A Publication of the Associated Subcontractors of Massachusetts, Inc.

SPRING 2012THE PROFESSIONAL

Getting to Know Martha CoakleyAn Interview with the AG

Safe Driving Study What Your Drivers Need to Know

Fine-Tuning Your Financial OperationsWhat Your Financial Statements Say

New Wing is a First for Fenway Institution

at Isabella stewart Gardner MuseuM

SubS MAkE HISTORy

14 TAXES Out with the Old, in with the New: 2012 Tax Planning

22 SAfETy Commercial Drivers and Distracted Driving

24 Bonding The State of the Surety Industry 26 TEchnology Training Tomorrow’s Green Workforce

The Professional contractor 3

A Publication of the Associated Subcontractors of Massachusetts, Inc.

THE PROFESSIONAL

features 04 PRESidEnT’S ViEW Successful Business Leaders Choose ASM

06 BEAcon hill SPoTlighT The Story of Massachusetts’ Attorney General

08 finAncES Fine-Tuning Your Financial Operations 10 inSURAncE Contractors’ Equipment Insurance

12 PRofilE Meet Carolyn Hendrie, Principle of BH+A

departments 28 MEMBER nEWS

cover story 16 A Creative Endeavor Gardner Museum Project Stretched Skills and Talents to the Utmost

My father loves the old adage “If you want to be successful, look successful!” If only it were that easy in life to achieve success by getting a

haircut, wearing a nice suit and shining your shoes. Doesn’t hurt, and it may be a good start, but succeed-ing in life and in business requires many other factors, including surrounding oneself with good friends, mentors and leaders. If you surround yourself with great people, you will have the tendency to become great. And there is no better way to achieve that, and promote the success of your business, than by joining successful organizations and networking with leaders.

That’s what I had in mind eight years ago when I first became active in ASM. Since then, member-ship has provided me the opportunity to get to know some of the most successful business owners in the construction industry, and gain valuable information and insight, often just through casual conversation at ASM events.

That’s why today, as president of ASM, I encourage all subcontractors to join our organization and start benefiting immediately from the ability to associate with our 350 members.

Not only do you surround yourself with success-ful industry professionals, you tap into a wealth of resources and industry information that cannot be obtained through any other organization. This infor-mation builds into knowledge that will enable you to make the best decisions in a more timely manner that

is the key to your business’ growth and success.The knowledge you gain through ASM comes

from the people you meet at our events, the experts you hear at our seminars, the information you receive in our newsletters and in this magazine. One of the best networking and knowledge opportunities was our recent seminar in February on “Fine-Tuning your Financial Operations.” If you missed it, you can still enjoy the benefits by reading the two articles in this is-sue that summarize key points from the seminar. And check the ASM website for upcoming seminars that will be equally valuable.

While you are gaining knowledge through ASM, you are also gaining a strong voice, through the work we do on Beacon Hill. You might say that member-ship in ASM is like insurance for your automobile. You wouldn’t risk the liability of driving without it, so why risk exposing your business to gaps in knowl-edge, connections and influence? Imagine a business climate without the Lien Law or the Prompt Pay law – without ASM, these good laws simply wouldn’t exist. It’s the power of ASM members that makes it happen!

Finally, membership in ASM makes great financial sense. The money my company saves from the dis-counts from our leasing program with Enterprise, our discounts from Lorman and the legal advice from our hot line with Corwin & Corwin more than pays for our annual investment. Other members receive financial benefits from our dividend-insurance program with Acadia and discount program with Verizon.

I invite you to join ASM to associate with leaders and further your success. For more information on membership, call 617-742-3412 or visit our website at www.associatedsubs.com – or contact me personally at president@associatedsubs.com. s

The Associated Subcontractors of Massachusetts, inc.One Washington Mall | Fifth Floor | Boston, MA 02108tel 617-742-3412 | fax 617-742-2331mail@associatedsubs.com | www.associatedsubs.com

ASM officersPresident: David G. Cannistraro J.C. Cannistraro, LLCPresident Elect: Richard R. Fisher Red Wing ConstructionVice President: Joseph H. Bodio Lan-Tel Communications, Inc.Vice President: Steven P. Kenney N.B. Kenney Co.Vice President: Gregory A. Porfido Mark Richey Woodworking & Design, Inc.Treasurer: Russell J. Anderson Southeastern Metal Fabricators, Inc.Past President: Sara A. Stafford Stafford Construction Services, Inc.Past President: Scott H. Packard Chapman Waterproofing Co.

ASM directorsGeorge A. Allen Sr. | Steven T. Amanti | Clement P. Clare | R. Lindsay Drisko | Roger A. Fuller William M. Gillespie | Wayne J. Griffin | Robert B. Hutchison | Dana E. Johnston Jr. Michael S. Kosiver | William J. (Mac) Lynch | Susan Mailman | Erik S. Maseng James B. Miller | Louis J. Sannella | Nancy H. Salter | Ann T. (Nancy) Shine | Frank J. Smith Lee C. Sullivan | Carolyn M. Francisco, Counsel | Monica Lawton, CEO

The Warren groupDesign / Production / Advertisingwww.thewarrengroup.comcustompubs@thewarrengroup.com

©2012 The Warren Group, Inc. and Associated Subcontractors of Massachusetts, Inc All rights reserved. The Warren Group is a trademark of The Warren Group Inc. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher.

4 Spring 2012

The Professional Contractor is published by

Successful Business leaders choose ASM

By DaviD G. CannistraroPRESidEnT’S ViEW

David G. Cannistraro is executive vice president of J.C. Cannistraro in Watertown, and president of ASM.

WE’RE MADE OF:THE TOOLS YOU NEED.

Find out what we’re made of SM at easterninsurance.com

Eastern Insurance Group LLC is a wholly owned subsidiary of Eastern Bank.

Whether you’re a plumber, electrician or builder, you need a risk plan developed by an agent who knows your business. As one of the largest independent insurance agencies in New England, we provide detailed support to design the most competitive and comprehensive insurance plan for you. For an in-depth review of your program, call Eastern Insurance at 508-620-3478 today.

General Contractors Homebuilders Specialty Contractors Surety Trade Contractors

Construction Division

VERSION: DATE: JOB: BY SIGNING YOUR INITIALS BELOW, YOU ARE STATING THAT YOU HAVE READ AND APPROVED THIS WORK.

BLEED:

TRIM:

LIVE:

PUBLICATION(S):

TRAFFIC:

AE:

DESIGNER:

PROGRAM:

FILE FORMAT:

COLOR: CD COPYWRITER AD

ACCT SERVICE PROD PROOFING

77 North WashingtonBoston MA 02114617412 4000 telctpboston.com

1 3/22/12 12-EIG-010

8.125”w x 10.6225”h INDD Rachel

7.25”w x 10.625”h PDF Selena 4C Abby

The Professional Contractor

The Story of Massachusetts’ Attorney general An Interview with Martha Coakley

G rowing up, what inspired you to become a lawyer and set out on a path leading to your election as the first female attorney general

in Massachusetts?Growing up in North Adams, I was a big fan of

Perry Mason, and that really interested me in be-coming a lawyer, specifically a litigator. I also read a lot of Nancy Drew. I loved the mysteries. There were not a lot of female role models at the time, and she was one. The combination led me to law school and becoming a litigator.

Which position do you consider the most formative of your career prior to becoming attorney general? How so?

