costs Incurred to Date” and “Estimated Costs to Complete.” Both increased costs incurred and decreased future costs improve available capacity.  Future costs may be reduced by progress on the contracts as well as greater labor efficiency, material cost savings, improved scheduling and other factors.
    • A reduction in the contract amount (by amendment) has the same effect because it reduces unincurred costs. Report such amendments immediately.
  1. Prompt reporting of completed or terminated work, including unbonded projects, removes it from the work load and therefore increases availability.

Note: Factors that can reduce available capacity include unincurred contract costs that increase for any reason and the addition of new unbonded projects.

*The aggregate capacity amount is based on all the contractor’s professional and financial capabilities. If unbonded projects are acquired, they consume resources (supervisory staff, equipment, etc.) and therefore must be recognized within the use of the bond line.

Available bonding capacity is a moving target subject to frequent revision.  To maximize availability, send your bonding agent the right information and keep it current.

Brady K. Cox is a Principle with the Baldwin-Cox Agency, LLC. in Dallas, TX.  The agency was founded in 1990, and has always focused on providing construction bonds to contractors. Today the Baldwin-Cox Agency,LLC  is one of the largest bond producers in all of North Texas.

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2013 TMV, LLC (Triune).  Any and all rights reserved.

 

Top Five Reasons to Use a Benefits Consultant

Top Five Reasons to Use a Benefits Consultant

Top Five Reasons to Use a Benefits Consultant

By Marc Pieroni

The federal government launched the Health Insurance Marketplace on October 1, 2013.  The online marketplace, currently available in 36 states, is where individuals may shop and compare insurance plans and rates, with 14 states operating their own state-run exchanges.  With all this information now at your fingertips, you may find yourself wondering, “why choose the services of a benefits consultant?”

With reported glitches in the online portals, compromising of secure information and vague information as to specific coverage, it is now more important than ever to utilize the services of a benefits consultant.   A recent panel asked people what mattered most when buying insurance and used those criteria to determine the differences between buying direct and using a benefits consultant.  The results revealed that using a benefits consultant excelled at satisfying the top five most important criteria when considering purchasing insurance.

The top five reasons to choose a benefits consultant are:

  1. Cost. Contrary to popular belief, benefit consultant pricing is actually better than going it alone.   A good benefits consultant knows the difference between what looks like a good plan and what is the best plan.
  2. Half of consumers believed buying online direct would be the easiest option.  However, when put to the test, most direct services fell short when queries or changes became necessary, especially later in the life of the policy.  A benefits consultant has their own website and is much better at answering questions and providing follow-up services.  A benefits consultant also offers a full service on-site facility.
  3. Speed. A benefits consultant can access information more accurately and quickly than an online service.  This leads to better pricing, faster dispute resolution and personal detail.  A benefits consultant will save you time by offering personal service and swift resolutions so that you can focus on growing your business.
  4. Peace of mind. A benefits consultant is more efficient at cross-checking policies and educating its clients about the best coverage available to suit each client’s needs.  A good benefits consultant should provide superior customer service so that clients achieve peace of mind about their insurance needs.
  5. Security of personal data. Internet-based services rely solely on the data provided and do not provide personal care.  Diligence about providing personal security and making sure the client is in safe hands should be top priority when considering a secure and trustworthy option for your insurance needs.

Marc Pieroni is the Managing Partner of BenefitCorp, a commercial insurance consulting agency founded in 1995.  Marc is dedicated to helping businesses implement, administer and communicate all lines of insurance and financial products.  Please call Marc at 972-480-0109   www.benefitcorp.com

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2013 TMV, LLC (Triune). Any and all rights reserved.

Vince – the blogger’s Reality Bite:  Agree whole heartedly that if you are interested in providing health coverage for you employees a benefit consultant is the way to go. After all, the ones I have used over the years are not paid by you but by the insurance company.

 

Additional Insured and Indemnity Requirements in Your Contracts: Will Your Insurance Respond?

Additional Insured and Indemnity Requirements in Your Contracts: Will Your Insurance Respond?

Additional Insured and Indemnity Requirements in Your Contracts: Will Your Insurance Respond?

