Return on Investment

By: Tim Mosterdyke
Director of Education

“If you think education is expensive - try ignorance” -Derek Bok
“If a man empties his purse into his head, no one can take it from him (or her)”
-Benjamin Franklin


If your company is like most, productivity is key to success. If you are like most employers, you would also say that it is your people that are responsible for much of your company’s success. The question is, “How do we increase productivity without burning people out?” Investing in technology and tools will help; however, investing in your people brings double-digit returns.

“But training takes time away from the job and decreases productivity” you may say. -- I understand. Prioritizing training takes commitment and top-management buy-in, literally. However, I believe the Return on Investment (ROI) both financially and in employee’s time will result in increased productivity, as well as a change in your company culture. The current economic down-turn has caused many employers to cut back to their core work force. If this is you, maybe now is an opportunity to invest in your key employees and change the companies’ culture.

Over the course of the last two months our Marketing Coordinator and I have visited with numerous construction company officials to promote craft worker and management training and explain other programs available at NWCC. We visited union and merit shops, small companies and large international, general and specialty contractors, all with the objective of learning more about their organizations so we could tailor a training plan to meet their needs. We met with Safety Directors, HR Managers, Estimators, Project Managers and owners. Each company has been receptive to educational opportunities and genuinely seemed interested in further utilizing some of our programs.

In our interviews with contractors, we have found some commonalities:
a) Production is the primary focus.
b) Most have been affected by the current economic down-turn and reduced to core employees.
c) Tuition rates were not a hindrance to attendance, it was lost production time.
d) Few have a Strategic Training Plan in place, while some taught us a few things.

These visits have been mutually beneficial. Employers have a better understanding of the breadth of classes offered at NWCC and we have a better understanding of their training needs.

Some companies we visited had outstanding in-house training programs, but most were focused primarily on production. As a former contractor, I understand this necessity. Companies with Mission Statements that read anything other than ‘Be Profitable’, still baffle me. “Production equals Profitability” is the unwritten underlying policy. However, that said, a close second should be ‘create, mandate and standardize training and educational opportunities to create a culture of life-long learners.’

The question is, what is ‘Profitable Production’ and how do I get it from each employee? How do I get people to work smarter and ‘think outside the box’? Investments in new tools and technology will increase productivity; however, I propose a paradigm shift, something that seems counter-intuitive. Invest in Education. We have all heard the aphorism; “It takes money, to make money.” Unlike investing in tools and technology, when investing in people, it is sometimes difficult to see visible results. Some of the most expensive remodeling work done on a house is replacing rotten structural members. When the project is finished it looks like the same old house and you may wonder what you really got for your money. Investing in people is investment in your company’s structure as well as increasing the bottom line.

Statistical research shows dramatic return on investment on money budgeted for worker training and education. The National Center for Education and Research (NCCER) and the Construction Users Roundtable provided funding for a Construction Industry Institute (CII) research study titled “Construction Industry Craft Training in the U.S. and Canada.” Results of this study examining construction craft training found that investing 1% of a project’s labor budget in training could have double-digit returns in productivity, reduced absenteeism, and the need for rework, among other things. (This study may be purchased from the CII Web site.) Don Whyte (President) and Steve Greene (Vice President) of NCCER report:

“As an industry, we now have wide access to credible, quality training programs, but contractors ask why they need to train. The answer is simple. It benefits everyone, the worker, the contractor and the owner. The following statistics from the 2005 Houston Business Roundtable’s Workforce Development Awards shows dramatic proof of these benefits. These statistics were obtained from contractors who successfully train their employees:

• OSHA recordable injuries were down by 67%
• First aid cases reduced by 90%
• Productivity was up by as much as 24%
• Turnover was down by 32% to 43%
• Absences of those employees engaged in training were down 59%”

An additional benefit and result to further education is creative thinking. Having employees that ‘think outside the box’ can be stimulated through providing educational opportunities as well.

Combining in-house training, to maintain company culture, with some NWCC programs, to promote standardized training, is a sound educational structure. If you have been persuaded to increase educational objectives and would like assistance in drafting a Strategic Training Plan for your company or department, we would be happy to help. Just give us a call to set up an informational interview.

Prepare For the Coming Surge in Florida Public Projects:

Understand How to Find Projects and Anticipate Potential Bonding Requirements

In times of economic recession, the government has historically increased spending to stimulate the economy. The American Recovery and Reinvestment Act is no exception with $787 billion in spending spread over two years. A significant portion of the funds are earmarked for spending on infrastructure. Although prime contracts on substantial public projects will fall outside the capacity of smaller contractors and subcontractors, stimulus funding will provide many opportunities on public projects for all contractors, no matter the size.

Economists predict that stimulus funding will result in federal, state and local projects. Opportunities exist for smaller contractors to obtain: (1) subcontracts on substantial state and local government projects; and (2) primary contracts on smaller projects. However, smaller contactors must be prepared by understanding how to find public projects at the state and local level and anticipating the potential bonding requirements on those projects.



Finding Public Projects

In Florida, state and local governments begin the construction contract process by soliciting competitive bids, requesting proposals or requesting qualifications. With the exception of emergencies, solicitation of bids or requests must be publicly advertised.