My time as district attorney in Middlesex Coun-ty. Middlesex is about 25 percent of the state, and it’s not only criminal prosecution, but I learned a lot about what it means to manage a large office and recruit talent. I learned that it’s not just about responding to cases – doing the research, putting in the time, deciding whether to settle or prosecute, and not being afraid to try a case – it’s also about problem-solving. I realized in my time in that of-fice that many of the issues facing our society don’t have easy answers, and it’s important to look out-side of the office and work with others to address that, something that I continue to do as attorney general.

What first attracted you to public service? I grew up in the ’50s and ’60s, and I remember

that attitude of “ask not what your country can do for you; ask what you can do for your country.” My dad was very involved in his church and the commu-nity. I think I grew up believing that we were lucky to have what we did, and that good citizens give back to their communities and their country. When I graduated from law school in 1979, women were just starting out, just coming into the professional workforce. I thought that it was important for me to do something I thought could make a difference. Being an attorney in public service, speaking for the commonwealth, I thought that was important.

What do you consider your most memorable/re-warding accomplishment(s) prior to coming to the Attorney General’s Office?

My time as district attorney. I’m really proud of my record as DA, working with everyone in Mid-dlesex County – the police, schools, domestic ad-vocates – everyone who worked with me and the office to help prevent crime.

What did you most hope to accomplish as attorney general? What problems did you want to address?

I continue to work for public safety. Being at-torney general is different from being a district at-torney, but it’s important to continue to work to keep kids safe. We have done, and will continue to do, a lot of work with financial crimes, cyber crime; I continue to be a consumer advocate. When I was running for office, we were already aware of the foreclosure crisis and were already working on that, which we continue to work on.

How has the AG’s office changed under your lead-ership?

I’m very proud to follow my two predecessors, Scott Harshbarger and Tom Riley. I think they were each able to build on works of the other, and I’m proud to continue what they started. We have also started several new divisions, including the Health Care Division, working on health care cost containment; and the Business, Technology and Economic Development Division. I’ve also worked to make the office both more efficient and more transparent. A lot more information is available on-line, and we’ve updated the infrastructure. We also have a new focus on dedicating investigations and attorneys to fighting corruption through the Public Integrity Division.

What changes/new initiatives would you consider most significant to the business community?

In listening to the business community and hearing their concerns, we created a new division, the Business, Technology and Economic Develop-ment Division, that is a voice in the attorney gener-

6 Spring 2012

By CassiDy MurphyBEAcon hill SPoTlighT

Cassidy Murphy is associate editor of custom publications for The Warren Group, publisher of The Professional Contractor.

The Professional contractor 7

al’s office for them. Business is not the opposite of consumers – they are concerned about many of the same things; econom-ic development, energy efficiency, rising health care costs. When we’re preparing to issue new regulations or initiatives, we listen to their concerns and work with them to promote a healthy economy in Massachusetts. We’ve had great luck with the division – affectionately called BTED – working across a range of issues. The business community talks to the office on issues they think we can help them with, and we hear them.

How would you describe the relationship of your office with the construction industry?

We’ve done a lot of work with enforcing fair wage laws, and it was surprising and gratifying to see that the business com-munity is very happy to see us enforcing the law, bringing cita-tions against those in construction who are paying employees under the table, or not insuring their workers – it creates un-fair competitive advantage for those who do comply with the law. We are making sure that there is a level playing field for those who play by the rules, and the business community is re-ceptive to that. Employers in Massachusetts, particularly in the construction industry, are trying to get the job done and help turn the economy around, and we want to work with them to accomplish that.

What are some of your priorities for the office this year? We are very focused on trying to resolve the foreclosure

crisis in order to move our economy forward. In December we filed suit against five major banks, which hold 60 percent of the mortgages in the state. We have since settled part of that case, which will bring an estimated $318 million in assistance to Massachusetts borrowers. We believe this resolution makes sense for Massachusetts and Massachusetts’ consumers. The agreement also allows our office to continue to pursue other claims against the banks.

In addition, we will work closely with other players on con-trolling the costs of health care; on addressing financial fraud and white collar crime; and rooting out public corruption. I’m looking forward to this year; we are hosting a national con-ference on cyber crime, with police and private investigators, addressing ways to prevent and respond to that. We’re also working with some of the state’s junior colleges, setting up programs to work with returning veterans, creating ways for them to transfer the skills they learned in the armed forces into jobs here.

Are there particular areas of focus that you would like to men-tion? Wage and hour violations? Business ethics? Transpar-ency and accountability?

We were very active in creating an anti-human traffick-ing law, which the governor signed. We’ve brought together nonprofits who work with victims of labor and sex trafficking, along with law enforcement, so we can start enforcing the law. The statute is only as good as we’re able to train people to use it and implement it, and I’m thoroughly committed to focus-ing on education and enforcement on that issue this year.

What would you say are the greatest challenges for the office in meeting your goals?

I’d say this is a huge challenge for every government of-fice, and that’s attracting and retaining talent. I think that’s a challenge we’ve been able to meet. We have a terrific staff that’s energetic and enthusiastic, despite salaries that are less than in the private sector. I’m proud of the office and the staff, particularly on their legal work around the issues. In litigation, we go up against some of the best firms in Mas-sachusetts, if not the country. I think we’re equal to the task, and I’m really proud of that.

What do you see as the role of the Attorney General’s Office as these difficult times continue?

Our primary focus is on helping turn the economy around. We’re also addressing the rising cost of health care, working on energy issues, and working with other elected of-ficials, to address the things that are a barrier to turning the economy around. We’re always happy to bring others to the table; we take that very seriously here in our office.

What would you like people to know about you, that may not be common knowledge?

I do have a sense of humor! I think in people’s image of the district attorney and the attorney general, they mostly see me on television, announcing indictments of politicians or bringing suit against major companies, and that’s serious business that I do on behalf of the commonwealth. I really enjoy the work, and I enjoy our office – people who don’t know me might not see that very often.

What do you like to do in your spare time, to relax and re-charge?

I love to cook. I find it very relaxing to shop for a meal, prepare it, fool around with a recipe until it’s mine. I have two labs who require walking, which is good for them and good for me. We take long walks around the Middlesex Fells, which I enjoy. I try to stay active in the summer by bike rid-ing with my husband, and in the winter, I’ve been skiing for a long time, which I still like to do. Growing up in the Berkshires, I think I started skiing about the time I started watching Perry Mason. I love to read. I like to stay abreast of current events, but I also like novels. I watch movies. When I have time.

Any closing comments? I really enjoy being the attorney general, and I look for-

ward to the challenges of 2012. I’m confident that we’ve made a lot of progress so far, and will continue to do so this year. s

8 Spring 2012

W ith the construction industry facing yet another season of tepid market demand and tight credit, having access to accurate

and timely information about your company’s fi-nancial health will be more important than ever this year.

Whether on a monthly, quarterly or annual ba-sis, construction business owners can turn to a trio of financial measuring tools to stay on top of how the company is doing, where it’s going, and wheth-er there are any trouble spots that need to be ad-dressed before any long-term damage occurs.

Taking a Broader, deeper PerspectiveSo, what kind of information should you be

getting, and how often? At a minimum, your end-of-the-year financial statements will give you a detailed picture of the financial health of your company over the past year. But it’s important to dig deeper.

Run a comparison of your most recent year against how the company has done over the last three to five years to uncover broader trends. Then analyze how you are doing in comparison to others in the industry. These benchmarks will give you valuable insights into how your business is actually doing, and provide deeper context to your planning and decision-making.

Better yet, review your company’s perfor-mance on a monthly or quarterly basis. More frequent information can give you more time to think about – and react to – worrisome trends that may need correcting.