By Brad Burnham

Agreements between general and subcontractors have been changing in recent years.  Many, if not all, contracts have always had an insurance provision requiring the subcontractor to carry specific types of policies and limits of insurance.  More recently, requirements for Excess Liability (Umbrella) and Workers’ Compensation have been included and many general contractors now require very specific wording on the Certificate of Insurance.

Contracts may call for the subcontractor to specifically name the general contractor (GC) and/or owner as an “Additional Insured” and require very specific wording about the completed operations coverage and far-reaching indemnification.

The requirements may include the subcontractor assuming so much of the GC’s liability that the insurance company becomes unable or unwilling to provide the coverage needed, leaving the subcontractor out of compliance.  Some insurance agents will issue the Certificate of Insurance without understanding the scope of the coverage and without reading the client’s contracts and insurance requirements.  However, only the policy itself defines the coverage and will always supersede a Certificate of Insurance.  

Are you out of compliance with your subcontract agreements?

  • Look at your current contracts for the Insurance and Indemnity Provisions.
  • Ask a qualified construction insurance agent to explain how your current insurance program will respond to the contract requirements.
  • Send contracts to your attorney and insurance agent prior to signing them.

Why have the contracts changed?

  • More litigation in our society – a “find fault first” approach to occurrences
  • Rising defense and investigative costs
  • Risk managers (rightfully) assuring that any claims are paid by the party causing the injury or property damage

Overreaching Indemnification

By indemnifying, the subcontractor promises that it will stand by its work and protect the general contractor from all claims, including those for defective work, injuries and property damage.  General contractors generally will not hire subcontractors without the inclusion of such a provision, and they are not unreasonable.  What the subcontractor must avoid is a provision that obligates it beyond acts and omissions that it or its employees performed. Indemnification clauses that require the subcontractor to indemnify the GC for work beyond the subcontractor’s control are not reasonable and, in many states, not enforceable. A reasonable general contractor will agree that the indemnification clause should be limited to only those damages caused by the subcontractor or those under its control.

Brad Burnham is a Vice President and Partner with Hotchkiss Insurance Agency, LLC, headquartered in Dallas, Texas.   Brad leads a construction team of licensed agents and Risk Managers.  Contact Brad @ 972-512-7727 or bburnham@hiallc.com  Hotchkiss Insurance Agency, LLC  www.hiallc.com

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2013 TMV, LLC (Triune).  Any and all rights reserved.

 

How to Have a Better Relationship with the Design Folks

How to Have a Better Relationship with the Design Folks

How to Have a Better Relationship with the Design Folks

By William Goodman

I recently read an article on the “Collaborating Contractors” website about contractor and architect relationships. Here is a quote from the article:

“Disagreements between an architect and general contractor are not only detrimental to the productivity of the construction project, but can become quite costly as well. The most important aspect of any relationship is communication, as well as making sure that everyone involved is on the same page. By doing these two things, you’ll keep up the flow of the construction operations.

When the contractor and the architect each know the other’s responsibilities, they can strengthen their relationship by helping each other to work on any weaknesses or to complement each other’s strengths. Since both the architect and contractor have their own distinct roles in the building process, it is very important that they know how to work together from the start. Doing this can prevent any confusion and avoid costly changes to the construction plans later down the road.”

The above quote describes the expectation the contractors and architects would want to achieve and/or need in building their relationship, but somehow the relationship tends to take one step forward and two steps backwards. It is an all-too-common occurrence in today’s so-called collaborative design and construction environment.

The truth of the matter is that the contractor and design folks need each other and are dependent on each other’s ability to manage the process without any perceived or predetermined notion of how it should be done. So with that said, here are a few tips from experience that will make for a better relationship:

  1. Mutual Respect. It’s important to have respect for each other’s abilities, profession and achievements. One way to do this is to check your ego at the door. Another way is to spend time at the beginning of the project discussing and sharing past experiences. For example, what problems have you had on past projects, what worked, and what didn’t work in the relationship? Try to find that middle ground both can agree upon that will define how both move forward in the relationship. Both may not always agree with each other’s philology, but each should always be respectful of the other’s profession and opinions.
  1. Communication is always essential if all parties desire a successful outcome. During the preconstruction or kickoff meeting, the contractor and architect need to establish what form of communication is preferred, i.e. emails, conference call, meetings, etc. In some if not all cases, you will use all of them throughout the project. Define the frequency of communication. How often will you need to meet? Will the meetings be in person or by conference call? Who is required to attend or be notified of scheduled meetings? Most importantly, both contractor and architect need to be available on short notice to address any issues, conflicts and/or clarifications needed to keep the project running smoothly.
  1. Deliverables are another key component of the construction process. Generally submittals are the most common and frequent deliverables required by the project contract. This usually is the most difficult and time-consuming process during the project. Architects are becoming insistent on having complete submittals for any given section, submitted at one time. This will allow them to review and coordinate all related aspects of that particular specification section during a single review. I can diffidently understand their need for this. However, the struggle for the contractor is getting the submittals from the subcontractor in the proper format, accuracy and completeness. Typically they are received piecemeal and incomplete. Again, this is something that needs to be addressed during the preconstruction or kickoff meeting: what the requirements and commitment will be on the how the submission and processing of the submittals will be accomplished. Once the contractor and architect establish these ground rules, it will make for a smoother process with less delay in the return of reviewed deliverables.

How effectively and efficiently the contractor and architect are able to work together and communicate will translate into a satisfied owner/client who will want you to work for them in the future.

William Goodman, with over 30 years of commercial construction experience, is Senior Project Manager for Triune. Founded in 1997 with headquarters in Dallas, Triune is a leading, integrated design-build General Contractor in the Southwest region of the country.

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2015 TMV, LLC (Triune).  Any and all rights reserved.

 

How To Price a Federal Government Construction Claim Part 4

How To Price a Federal Government Construction Claim Part 4

How To Price a Federal Government Construction Claim

General and Administrative Costs, Bond Costs, Profit and Miscellaneous Costs (Part 4)

By Kay Kendall

The [SPELL OUT FIRST] (FAR) defines direct costs as any costs that can be identified specifically with a final cost objective.  An example of a direct cost would be labor and concrete material costs incurred to construct a concrete slab.  The concrete slab is the final cost objective.

Indirect Costs

The FAR defines an indirect cost as any cost not directly identified with a single, final cost objective, but identified with two or more final cost objectives or an intermediate cost object.  An indirect cost is not subject to treatment as a direct cost.  An example of an indirect cost is a contractor’s general and administrative (G&A) expenses.  These are also known as home office overhead.  The G&A cost cannot be identified with the concrete slab above because the home office personnel did not work directly on constructing the slab.

G&A costs are calculated by multiplying the contractor’s G&A rate by all other allowable direct costs in the REA or Claim.

When preparing a REA or Claim, the actual G&A rate should be used and the costs included in the G&A calculation should be in accordance with FAR Part 31 – Contract Cost Principles and Procedures.  Costs that are not allowable should not be included in the G&A rate calculation.   Examples of costs that are generally unallowable are interest expense, advertising for the promotion of sales, bad debt and contributions.  There are others, but these are some common examples.

Some contractors arbitrarily use a rate of 5% or 10%, or some other markup for G&A.  However, without making the actual calculation, the contractor will not know its actual G&A rate.  Maybe the contractor’s actual G&A rate is 18%, but it has just arbitrarily been using 10% or less in its price proposals.  The contractor is entitled to recover its actual costs.

When submitting REAs or Claims to the government, the actual G&A rate should be used.  The government can request an audit of the contractor’s REA or Claim, and in some cases – if the total REA or Claim is over the acquisition threshold, then it is required by the FAR to be audited.

Bond Costs

Bond costs are calculated on the total contract amount.  When contractors bid a project that requires a bond, they include the cost of a performance and payment bond.  The actual bond premium is based on the entire contract amount.  The bond premium is probably calculated on a scale.

Suppose a contractor is awarded a $5,000,000 project that requires a performance and payment bond.  The premium may be calculated on a scale similar to this one: the first $500,000 may cost $15.00 per $1,000, the next $2,000,000 $13.50 per $1,000, and the remaining $2,500,000 may cost $11.00 per $1,000.  The scale may continue for anything over $5,000,000, and the premium cost will be $9.00 per $1,000.  In this example, if the original project was $5,000,000 and work was added, then the correct bond rate to use in a REA or Claim that will increase the contract amount above the $5,000,000 is the $9.00 per $1,000.