The method by which the State of Florida must advertise solicitation of competitive bids or proposals on state construction projects is based upon the projected cost of the project. Projects that are projected to cost more than $200,000 must be advertised once in the Florida Administrative Weekly (www.flrules.org) at least 21 days prior to the established bid opening.

Projects that are projected to cost more than $500,000 must be advertised in the Florida Administrative Weekly at least 30 days prior to the established bid opening, and at least once in a public newspaper of general circulation in the county where the project is located, at least 30 days prior to the established bid opening and at least five days prior to any scheduled prebid conference.

Similarly, county and local governments must advertise solicitation of competitive bids or proposals based upon the projected cost of the project. Local projects that are projected to cost more than $200,000 must be advertised at least once in a public newspaper of general circulation in the county where the project is located, at least 21 days prior to the established bid opening, and at least five days prior to any scheduled prebid conference. Local projects that are projected to cost more than $500,000 must be advertised in the same manner, but at least 30 days prior to the established bid opening.

Florida Public Notice provides an online database for members (www.floridapublicnotices.com) of public notices published in newspapers throughout Florida. Membership is free. Both Florida Law Weekly and Florida Public Notices provide an email notification service that allows members to indicate what types of notices are important, and automatically emails the member updates of those specific notices.

In addition, the Florida Office of Economic Recovery, with a website located at www.flarecovery.com, is charged with tracking the stimulus funding, ensuring the funds are spent quickly and with maximum efficiency, ensuring that communication within the state and to the public is open and clear, evaluating the progress of the funding and ensuring the funds are used for the intended purpose. The FOER website further provides general descriptions of major state and local projects.


Bonding Requirements on Public Projects

After contractors locate potential projects in the publicly advertised notices, one of the most important determinations is the extent to which a bond is required on the project. The solicitations for competitive bids, requests for proposals and requests for qualifications will identify the bonding requirements for the project.

In general, no payment or performance bond is required for a contract with the state of Florida in the amount of $100,000 or less. A contract with the state greater than $100,000 but not greater than $200,000 may be exempt from the payment and performance bond requirements by the proper state official.

A contract with a county, city, political subdivision or public authority in the amount of $200,000 or less may be exempted from the payment and performance bond requirements at the discretion of the official or board that awarded the contract. Alternatively, a contractor may provide security for the project in the form of an irrevocable letter of credit or other specific forms of security designated by the legislature.

The payment and performance bond must be obtained from a surety insurer licensed to do business in Florida. Before commencing work on the project, the primary contractor must provide the public entity with the executed bond and must record the bond in the public records of the county in which the project is located.

Recording the bond is a crucial step because it provides notice of the bond, and the information contained in the bond, to other contractors and suppliers on the project. If a contractor fails to record the bond in the public records or to include the required information, the contractor cannot later claim that suppliers and other contractors who failed to comply with the notice requirements are prevented from making claims against the bond.

The bond must also contain specific information related to the contractor, public entity, surety, project, description of the improvements and statutory notice and time requirements. The amount of the bond must be for the amount of the contract unless the contract is greater than $250 million. In that case, the bond should be for the greatest amount reasonably available but not less than $250 million.

In addition, the bond cannot restrict the types of potential claimants who are protected by the bond, such as laborers, suppliers or subcontractors. The bond will usually include a provision that awards the public entity attorney’s fees and costs if the contractor defaults.


Cautionary Measures for Public Bonds

Regardless of what the public entity requires or allows, contractors must take responsibility to follow the bond requirements outlined in the statute and ensure it has fulfilled its obligations. Failure to do so may result in problems for the contractor because almost all public contracts require that the contractor stand in the shoes of the government entity by providing a defense and paying any judgment in the event of a dispute.

As a cautionary measure, contractors should not rely upon employees of state and local governments for information regarding bond requirements. If a government employee makes a mistake with the bond or provides misinformation, the contractor, not the government entity, will pay for the mistake.

A recent example illustrates the point. A contractor provided a payment bond as part of its bid package to a county in Florida. The contractor’s bond was approved by the required department and the county attorney. The contractor won the bid and entered into the contract with the county. However, the bond was not issued by a surety licensed to do business in Florida, did not meet the requirements to qualify as an alternative method of security, and failed to contain all of the required information. Also, the county did not require that the contractor record the bond. After the job began, a dispute arose between a subcontractor and its material supplier. The material supplier sued the subcontractor, contractor, surety and the county. Not only did the contractor have to defend the county in the lawsuit because the bond was defective, but the contractor had to explain to the county why his bond did not protect the county and it was now a defendant in a lawsuit. Needless to say, this severely damaged the county’s relationship and trust with the contractor. Prudent contractors will ensure that their bonds meet the statutory requirements and protect their valued customer – the government entity.

The Boy Scout motto holds true for finding public projects arising out of the influx of stimulus funding from the American Recovery and Reinvestment Act: Be Prepared. Opportunities exist for smaller contractors and subcontractors who understand how to find public projects and anticipate the potential bonding requirements on those projects.

Bruce Loren & Associates is an AV-rated construction and business litigation law firm. Bruce Loren is Florida Bar Board Certified in Construction law and is a U.S. Green Building Council LEED Accredited Professional. If you have any questions about this article or any construction related issue, please contact Bruce Loren or Michael St. Jacques at bloren@lorenlawfirm.com or mstjacques@lorenlawfirm.com or call (561) 615-5701.