Tip: A particularly helpful tool is a weekly flash report – a simple, one-page snapshot of cash on hand, receivables, payables, line of credit balance, and cash flow needs for the next week. Your book-keeper should be able to compile this fairly easily.

The idea is to collect and review information at a pace that makes for better decision-making. Armed with the right information and gathered in near real-time, you will have a more sensitive barometer with which to prepare for any storms that may be forming on the horizon.

The Metaphor of the Three-legged StoolMost construction companies use three dis-

tinct reporting tools to measure and monitor their financial health – the profit and loss state-ment (P&L), the cash flow statement and the bal-ance sheet.

Imagine your business as a three-legged stool. The seat represents all the working parts of your business. The relative health of your business is reflected by the three financial reporting mecha-nisms or the “legs.” These legs support the busi-ness by performing at high levels.

Many turn to the P&L statement first, because it answers the question, “Did I make money?” The statement of cash flow is usually the next most in-teresting to the owner, because it answers the ques-tion, “How much cash did my company produce?”

But in determining the true financial health of your company, the most important of the three legs is the balance sheet. This is the tool that measures how well a company can weather a downturn in business. It is the information on which banks and sureties make some of their im-portant decisions about lending and bonding. And as such, the owner’s attention needs to be focused on creating a strong, low leveraged, bal-ance sheet.

Working Toward a Positive Bottom lineThis is not to say that the P&L is a trivial docu-

ment. Obviously, companies need to grow rev-enue, and need to ensure that they are accurately determining the “cost of revenues” to produce a profit from their sales. Accounting software sys-tems like Timberline, CF Data and QuickBooks can be possible solutions for this process.

It is especially important to correctly calculate direct costs in the bidding process in times like these when margins continue to be under pres-

fine-Tuning your financial operationsWhat Your Financial Statements Tell You – And Why You Should Listen

By WilliaM F. ruCCi, Jr. Cpa, MstfinAncES

Bill Rucci is a partner with the Boston area accounting and business advisory firm Rucci, Bardaro & Barrett (www.rb-b.com), where he heads the firm’s Construction Business Services Group. For a complimentary copy of “The 17 Most Useful Financial Indicators for Construction Businesses,” contact him at (781) 321-6065 or billr@rb-b.com.

The Professional contractor 9

Risk Management...more than just Insurance. Sullivan Group professionals will assist your companywith contractual risk transfer, selection of appropriatedeductible and retention levels, claims management, and loss control.

Access to Markets. Sullivan Group enjoys strong relationships with all of themajor underwriters servicing the construction industry. 1.800.649.1553 • www.sullivangroup.com

One Chestnut Place • Worcester, MA • 01608-2804 • 508-791-224172 River Park • Needham Heights, MA • 02494-2631 • 781-449-8323

Insurance Relationships:Risk Management • Employee Benefits • Property & Casualty Insurance • Bonding • Financial Services

BUILT TO LASTWork with an Owner. Our 18 principals directly service the risk managementand insurance needs of our clients.

Many of our clients in the commercial building industry have been with us for decades...

SullGroupTPC 1/29/09 3:49 PM Page 1

20

sure. (See the articles, “Understanding the Vari-ables of Successful Bidding,” by Sal Falzone, in the Fall and Winter 2011 issues of this magazine.)

Tip: Always have a target range in mind for your overhead. This is where industry benchmarks play an important role. As a percentage of sales, overhead might range from 10 to 25 percent, but companies operating at the upper end of this range typically end up struggling to survive.

cash flow as a Measure of financial StrengthIt’s been said that plenty of profitable compa-

nies have gone bankrupt. Why? Because business-es don’t pay their bills with profits – they pay their bills with cash.

It’s important that owners read and understand the statement of cash flow, especially the section that reports cash flow provided by operating ac-tivities. That number indicates the true amount of cash profit the company is producing, and the resources it has on hand to pay the company’s obligations – job materials, rent, payroll, benefits,

unions, debt service, and the like.Do you know your break-even cash flow? Re-

markably, some owners don’t know the amount of cash they need to collect every week in order to pay their bills. The ratio “days-of-cash” is a good start to determining how much cash you need to have on hand at any given time during the year.

This number can also be compared to industry benchmarks. More than 20 days of cash is a good target. Anything below this number begins to put pressure on receivables collections, and ultimately impacts the company’s ability to fund its day-to-day operations.

Tip: Having a working capital line of credit is one way to weather short-term disruptions in cash flow. It’s usually best to set up this arrangement

Editor’s note: This article is based on a seminar presentation given by the author for ASM members in February. ASM is grateful to Mr. Rucci for making this excellent information available to readers of The Professional Contractor.

continued on page 27

10 Spring 2012

By BernarD K. Quinlan, CiC, CrM, CpCuinSURAncE

contractors’ Equipment insuranceA Primer

A “contractors’ equipment floater” is a form of in-land marine insurance that covers mobile equip-ment and tools. An “installation floater” protects

a contractor’s building materials. This article address-es the contractors’ equipment floater, and the installa-tion floater will be the subject of our next article in the summer issue of The Professional Contractor.

Contractors’ equipment insurance policies are of-fered by a number of underwriters including Acadia, CNA, Chubb, Hanover, Hartford, Liberty Mutual, Peerless and Travelers, among others. This coverage is not subject to a standard policy form, so coverage offered by two underwriters may differ significantly. As with any product or service, the lowest cost might not provide the best value.

Contractors’ equipment insurance is available on a scheduled, blanket (unscheduled), or combination basis. Scheduled coverage specifies the equipment covered, including model and serial numbers, and states the limit applicable to each piece of equipment. Blanket coverage, which applies to all equipment and tools, may be subject to limits per location and per item, and a catastrophe limit. Contractors’ equipment policies can cover any type of construction equipment or tools, including but not limited to:• Cranesandcherrypickers• Bulldozers,backhoes,forklifts,scissorlifts• Compressors,pumps,generators• Officeandutilitytrailers• Toolsandspareparts

Contractors and their insurance providers should review the policy form carefully (especially with re-spect to blanket coverage) to make sure the tools and equipment they desire to cover are included in the policy definition of covered property. Coverage for the following types of property is often limited or spe-cifically excluded:• Property of others. If you lease, rent or borrow

equipment, make sure that your policy provides coverage. If you regularly rent equipment, read the rental agreement carefully. If you are purchas-ing insurance as part of the rental fee, you may

find that this is very expensive coverage. If you elect to cover rented equipment on your policy, be careful to check the valuation requirement. The rental agreement may require replacement cost valuation, but your equipment floater may provide actual cash value (ACV) coverage that factors depreciation into loss settlement.

• Newlyacquiredequipment.Mostpoliciesprovidesome coverage for newly acquired equipment. However, the coverage typically includes a time limitation, 30 to 90 days, during which the insured is required to report the acquisition to the under-writer. There may also be a value limitation for newly acquired equipment.

• Equipmentloanedorrentedtoothers.Ifyoulend or rent equipment to other contractors, or to your subcontractors, you may need to modify the policy.

• Vehicles.Vehicleslicensedforroadusearemoreappropriately covered by auto insurance policies. However, equipment permanently mounted on vehicles, such as compressors and generators, may be covered by the equipment floater.

• Aircraftandairborneproperty.• Watercraft, waterborne property, and property

under water.• Constructionmaterials.Buildingmaterialsarein-

tended to be covered by an installation floater or builders’ risk policy.