Profit Calculation

Profit is a negotiable item.  Some government entities use the Weighted Guidelines to determine the rate of profit for the contractor on a particular change.  When all of the Weighted Guidelines criteria are maximized, the highest rate of profit that can be achieved using the Weighted Guidelines is 12%.  Although the Weighted Guidelines are not mandatory in determining profit, they are widely used by government agencies.  There are other methods for determining a reasonable profit.  The key is that the method must be fair and reasonable.

Miscellaneous Costs

Other miscellaneous costs should not be overlooked – for example, builder’s risk, general liability and workman’s compensation insurance.  If these costs are not included in the G&A and are charged directly to the project, they should be included in the REA or Claim.  If they are part of the G&A rate calculation, to avoid duplication of costs, they should not be included as a direct cost in the REA or Claim.

Contractors in some states or U.S. territories incur costs that are not incurred in other states.  For example, in Puerto Rico, there is a tax calculated on the total contract amount.  The tax is an allowable cost to include in the REA or Claim.  It should be calculated at the current rate on the total amount of the change, including bond and profit.  Technically, the tax should also be calculated on the tax, but on smaller REA and Claim amounts it is insignificant.

Conclusion

With the information in these articles, contractors have a guideline for preparing REAs and Claims.  Sometimes, the REAs or Claims can become complex.  In those situations contractors should seek a qualified professional to assist with the REA or Claim preparation.

Remember, until the issue becomes a dispute or a Certified Claim is submitted, the cost to prepare and support the REA is generally allowable to include in the REA.  A consultant experienced in government contracting can facilitate a successful REA or Claim.

In the event the issue elevates to an appeal or lawsuit, a construction lawyer with federal government experience should be consulted.  Federal government law and procedures are different than in the non-government arena.

Kay Kendall is currently president of Kendall-Dinielli Consulting, providing consulting services to government and commercial clients.  She has extensive experience in preparing requests for equitable adjustment proposals and claims for government construction contractors.  She has also consulted Contractors with DCAA audits and resolving audit disputes. You can visit Kendall-Dinielli Consulting at www.kendall-dinielli.com.

Vince – the blogger Reality Bite: Again, you should never undervalue the worth of a qualified claims consultant and/or a lawyer well versed in federal construction law and procedures.

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2015 TMV, LLC (Triune).  Any and all rights reserved.

 

How to Level the Commercial Construction Playing Field

How to Level the Commercial Construction Playing Field

David vs. Goliath Businesses:

How to Level the Commercial Construction Playing Field

By Vince Fudzie

At the beginning of every year numerous pontificators are charged with predicting the future, only to have those predictions rescinded and recast throughout the year. Yet it’s probably still best to run your business based on educated predictions and forecasts than none at all.

According to data from several prominent sources such as FMI, AIA and Dodge, everyone seems to believe that any growth in 2015 will be bolstered by a broader range of sectors. And it’s probably safe to say that U.S. construction starts will be somewhere between the estimated $654 billion in 2014 and the 2015 estimated $612 billion – give or take a billion or two.

Based on our own increased volume of new bid opportunities, I can safely say that there appears to be an uptick in the amount of construction starts going into 2015.  Unfortunately, even though we have been extremely competitive on our bids, there have been a couple of recent occasions where we were the low bidder from an invited list, and we still were not awarded the project.

Case in Point: On one recent bid we were invited to participate with two other general contractors. The first contractor was a hundred-year-old behemoth, which I will call Company T, and the other was a captive entity of a large healthcare system, which I will call Company M. As such, both competitors had very deep pockets and extensive resumes doing large-scale projects of which this was not one.

Other than that, we were all pretty equally yoked. We had comparable bonding, insurance, people and more importantly, lots of successful relevant experience. The bid tab indicated that we were lower – by 7 percent or $275,000 from Company T.

So what would make a customer spend an extra $275,000 on a project that we have numerous times proven ourselves more than capable of doing?

Whatever the reasons it simply burns my britches, but instead of complaining about the unfairness of it all, I want to spend time talking about how we all can mitigate such occurrences in the future. In essence, what can we, as small to midsized contractors, do to level the playing field when competing against our older cousins? Spending some time in the new year developing the right strategy will soon have you chopping your larger competitors down to size.