As stated above, coverage for certain types of prop-erty may be excluded or limited by the policy form. Many underwriters offer coverage for the following items on an optional basis:• Leasedorborrowedequipment.• Rental reimbursement coverage for the cost of

renting equipment to temporarily replace your equipment that has been damaged or stolen.

• Employee tools.• Pollutantcleanupcostsresultingfromdamage

to equipment.• Expediting expense coverage to help speed

up the replacement and delivery of specialized equipment.

Most contractors’ equipment coverage is written on an “all-risk” basis, which covers all perils except

Bernie Quinlan is a principal with Sullivan Group. He can be reached at bquinlan@sullivangroup.com or by visiting the company’s website at www.sullivangroup.com.

The Professional contractor 11

We know there’s more on your mindthan the safety of a building alone.

Maine • Connecticut • New Hampshire • Massachusetts • New York • Vermont

Construction is a business where risk is around every corner. You need an insurance company that understands that. Not just from an insurer’s perspective, but from yours. Acadia. We’re closer to your business. Visit acadiainsurance.com or contact your local independent agent for more information about the ASM Safety Group and Dividend potential.

ACAD-0137 ASMAD4.75x4.75.indd 1 12/16/10 3:53 PM

Pavilion Floors90 Commerce WayWoburn, MA 01801Ph: 781.933.8500 Fx: 781.932.8844E: info@pavilionfl oors.comwww.pavilionfl oors.com

1312

Allow the timeless beauty and durability of tile, ceramic and stone fl oors to be yours. Whether it’s a hand-cut marble foyer in a herring-bone pattern or a hand-built feature wall, our craftsmen are experts. Let your imagination run wild!

Would you like to know more? Call us before your next project to learn about our stonework, ceramic tile and other hard-surface products and fl ooring.

Renaissance Craftsmanship

pavflrs_pc_thirdpg_3-23.indd 1 3/25/12 5:34:38 PM

those specifically excluded. Some of the more typical exclusions are:• Dishonestactsofemployees.Virtu-

ally all property insurance policies have an exclusion for loss resulting from employee dishonesty. Con-tractors must purchase employee dishonesty or fidelity bond cover-age to address this exposure.

• Weight of load exceeding desig-nated capacity and loss to crane or derrick booms while in operation.

• Wearandtear,depreciation,etc.• Electrical injury and mechanical

breakdown.• Voluntary parting due to fraudu-

lent scheme.• Mysteriousdisappearanceorshort-

age discovered by inventory recon-ciliation.

• War, nuclear hazard, government seizure.

• Terrorism. Coverage can typicallybe included for 1 to 2 percent ad-ditional premium.

• Coverageforfloodandearthquakeis sometimes excluded, limited, or subject to a larger deductible.

Carefully review policy exclusions with your insurance agent.

The premium for contractors’ equip-ment policies is a function of the amount and types of equipment covered, protec-tion (alarms, LoJack, fenced yard, etc.), job locations/territory, type of work per-formed and deductible. Loss settlement is typically on an ACV basis, which includes depreciation, although replacement cost coverage may be available for newer equip-ment. The policy may have a coinsurance clause requiring the insured to purchase limits equal to 80 percent, 90 percent, or 100 percent of total equipment value. If the policy includes a coinsurance clause, take care to meet this insurance to value requirement. Whenever possible, negoti-ate an agreed value provision to eliminate the coinsurance clause.

Contractors equipment floater is im-portant insurance coverage for most ASM members. Keep in mind that all policies are not the same. Work closely with your insurance provider to specifically tailor coverage to address your needs. s

For more information about this story or ASM please contact Jackie Rafferty at (617) 742-3412 or jrafferty@associatedsubs.com.

12 Spring 2012

Meet carolyn hendrie, Principal of Bh+A

The dream of designing a building, a cityscape or an entire town from a clean slate has been an al-lure for architects for centuries. Architects have a

unique and integral role in construction, so naturally we wanted to learn more about the role they play.

Carolyn Hendrie, AIA, principal of Bargmann Hendrie+Archetype, Inc. (BH+A), has fulfilled that dream and agreed to share her insight into the re-lationship between architect, contractor and sub-contractor.

Carolyn began her career working for large, na-tional architectural firms in Cambridge and New York, where she worked on a range of international projects in Europe and the Middle East. She spent the next 10 years as principal of ADD, Inc, where she managed a wide range of award-winning commercial projects, office buildings and interiors.

In 1997 Carolyn and her husband, Joel Barg-mann, drawing from their experiences as princi-pals of ADD, Inc, and Archetype, Inc., respectively, launched BH+A, a 40-person architecture firm based in Boston. The firm is a woman-owned business en-terprise (WBE) with expertise in workplace, housing, athletic, historic and childcare projects. Carolyn’s work focuses on buildings and interiors for financial service firms, law firms and facilities for manufactur-ing companies. Notable clients include Convexity Capital, TA Associates, Baupost Group, Hasbro and Kollmorgen Electro-Optical, among many others. Notable museum, educational and housing projects include The Basketball Hall of Fame, Independence Hall National Historic Park, Phillips Exeter Chil-dren’s Center, Minute Man National Historical Park and Mezzo Apartments.

What inspired you to start your own firm?Creating our own firm allowed us to determine

the focus, direction and design character of the firm and each of its projects. While it is true that owning a firm means that you really never stop working, the alternative path (working for others) was simply not an option.

What is unique about your work and what are you working on now?

Our niche is designing workspaces that con-nect all people within an organization, whether by means of a dramatic open stair or perhaps a cen-trally-located destination such as a café or all-hands area for a single floor project. As an architect, my approach is to integrate our design carefully with the existing building structure, including remov-ing beams and slabs in order to maximize these connections. We always look to take advantage of the building’s natural assets (sunlight, higher ceil-ings between beams, exterior views from elevator lobbies, etc.), which is what will take a design from good to great.

By using glass instead of solid partitions, by cre-ating shared amenity spaces as staff destinations and by connecting floors with a new open stair, we can help create organizational change. A work-place that fosters and creates formal and informal collaboration and interaction can expect to see enhanced productivity and innovation, effectively becoming more competitive. When we hear this from clients, it is better than any design award!

We have several large projects pending and we are currently working on two design competitions where our involvement came about because the prospective client had seen our work. It is refresh-ing to be valued for what we can create! In today’s economy too many architects try to compete on price, which ultimately devalues the profession and we become our own worst enemy.

is it frustrating to keep clients confidential? What challenges does that present?

Yes and no – it’s always gratifying to share our work with others but I understand and accept that the details of these projects are private. Some of our projects have created some buzz in the market so even without providing details, the news gets around. Maybe the mystery enhances the hype!

how has the field of architecture changed?Project timelines have become shorter, requir-

ing the whole team to move faster, and we have responded to these changed expectations by struc-turing a large project team as a series of smaller

By JaCKie raFFertyPRofilE

The Professional contractor 13

teams each led by a senior designer/manager. It is im-perative to be nimble and tactically prepared to address all project requirements with a design team that includes specialists who work simultaneously. Thus, in the aggre-gate, a team of specialists can create an integrated, com-plex solution in less time.

Critical to success is that we remain focused, flexible and committed despite design changes and budget chal-lenges. Not making our deadlines is a non-option and creating the best possible design regardless of interim de-sign changes is the single most important commitment we make on every project.

how has Bh+A embraced changing technology?For years BH+A has been committed to sustainable de-

sign, with or without LEED certification. In 2012 a new natatorium we designed received LEED Platinum; that is an achievement because of the inherent conflict between a controlled environment and reducing energy consump-tion. We are extremely pleased that the construction pre-mium to build a LEED project is diminishing. The choice to certify is more common as clients become more edu-cated about the benefits, and the costs are stabilizing as the construction industry becomes more experienced in sustainable products, waste management, etc. The rebates and reduced operating costs we have identified for our clients are indicators that sustainable design is an expecta-tion, not a want-to-have; this is a change that we celebrate.

What is your relationship with owners, contractors and subcontractors?

We value our relationships with contractors and subcon-tractors. The complexity of some of our projects requires that we work closely with subcontractors, particularly mill-work, flooring, HVAC, electrical and AV subs. I not only welcome this but expect it because the end result will be better constructed and may even cost less. When the sub-contractors understand the intent, they may suggest a bet-ter way to build it, generating buy-in and pride shared by all. I enjoy the “healthy tension” that accompanies this pro-cess and the pride of authorship that we share at the end.

how would you define “success”?Success depends on constant communication – no sur-

prises, except for good ones! Critical to this is for us to gain an understanding of our client’s goals and what they need to make decisions. Our deliverables (renderings, mockups, drawings, budgets) are the tools to help the client make informed decisions and to be confident that the space will meet their goals and might even exceed their expectations.

What is your view of the economy’s impact on con-struction today?

The window of competitive construction is still open, translating to great opportunities for clients. Come on now, it’s not going to last forever, so take the plunge! s

14 Spring 2012

Lou Sannella is partner and managing director at McGladrey & Pullen, LLP. He can be reached at (617) 241-1576.

out with the old, in with the new: 2012 Tax Planning

your tax planning for 2011 may be coming to a close, but it’s not time to sit back as there are a multitude of changes coming in 2012. It’s im-

portant to be aware now of what could happen down the road.

Politics play an important role in tax planning. When the Bush tax cuts were originally passed in 2001, they were scheduled to expire in 2010. After nearly a decade of debate, Congress agreed in 2010 to extend these laws, but only until Dec. 31, 2012. Without further legislation, these laws will expire, which could cause your tax liability to increase. That being said, 2012 is a presidential election year. Major tax legislation is unlikely to occur before the Novem-ber 2012 elections, which will make planning for the 2012 tax year even more difficult.

Only time will tell what the tax situation will look like after 2012. Here are some tax items to keep in mind for your tax plan.

individual income Tax RatesThe lower tax rates enacted with the Bush tax

cuts have been extended through 2012. Therefore, the same rates that applied in 2010 continue to ap-ply for 2011 and 2012. Depending on your personal taxable income, you will fall into the 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, or 35 percent rate brackets. These rates are set to increase with a top rate of 39.6 percent in 2013. Speculation will continue to build through the year, but we could be in a wait-and-see scenario until after the Novem-ber elections.

Capital gains and qualified dividends will be taxed at reduced rates again in 2012. The top tax rate on capital gains and qualified dividends is 15 percent. If the reduced rates are not extended again, capital gains will be taxed at 20 percent and qualified dividends will be taxed as ordinary income beginning in 2013.

Tax planning normally involves trying to acceler-ate deductions into the current year and deferring income until later tax years. However, if you believe the tax rates will increase in 2013, you may want to

consider accelerating income into 2012, if possible, while the tax rates are lower.

gift and Estate TaxThe gift and estate tax lifetime exemptions and

top tax rates were reunified in 2011. The lifetime exemption is $5 million with a top rate of 35 percent for both tax systems. Without legislative action, the lifetime exemption will drop to $1 million in 2013 with a top rate of 55 percent. If you anticipate mak-ing large gifts in the near future, you may want to make the gift in 2012 to ensure that you can take ad-vantage of the larger exemption and lower tax rate.

For taxpayers who die in 2012, the unused exemption can be used by the surviving spouse. In order to utilize this portability, the executor of the estate must make an election on the deceased’s estate tax return to transfer the unused exemption to the surviving spouse. Since this is an election, it’s important to file an estate tax return, even if it would not otherwise be required. The surviving spouse can then use the remaining lifetime exemption on his/her gift tax returns or estate tax return. This por-tability can only be used once and does not apply to people who die after 2012.

depreciation issuesBonus depreciation has been extended for

property acquired and placed in service during 2011-2012. The additional first-year depreciation was 100 percent of qualifying additions in 2011. The bonus depreciation deduction drops to 50 percent for property acquired and placed in service in 2012. Currently, no bonus depreciation will be allowed for property acquired in 2013 and beyond.

Section 179 expensing was also expanded for 2011. Section 179 allows immediate expensing for qualifying property additions. In 2011, the limit was $500,000 of additional expense with an investment ceiling of $2,000,000. This is scheduled to drop in 2012 to $125,000 of additional expense with the phase out beginning at $500,000.

Surtax on Unearned incomeIn March 2010, two laws were passed to overhaul

the healthcare system. To help pay for this initia-tive, the Medicare tax will be imposed on unearned

By louis J. sannellaTAXES

The Professional contractor 15

Your Commercial Truck Headquarters!Your Commercial Truck Headquarters!

Receive up to Receive up to $1,000 $1,000 toward your eligible vehicle when you install a comparable amount of eligible toward your eligible vehicle when you install a comparable amount of eligible

upfits for your RAM Pickup, Chassis Cab or Cargo Van! upfits for your RAM Pickup, Chassis Cab or Cargo Van! CALL US TODAY! 603CALL US TODAY! 603--772772--37023702

25 MPG!

income beginning in 2013. The surtax of 3.8 percent will be imposed on the lesser of your net investment income or the excess of taxable income over the income threshold ($200,000 or $250,000 depending on your filing status).

Unearned income includes taxable capital gains, dividends, royalties, and interest income. It also includes net rental income and taxable gains on the disposition of rental real estate if the rental activ-ity is a passive activity (i.e. the tax will not apply to taxpayers’ net rental income if they are active in the rental activity). Unearned income also includes the income earned on the disposition of an interest in a partnership, LLC, or S corporation if the taxpayer was passive in the activity.

Alternative Minimum TaxThe original intent of the alternative minimum

tax (AMT) was to require high income taxpayers who use tax shelters to pay a minimum amount of income tax. However, more taxpayers are becoming subject to AMT because legislative action is required

to increase the AMT exemption; it’s not automati-cally indexed for inflation. The latest AMT patch in the form of an increased AMT exemption was only effective through 2011. As it stands right now, the AMT exemption amounts will drop significantly this year, which will cause a lot more taxpayers to become subject to AMT.

conclusionThe tax area is constantly changing. A major-

ity of the tax items discussed above are subject to change within the next two years, unless Congress extends the current tax laws. This year, pay close attention to tax legislation because this will impact your planning for 2012-2013. In addition, please also consider the impact of your state tax rules, as many states have decided to not follow the federal tax benefits including the bonus depreciation and estate rules. All of these aspects should be consid-ered as you position yourselves in the coming year – the earlier you plan, the more effective your tax plan can be. s

16 Spring 2012

The Professional contractor 17

The $114 million project was overseen by one of Boston’s premiere general contractors and fea-tured a small army of dedicated subs with a range of specialties, from concrete to woodworking.

The challenging design/build process called for on-the-spot problem solving. And it gave subs, often used to following orders in a hierarchical command structure, the opportunity to work directly with one of the world’s top architectural firms, the Renzo Piano Building Workshop.