1. Recruit the Best and Brightest

One of the advantages of being smaller is that you typically can’t afford to spend thousands to hire and train the best and brightest young minds, but you can afford to hire them later in their careers. Many such employees may have become disenfranchised by the bureaucracy, politics and inefficiencies found in larger firms. Therefore, create a culture that is appealing to the best people your company can afford and maintain an environment to keep them.

2. Engage Industry Leading Service Providers

If you are going to effectively compete, you need to employ the same caliber of service providers as your larger competitors. This way no potential customer can call this aspect of your business inferior. Whether it’s insurance, banking, bonding or any other needed service, make sure they are leaders in the industries they represent.

3. Develop a Solid Subcontractor Network

Having a competitive and knowledgeable subcontractor network is essential to not only quality bids, but also to maintaining the highest level of knowledge in the various trades of our industry. This level of knowledge will become invaluable as you work to be an industry leader on par with bigger players.

4. Try Something Exceptional

This is where you need to think outside the box and do something that will put you on the radar in your market area. This could be sponsoring a major event or actively supporting a charitable organization in the community.   Remember you don’t have to be a behemoth to do exceptional things that will endear you to potential customers and the community.

5. Determine Your Value Proposition

Have you spent time establishing a value proposition that truly adds value to customers? If not you need to get on it. As a smaller competitor there are numerous attributes that you possess that adds value to each project. You just need to spend time seriously determining exactly what they are. Once you have determined the value you bring, you must actively convey it to potential customers and decision makers prior to your next bid opportunity.

6. Exceed Expectations

Once you have leveled the playing field and successfully won a project, it is imperative that you not only meet but exceed the expectations of your new customer.

Exceeding expectations will not only create loyalty with the customer but will also create a new advocate for you and help establish your company’s reputation.

In a nut shell, you level the playing field by being on par with the larger competitors in all possible areas – personnel, knowledge, service, and subcontractors – and then beat them in the areas where you are unique and/or add value.

Vince Fudzie MBA, CPA, CIRA, is the Managing Member of Triune. Founded in 1997 with headquarters in Dallas, Triune is a leading, integrated design-build General Contractor in the Southwest region of the country.

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2015 TMV, LLC (Triune).  Any and all rights reserved.

 

How To Price A Federal Government Construction Claim

How To Price A Federal Government Construction Claim

How To Price a Federal Government Construction Claim – Part 3

Pricing Material, Subcontractor and Jobsite Costs for REA or Claim (Part 3)

By Kay Kendall

Continuing our discussion of pricing the REA or Claim, we will pick up with material costs, subcontractor costs and jobsite overhead costs.

Material Costs

Material and subcontractor costs should be easier to track than labor and equipment costs.  If a change has taken place that requires more material than originally required, the additional quantity at the price it was purchased should be included in the REA/Claim.

Documentation to support the additional costs such as purchase orders, change orders to existing orders and invoices should be provided that show the additional quantity and cost.  If the quantity has only increased, it could be useful to show how the additional quantity was calculated and the calculation of the additional cost for the increased quantity.

Subcontractor Costs

Subcontractors have the same burden that the prime contractor has in providing sufficient detail and supporting documentation to justify their REA/Claim.  Sometimes, in the interest of keeping the project moving forward and keeping cost tracking simple, it might be a good idea to have the existing subcontractor dedicate a separate crew to perform changed work.  This isn’t always the case but should be considered if the features of work are separable.

This author’s experience is that the government (and other contract owners) denies portions of subcontractors’ REAs/Claims because of commingling costs.  Basically, the government puts the burden of proof on the subcontractor or contractor to prove how many hours were spent on the changed work.  When the features of work are so intertwined that it is not possible to track the labor or subcontractor costs separately, a loss of productivity theory of recovery should be considered.

When a subcontractor is performing changed work, the contractor should get a firm price from the sub for the defined scope of work.  Also make sure the contractor’s subcontracts include flow-down clauses from the government contract for the subcontractor to follow the same FAR clauses, other contract clauses and cost principles that the prime contractor has to follow.

The contractor must exercise due diligence to review and verify the accuracy of the subcontractors’ REA/Claim costs.  In some situations, it might be prudent for the contractor to submit subcontractor Claims separate from the contractor’s Claim, because the contractor will be certifying the Claim – including a proposal or claim for costs not incurred or under the direct control of the contractor.

Either way, the subcontractor should also certify their claim.