The result has been acclaimed by one writer as a “marvel,” a work of clear, colorless glass and copper that both provides a badly needed new wing while keeping open views of the ornate, 19th century Fen-way mansion/art palace.

But getting there was a journey, one that sum-moned the creative energies of all those involved in the construction of the 70,000 square foot addition.

“‘Meticulous’ is a good word,” said Whitney Hammett, project manager on the Gardner for Mark Richey Woodworking and Design, of the experience working with the famed Renzo Piano

team. “It was very precise. Everything was looked at from a design perspective … from the perspective of visual impact.”

Working with a Superstar ArchitectThe project itself was years in the making; the

strategic planning process was launched by the mu-seum a decade ago.

With more than 200,000 annual visitors, the mu-seum had outgrown the Victorian mansion it has been housed in since Isabella Stewart Gardner’s death, but major changes to the structure were barred in her will.

Museum officials decided to solve the problem by putting a new wing on the museum, a stunning glass structure through which can be seen the his-toric Gardner Museum and gardens. Features in-clude a new performance hall and an adjustable height gallery.

Given the sensitivity of the project, it took three years alone – from 2006 to 2009 – for museum offi-cials to line up the necessary city and state approvals.

The acclaimed expansion and renovation of the Isabella Stewart Gardner Museum put the skills – and creativity – of some of the Boston area’s top subcontractors to the test.

By Scott Van VoorhiS

Gardner Museum Project Stretched Skills and Talents to the Utmost

A cREATiVE EndEAVoR

All PhoToS on lEfT hAnd PAgE coURTESy of: Nic Lehoux

18 Spring 2012

Initial site work began in the fall of 2009, and the museum and its new glass-encased wing opened to the public in January.

Shawmut Design and Construction, which took part in the massive renovation and expansion of the nearby Museum of Fine Arts, served as general con-tractor on the Gardner project.

While the design had been hammered out by the time work began on the building, implementation was a step-by-step process.

The design/build approach used with the Gard-ner differs from traditional methods, where all the detailed blueprints would have been hammered out beforehand and turned over to the general contrac-tor to carry out. The GC, in turn, would dole out the orders to his subcontractors.

But with the design/build process that was used to build the new Gardner addition, all three par-ties, the general contractor, architect and the subs worked together on each step.

“It was definitely unique in that there was more involvement across the board,” said Chris Leitz, se-nior project manager for Shawmut. He noted the unusual levels of collaboration between the design-er and the manufacturer and the installer and the museum – which meant more than a few meetings around the table with architects from Renzo Piano’s

firm. It was an exciting, refreshing experience for the subs involved.

Problem SolvingMark Richey Woodworking, which fabricated and

installed the architectural woodworking and case-work throughout the museum, also faced one of the trickiest design challenges.

The plan for the Gardner’s music hall required intense attention to acoustics, with the paneling play-ing a key role. The new hall has a hollow wall, behind which curtains are adjusted to modify the sound in the space. That required Mark Richey to devise a new approach to designing and hanging the 6,000 square feet of paneling.

“It was our biggest challenge,” said Hammett, project manager. “We had to create this entire unique structure to allow the paneling to be [sound] transparent.”

Tim Griffin, owner of Griffin Interiors, also re-calls the Gardner’s new music hall as one of the more challenging projects he has ever encountered. Griffin, who helped hang the panels, noted that ab-solute precision was needed in order for the hall’s acoustics to work properly. That meant some panels were installed at an angle – laser levels were used to get the measurements just right.

All PhoToS BEloW And on RighT hAnd PAgE coURTESy of: Nic Lehoux

The Professional contractor 19

“It took a lot of time and precision,” he said.The music hall also presented some rewarding chal-

lenges for Southeastern Metal Fabricators, which was in charge of the rail inside the performance venue, said Elio Roffo, estimator and vice president. The design of the rail was changed by the architect mid-stream, requiring Southeastern to make changes on the spot. The main staircase, which required metric sized components, required the Rockland-based firm to go through a German supplier.

Even the bolts on the stairs – designed to look like buttons – required intense attention to detail. “The hardware, the connection bolts, were all custom made,” Roffo said.

Concrete, a seemingly mundane building material, was elevated to a high art form requiring painstaking attention and labor.

After looking at other potential floor stones, the ar-chitectural team decided to go with polished concrete, a technique popular in West Coast architecture and now starting to catch on in Boston. The cement is pol-ished with high-torque grinding machines, creating a smooth surface sheen.

Hudson-based S&F Concrete Contractors handled this part of the project, installing the floors in the Gardner’s greenhouse. It required some complicated logistics, noted project manager Bassel Isreb.

When the concrete was being ground down and then polished, all other work stopped in the area.

Isreb credited teamwork between the subs – and great overall coordination by Shawmut – in keeping everything moving smoothly along. “It’s an area where nobody else can work – you stop every other trade,” Isreb said.

And there were other challenges as well – last-min-ute changes and tweaks as the architect and the mu-seum saw how different facets of the building looked in real life. One involved the coat check area, which had to be reworked to bar views of the coat racks. Overall, such fine tuning is typical of a design/build project, which requires step by step collaboration between all players, from the owner (in this case, the Gardner), on down to the subs.

“As the end user becomes more familiar with the space, they start to realize things they didn’t see be-fore,” said Greg Porfido of Mark Richey Woodworking. “The design team, the contractor and the subcontrac-tors need to respond and adjust and make the accom-modations.”

But it’s a small price to pay to work alongside a re-nowned architect on a project of major architectural significance, say the subs who worked on the Gardner project.

“When someone hires a renowned architect, their job is not to do something that everyone else is doing,” Porfido reflected. “Their job is to push the envelope of architecture and building design.”

20 Spring 2012

ToP lEfT: Construction photo of the Richard E. Floor Living room in the new wing at the Isabella Stewart Gardner Museum designed by Renzo Piano.

ToP RighT: Construction photo of the Anne Hawley Grand Staircase in the new Renzo Piano designee wing of the Isabella Stewart Gardner Museum.

BoTToM lEfT: Construction photo of the interior balconies of Calderwood Hall, the new performance space in the new extension at the Isabella Stewart Gardner Mu-seum designed by Renzo Piano.

BoTToM RighT: Construction photo of the façade of the new Renzo Piano designed extension of the Isabella Stewart Gardner Museum. This is the glass north-facing exterior of the new Special Exhibitions Gallery.

All PhoToS on ThiS PAgE coURTESy of: George Bouret

The Professional contractor 21

Mark Richey Woodworking crafts and installs high-end architectural millwork for corporate, institutional, retail, restaurant, and residential clients. Our reputation is founded on peak performance and keen attention to client satisfaction.

www.markrichey.com

Scott Van Voorhis is a freelance writer.

The job of the general contractor and subs, in turn, is crucial for bringing this vision to life. “Your job is to come to the table and figure out how to make all those unique details work,” he said.

fireproofing Art historyJ.C. Cannistraro was in charge of installing critical

fire protection systems in the new Gardner wing. The Watertown-based contractor installed four different systems – “both VESDA and deluge systems, as well as two dry systems,” said Mike Cray, project manager for Cannistraro on the Gardner project.

The challenge was configuring the fire protection systems so that they would not be noticeable to pa-trons, especially around the project’s grand staircase, a centerpiece of the new wing. To do this, the ceiling needed to be “tied off at three different points,” Cray recalls.

A highly complex project, the Gardner required a high level of coordination and cooperation with everyone from other subs to the architectural team, said Tom Palange, marketing director for J.C. Can-nistraro.