Claim certifications should be taken very seriously.  Contractors that certify claims with known inaccurate or false information may be subject to civil and/or criminal prosecution.

Jobsite Overhead Costs

Jobsite overhead is another cost that should be considered in a REA or Claim.  In some cases, the government and the contractor enter into forward pricing agreements on costs like jobsite overhead and general and administrative (G&A) expenses.

If a change is directed to the work and it does not extend the contract completion date, some government entities will argue that no additional jobsite overhead is due.  There are some instances where additional non-working foremen, superintendents or project managers are required to execute the work in a change.  In those cases, the costs for the additional personnel should be included as direct costs in the REA or Claim.

The government will sometimes subtotal the direct costs (labor, material, equipment, subcontractors) in a REA or Claim and add a percentage to that cost for jobsite overhead.  This author has seen this method agreed to by the government on changes that did not result in a time extension.

In the event that the change does result in a time extension, the percentage method of calculating the jobsite overhead may not be enough to cover the jobsite overhead costs.  For example, maybe the direct cost of the change is only $10,000 and the government position is at 15% markup for jobsite overhead – $1,500 in this case.

But suppose the change, when added to the construction schedule, increases the contract completion date by 25 calendar days due to the submittal and approval of something in the change, and the procurement of the material takes more time because it can’t be ordered until approved by the government.

In this case, if the contractor’s jobsite overhead cost is $1,500 per day, the cost impact is $37,500 due to this change ($1,500 per day x 25 calendar days).  Therefore, the $1,500 calculated from the 15% markup doesn’t produce equitable results for the contractor.

For changes or delays that impact the contract completion date significantly, and the application of a percentage to the direct costs does not produce equitable results, the jobsite overhead costs should be calculated from the contractor’s Job Cost Report.

Costs that are normally considered jobsite overhead are on-site management, their vehicles, office facilities and utilities, secretarial and clerical workers, timekeepers, telephone costs and other similar costs charged directly to the project but not associated with any other direct cost objective.

A common way to calculate these costs is to total the types of jobsite overhead costs listed above and divide the total by the number of calendar days in the period the costs were computed.  If the project is complete at the time the REA or Claim is being prepared, the total costs for jobsite overhead costs – less mobilization, demobilization and other non-recurring costs – should be divided by the duration of the costs to get a calendar day rate.  The calendar day rate can then be multiplied by the number of calendar days the contract completion date was extended as a result of this change or delay.

In the next article, we will discuss general and administrative costs, bond costs, profit and miscellaneous costs.

Kay Kendall is currently president of Kendall-Dinielli Consulting, providing consulting services to government and commercial clients.  She has extensive experience in preparing requests for equitable adjustment proposals and claims for government construction contractors.  She has also consulted Contractors with DCAA audits and resolving audit disputes. You can visit Kendall-Dinielli Consulting at www.kendall-dinielli.com.

Vince – the blogger Reality Bite:  As the general contractor, since you will be in most cases responsible for certifying all claims, it is wise to spend time educating your subcontractors on how to submit claims properly.

I have been amazed at the astronomically high claims some subcontractors will submit because they simply don’t understand the process or feel that it’s an opportunity for a financial windfall.

You will save yourself considerable time and effort if you assist them from the beginning. In just about all cases where there is substantial money involved, I suggest that you hire a good claims consultant – they are worth their weight in gold.

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2014 TMV, LLC (Triune).  Any and all rights reserved.

 

How To Price a Federal Government Construction Claim

How To Price a Federal Government Construction Claim

How To Price a Federal Government Construction Claim

Pricing Labor and Equipment Cost for Government Construction REA or Claim (Part 2)

By Kay Kendall

After establishing the legal basis and causation of a REA or Claim, the damage costs must be quantified.  The costs in the REA or Claim should be in sufficient detail to permit an analysis of all material, labor, equipment, subcontract and overhead costs, as well as profit, and should cover all work involved in the proposal, whether such work was deleted, added or changed.

In a previous article titled “That’s Not in the Contract, Do I Still Have To Do It?” we discussed one of the differences between a REA and a Claim: costs incurred in preparing and supporting the cost in a REA are generally allowable costs to include in the REA.  Therefore, it is best to put as much supporting documentation and explanation into the REA as is available.

That way, when/if a Claim or even an appeal is pursued, the detail has already been done and it was done in the REA where the preparation costs are generally allowable.  If the contractor prepares and submits the REA without adequate documentation to support the costs and then decides to go the Claim route, a more detailed document will need to be prepared for the Claim, or the same result may occur.

When possible, the contractor should set up a separate cost code to track the changed or delayed work.  If there are multiple changes or delays, then multiple cost codes should be set up to track the costs.

If it is not possible to set up cost codes, the costs should be documented in other ways.  Contractors Quality Control Reports are a good place to discuss costs and personnel working on changed or delayed items.

In this article, we will discuss labor and equipment costs.

Labor Costs

When direct labor costs can be identified by the names of the personnel who performed the work, the actual labor rate of those personnel should be used to calculate the actual cost.  Be sure to add costs related to labor, such as payroll taxes and fringes.  Those employees who are not a part of direct labor or whose hours are not tracked to a specific project should compile contemporaneous notes of the time spent on the projects, were claims will be submitted.

Equipment Costs

Equipment usage and idle time related to the change or delay should be tracked.  If the equipment is company owned, hourly rates can be obtained from the Corps of Engineers Construction Equipment Ownership and Operating Expenses Schedule.

It is also known as EP-1110-1-8 and has a volume for 12 different regions in the US and US territories.

It can be downloaded from the following website:  http://140.194.76.129/publications/eng-pamphlets/EP_1110-1-8/toc.html.

The contractor will have to determine which region the project is in to apply the rates, and the appropriate year of the publication should be used for the time the work was performed.  The Corps Equipment Schedule is referenced in many government contracts as the source to use for pricing equipment costs for changes.

Construction equipment rented from third parties should include an hourly rental rate based on the monthly, weekly or daily rate – whichever was invoiced.  If the equipment was active (or operating), the fuel costs should be added.  The Corps Equipment Schedule is a good source for obtaining hourly fuel costs, as it has some cost elements broken out of the rate.

If the fuel costs used in the Corps Equipment Schedule are significantly lower than the actual current fuel costs, the fuel costs can be adjusted by dividing the fuel cost in the schedule by the cost per gallon used in the Corps Equipment Schedule, then multiplying by the current fuel cost.  On smaller REA’s and Claims, the difference is not significant, but on larger REA’s/Claims that include many pieces of equipment performing work for a large change, the increased fuel cost could make a sizable difference.

If the construction equipment used in the change or sitting idle during a delay is not specifically listed in the Corps Equipment Schedule, then a similar piece of equipment can be used.  In determining a similar piece of equipment, such as a bulldozer, comparing HP, weight, purchase price and similar functions and attachments can be used to determine a comparable piece of equipment to use in the REA/Claim price.

Standby rates are applicable to periods when the equipment is dedicated to the change or delay and the equipment is idle.  Standby costs for equipment are not applicable if the equipment would have been idle anyway.

In the next article we will discuss material costs, subcontractor costs and job site overhead costs.

Kay Kendall is currently president of Kendall-Dinielli Consulting, providing consulting services to government and commercial clients.  She has extensive experience in preparing requests for equitable adjustment proposals and claims for government construction contractors.  She has also consulted Contractors with DCAA audits and resolving audit disputes. You can visit Kendall-Dinielli Consulting at www.kendall-dinielli.com.

Vince – the blogger Reality Bite:  We as a company went nearly 10 years without having to file a Certified Claim on a federal project. Fortunately, we were prepared with good documentation and we were eventually made whole. I think the biggest issue we have encountered with claims is making sure that we recover those costs of non-direct job cost personnel.

As a company you need to make sure non-direct personnel involved keep daily detailed notes including hours spent working on your claims. Don’t allow your profits to take a hit because you underestimate the non-direct expenses incurred as a result of REA’s and claims.

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2014 TMV, LLC (Triune).  Any and all rights reserved.

 

How To Prepare a Federal Government Construction Claim

How To Prepare a Federal Government Construction Claim

How To Prepare a Federal Government Construction Claim

Request for Equitable Adjustment and Construction Claims (Part 1)

By Kay Kendall

In the last article, “That’s Not In the Contract, Do I Still Have To Do It?” we discussed Requests for Equitable Adjustment (REAs) and Certified Claims.