“It was a highly complex, architecturally challeng-ing building,” Palange said. “It inspired us to be even more creative and collaborative.”

Pride in craftsmanshipThe subs who worked on the Gardner project

were all veterans of big projects. Some had worked on the Museum of Fine Arts expansion, while others were involved in retrofitting space in the Hancock Tower for Bain Capital.

But the Gardner project is likely to be a memora-ble one for all involved, having challenged everyone from designers on down to the concrete contractor to stretch their skills and talents to the utmost.

The project is especially meaningful for Mark Richey Woodworking, which does extensive work in the Boston market. “There is an enormous amount of pride that we were involved in renovating an icon-ic facility,” Porfido said. “These are iconic Boston in-stitutions.”

Overall, the Gardner expansion stands out for the unique ways common products and materials were put to use, noted Shawmut’s Leitz. “It ended up being a unique project because everything was touched with customization in mind,” he said. s

22 Spring 2012

driving presents significant risk of injury and property damage, and driving while distracted increases these risks. Intuitively, most of us

would agree that distracted driving magnifies the likelihood of crashes. Ongoing research has quanti-fied those risks, leading state and federal regulatory agencies to enact tougher laws. In the U.S. in 2009, 33,308 people were killed and 2,217,000 were in-jured as a result of motor vehicle crashes. Of these, 16.5 percent of the fatalities and 20.2 percent of the injuries were the result of distracted driving.

In 2010, the Federal Motor Carrier Safety Ad-ministration (FMCSA) banned texting by commer-cial drivers. Most recently, effective Jan. 3, 2012, all handheld cell phone use by commercial drivers was also banned. Some businesses incorrectly believe that FMCSA regulations do not apply to them since they only operate in one state, or they do not have vehicles requiring operators to have commercial drivers licenses. However, some states, including Massachusetts, have accepted federal regulations as state law. FMCSA regulations include all commer-cial motor vehicles with a gross vehicle weight rat-ing over 10,000 pounds, certain vehicles transport-ing passengers and vehicles transporting hazardous materials.

Local laws on cell phone use and texting should also be considered. In New England and New York, all states ban text messaging by all drivers. Only Connecticut and New York have banned the use of handheld cell phones as well. All states, except for New Hampshire, have banned cell phone use for “novice drivers,” those under age 18. These bans are all primary offenses, meaning drivers may be cited without other violations. The National Trans-portation Safety Board and other groups, such as FocusDriven, have gone so far as to recommend a complete ban on cell phone use and text messaging while driving.

Researching the dangers of distracted drivingVirginia Tech Transportation Institute (VTTI)

is a leading researcher that has employed sophis-

ticated technologies in numerous large scale, real world, driving studies. Their research is the basis for many of the changes in the regulations, includ-ing the bans on texting and hand held cell phones. One of their recent studies concluded that “talking [or] listening on a cell phone while driving was gen-erally found not to impact significantly the odds of involvement in a safety-critical event (and was even found to decrease the odds significantly in some cases), while other cell phone sub-tasks (e.g., tex-ting, dialing, reaching) were found to increase sig-nificantly the odds of involvement in a safety-critical event.”

The chart at right demonstrates the specific likelihood of a “safety critical event” (likelihood of crash situation) as reported in the VTTI study.

Without question, distracted driving does in-crease the likelihood of motor vehicle crashes. Ac-cording to VTTI, “driving is a visual task and non-driving activities that draw the driver’s eyes away from the roadway, such as texting and dialing, should always be avoided.”

Business impact of distracted driving ViolationsViolating the FMCSA bans can impose substan-

tial fines – up to $2,750 for drivers and $11,000 for employers. States, however, may choose to set the amount at or below those levels. These violations are documented in a company’s CSA score, main-tained by the Federal Motor Carrier Safety Admin-istration, in the “Unsafe Driving” BASIC. Exceeding the threshold score of any CSA BASIC exposes em-ployers to a compliance review by state or federal enforcement agencies.

distracted driving Safety considerationsEmployers, and drivers, are responsible to be

knowledgeable and comply with applicable federal and state agency regulations. Employers need to demonstrate that they have instructed drivers. If not already in place, all businesses should establish a written policy informing your drivers of your com-pany’s intent to comply with the bans on texting and hand held cell phone use.

Educating employees about the dangers of dis-tracted driving may serve to decrease, if not elimi-nate, their cell phone use while driving. The U.S.

Robert Kordell is a senior loss control representative for Acadia Insurance.

commercial drivers and distracted drivingImpacts On Your Bottom Line

SAfETy By riCharD KorDell

The Professional contractor 23

governments’ website, www.distraction.gov, provides compelling testimonies and information on distracted driving.

Many businesses have gone beyond these minimum standards by implement-ing total bans on cell phones while driv-ing. In a National Safety Council 2009 survey on cell phone policies, businesses with a distracted driving prevention pol-icy reported over a 20 percent decrease in crashes and more than 70 percent re-ported an increase or no impact on pro-ductivity.

For businesses seeking to institute a policy curbing distracted driving, the Na-tional Safety Council has a free how-to kit available at www.nsc.org. s

commercial drivers and distracted drivingImpacts On Your Bottom Line

for you?for you?What’s

The Associated Subcontractors of Massachusett s (ASM) is a non-profi t trade associati on representi ng subcontractors, suppliers and service providers across the Commonwealth. Established in 1950, we are the only organizati on that addresses the business objecti ves of all subcontractors, including union and open-shop. We provide the best legislati ve advocacy, legal resources, educati on, networking and news and informati on to our more than 400 members.

Be part of the most recognizable and respected subcontractor organizati on in the Commonwealth and enjoy the many benefi ts that membership has to off er. Feel the pride of being part of an organizati on dedicated to subcontractors and their businesses.

Who we are

Associated Subcontractors ofMassachusett s, Inc.One Washington Mall, 5th fl oorBoston, MA 02108(617) 742-3412 | www.associatedsubs.com

Be part of the most recognizable and respected subcontractor Become a Leader – Join Today

for you?in it

• Be the fi rst to learn about important legal and legislati ve policies that impact your business – and benefi t from one of the most eff ecti ve lobbying teams on Beacon Hill.

• Att end top-rated seminars addressing industry related trends, changes and regulati ons.

• Receive important informati on and news delivered to you in a variety of formats.

• Get noti ced with complimentary promoti onal opportuniti es in The Professional Contractor.

• Reputati on – ASM has rapidly earned a reputati on for “getti ng things done” within the subcontractor, general contractor and legislati ve circles.

How we add Value

ASM Membership

Task odds Ratio commentsText message on cell phone

23.24 Highest risk of all tasks studied.

Write on pad 8.98

Reaching for object/other device

6.72

Dialing cell phone 5.93 Diverts eyes away from roadway.

Personal grooming 4.48 Distraction goes beyond electronic devices.“Cell phone use” 1.22 Implies any manner. Certain subtasks, (e.g. dialing)

have greater impact than others. Talk/listen, hand-held Phone

1.04 Talking/listening to a cell phone allowed drivers to maintain eyes on the road and were not associated with an increased safety risk.

Talk/listen, hands-free phone

0.44 True “hands-free” phone use, such as voice activated systems, are less risky if they are designed well enough so the driver does not have to take their eyes off the road often or for long periods.

24 Spring 2012

By FranK J. sMithBonding

The State of the Surety industrySigns of Trouble, Advice for Contractors

The past three years of recession have been a roller coaster ride for New England contractors and their surety companies. Last year at this time the

market seemed to be improving, but even with 2012 well underway there is still a great deal of uncertainty, and all signs continue to point to a long, slow recovery. Because of the depth and duration of the recession, it will take a long time to get back to a “normal,” healthy construction economy.