The Federal Acquisition Register (FAR) provides government contracting guidelines for the government and contractors, including standard clauses for changes, differing site conditions, suspensions and terminations.  The FAR also provides detailed cost principles for costs that are allowable and allocable to government contracts.

Documentation, Documentation, Documentation!

Let’s take a quick sidebar into contract administration.  In this age of email and text messaging, it may seem convenient at the moment to send informal texts and emails for short communications, but when trying to piece events back together for documentation of REAs or Claims, often the communications are lost or difficult to find.

Many times those short communications make sense at the time because a phone call or a face-to-face conversation took place immediately before, but six months or a year later, they are unintelligible.  Therefore, contractors should establish an organized method for tracking communications and documentation for each project.

Letters should be assigned serial numbers and include the serial number and the purpose of the letter in its subject or reference line.  Request for Information (RFI) logs should be used to track RFI submissions and responses.  Other useful tracking systems should be established for common documents transmitted to and from the government.

Formal Notification

Now back to the REA/Claim preparation.  One very important step is to make sure that formal notification is given to the government if a change (directed or constructive) or even a delay/suspension/stop work order has occurred and that the contractor reserves its right to submit a REA or Claim.  Once the notification is made, the government can remedy the situation, provide some sort of direction or just be notified that the contractor reserved its right.

Executive Summary

When preparing the REA or Claim, it is always good to start with an Executive Summary.  It should briefly discuss the contract, the reason for the REA or Claim, how the issue arose and how it impacted the contractor.  It should also include a summary of the costs included in the REA or Claim.

If a Certified Claim is being submitted, then the claim certification should be included.  The certification language should match exactly that of the Disputes Clause of the contract and be signed by someone duly authorized to sign on behalf of the contractor.

Every REA and Claim should include these three basic elements: legal basis for the Claim, causation and damages.

Legal Basis of Claim

In order to present the REA or Claim, the legal basis must be established.  The contractor must make sure that it has not waived its legal basis for the REA or Claim.  Extreme caution should be taken not to waive the rights to the REA or Claim by signing other contract modifications that include blanket waivers of all prior issues.  Another thing to watch out for is signing contract modifications for time extensions that waive time extensions for previous events.

The legal basis of the REA or Claim should be identified.  If there was a change directed by the government or a constructive change, then the Changes Clause of the contract would apply and should be listed as a contract clause relevant to the REA or Claim.  There are other contract clauses that entitle a contractor to an equitable adjustment, such as the Suspension Clause, Stop Work Order Clause and the Differing Site Conditions Clause, to name a few.

Claim Causation

After identifying the legal basis, the causation needs to be established – the contractor needs to be able to connect the dots and show how the government’s actions (or inaction) were responsible for the cost and/or time impact.

Damage Calculation

Next, the contractor needs to accurately quantify the cost impact.  In the event that a change is directed to the contract to add an element of work, if the contractor can track those costs in the job cost report by creating a job cost code specifically for costs related to the change, this will help make the quantification process easier.

Sometimes it isn’t that simple, though.  In the event of a change that increases the quantity of an existing work item, and not necessarily at an identifiable point in time, it is hard to identify how much labor was spent on increasing the quantity.

An example would be an electrical change to a project.  Let’s say each room in an office building had three electrical outlets shown on the plans, and before the work is performed a change is issued stating that now some rooms will have five, some seven and some two.  It is not possible to track the actual cost for performing the changed work because it is co-mingled with the original work.  In situations like this, estimates must be used.

More discussion on pricing the government REA and Certified Claim will be provided in the next article.

Kay Kendall is currently president of Kendall-Dinielli Consulting providing consulting services to government and commercial clients.  She has extensive experience in preparing requests for equitable adjustment proposals and claims for government construction contractors.  She has also consulted Contractors with DCAA audits and resolving audit disputes. You can visit Kendall-Dinielli Consulting at www.kendall-dinielli.com.

Vince – the blogger Reality Bite:   As I have said many times before one of the keys to successfully completing construction contracts is through documentation, documentation and more documentation.

You should approach each contract with a litigious mindset, i.e. hope for the best but plan for the worse.  This mindset should be common practice for all personnel who work on any component of a project.

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2014 TMV, LLC (Triune).  Any and all rights reserved.