This article will take a look at the surety industry’s response to recession, both today and in the past, and what it means for contractors.

The construction industry has been through reces-sions before, but they have been different, and past experience has not been a good predictor of today’s reality.

In the recession of the late 1980s and early 1990s, the construction industry went into a deep slide, and after a short lag time, the surety industry followed. For the most part, the surety industry did not show signs of suffering until well after the construction economy began to improve. The cycle of fall and recovery was relatively swift.

In the current recession, the cycle has been slower, deeper and longer. Unexpectedly, contractors fared better in this recession than they did in prior ones for several reasons:• Theyhadstrongcashbalancesandsolidworking

capital and net worth positions.• They were better managers of their businesses

and did a better job aligning overhead to available profit dollars.

However, as contractors burned off backlogs by performing lower margin work, they began to lose both cash flow and profitability. Losses began to build and gradually ate up their strong balance sheets.

It was only about a year ago that the surety industry began to feel the effects, receiving a growing number of notices from subcontractors or suppliers that they had not been paid. That was the proverbial smoke, and the industry began to smolder.

At that point, the surety industry expected to see many contractors fail. But it didn’t happen, until 2011 was well underway. In fact, in 2011 the surety industry results were still good – in theory. However, when you get inside the numbers, the smoke is easy to see. And the flames are starting to spread.

good Results hide the True StoryThe surety industry loss ratio for the first six

months of 2011 was very low, just 12 percent, while surety expense ratios averaged about 55 percent. With a combined ratio of just 67 percent, the industry on the whole was very profitable, as the average surety company earned a 33 percent profit.

These results don’t tell the full story, however, because the numbers are heavily influenced by the experience of the top five surety companies, includ-ing Travelers and Liberty, who together write about 50 percent of the volume of the entire industry. The other 50 percent is written by 95 much smaller surety companies.

Liberty and Travelers (who alone account for 33 percent of the volume) write many of the large gener-al contractors, and their loss ratios were negative. This means that they recovered more from the prior year’s claims or by reducing reserves, than they incurred in current year losses. So their negative loss ratios skewed the industry results dramatically.

In general, larger sureties bond the larger contrac-tors, and the smaller sureties bond smaller contrac-tors. In today’s economic environment, most of the problems are occurring with the smaller contractors who have smaller financial buffers between them and adversity.• Ofthetop20suretycompaniesthelossratiosof

5 are bad or very bad (i.e., 25 percent have bad results).

• Inthemiddletierof40smallersuretycompanies16 (40 percent) show poor results.

• Andinthefinaltierof20,five(25percent)aresuffering.

These numbers show the losses are beginning to hit the industry, with greatest impact on the smaller surety companies bonding the small to medium-sized contractors. When surety losses start trending up they historically continue to get worse before they get bet-

Frank J. Smith is executive vice president for Eastern Insurance Group, Commercial Construction Division. He can be reached at (800) 649-0522 or fsmith@easterninsurance.com.

The Professional contractor 25

ter. The prediction now is for increasing loss ratios for the next couple of years.

What does all this Mean to you?Surety companies will close their doors when they

lose too much money or when the rating agencies down-grade them and no one will accept their bonds.

A case in point is First Sealord Surety, who just closed its doors and is being liquidated by the Pennsylvania In-surance Department. The first surety to exit the business in this recession, First Sealord was the 36th largest surety in the U.S. and wrote a lot of bonds.

The failure of First Sealord may be devastating for general contractors who accepted First Sealord bonds from subcontractors, and equally devastating to subcon-tractors who relied upon First Sealord bonds for pay-ment protection, and now may be without. Not only that, but contractors forced to replace the First Sealord bonds they provided may end up having to pay for bonds for a project a second time.

Most surety companies who get hit with losses will have the staying power and desire to remain committed to the business. But one way or another, contractors will be affected when companies begin to adjust their under-writing standards. Surety companies have a tendency to overreact when the underwriting pendulum is set in mo-tion, so contractors should expect some volatility in the coming months.

how Will companies React?They may:• Wantstrongerworkingcapitalandnetworthcases.• Wanthigherqualityfinancialinformation.• Wantfrequentfinancialinformation.• WantfrequentWIPsandARschedules.• Bemoreconservativeregardingjobsize,scope,loca-

tion, duration LDs, etc.• Wantabetterindemnitypositionincludingperson-

al indemnity, and the indemnity of realty trusts and related entities.

• Mayzeroinonworkingcapitalcompositionratherthan just a working capital number.

• Lookcloselyatcashanddebtpositions.• Willnotwant tobondcontractorswhoareheavily

reliant on bank debt for working capital and finan-cial survival.

If you run a good company you should be able to weather a tightening surety underwriting period for the next few years.

To make certain you receive the best possible surety program under the best possible terms and conditions (capacity, indemnity, rate and service) you should:• Getyourbondingcompany’sanalysisworksheet.• Understandhowyour suretyanalyzes yourcompa-

ny.• Like the surety,watch the trends;working capital,

net worth, cash, debt, profit margins, overhead, backlog, under billings, etc.

• Understand what is important to your surety andtake that into consideration when making opera-tional decisions.

• Keepyourfirmstrongandliquid.• Nottakeofficerloansforoutsidepurposes.• Keepthebottomlineprofitableandworkingcapital

and net worth increasing or at least not decreasing.• Communicatefrequentlywithyouragentandsurety

underwriter.• Providehighquality,timely,financialinformation.• Nosurprises!Deliverbadnewsearly.• Whenyoudeliverthebadnewsalsopresentasound

recovery plan.

Dealing with the surety industry will be increasingly difficult. But there will always be a market for good con-tractors who deserve bonds, and the surety credit you need will be available. However, you and your agent will need to negotiate very effectively to secure the surety support you need under the best possible terms and conditions. You will also need to provide a good flow of timely high quality underwriting information to support the fact that you deserve the credit you are seeking.

The best advice for contractors today is to maintain a close working partnership with a surety agent who is committed to helping you succeed in these challenging times. s

Editor’s note: This article is based on a seminar presentation given by the author for ASM members in February. ASM is grateful to him for making this excellent information available to readers of The Professional Contractor.

26 Spring 2012

11-0234 Boston Cedar_Layout 1 7/11/11 11:10 AM Page 1

By arthur levineTEchnology

Training Tomorrow’s green Workforce Local 12 and PHCC Secure Grant

As part of a $307,000 government ARRA grant, two solar thermal systems and a rainwater re-use system have been installed on the roof of

Plumbers and Gasfitters Local 12’s training center in Boston, to serve as real-world learning models for green technology classes. ASM member and PHCC of Greater Boston contractor E. H. March-ant Co., Inc., of Quincy, installed the systems, while Vanderweil Engineers of Boston donated the design services.

Proposed by Rick Carter, Local 12’s training director, and Hugh Kelleher, executive director of the PHCC of Greater Boston, the federal grant was used to install the equipment and develop the training curriculum. “This is a quite a coup for us,”

The Professional contractor 27

DeSanctis Insurance AgencyDeSanctis Insurance Agency

Protection starts here

and here.

DeSanctis Insurance Agency, Inc.36 Cummings Park

Woburn, MA 01801 (781) 935-8480 www.desanctisins.com

Serving the Bonding and Insurance needs of the N.E. construction industry for over 35 years.

Adam DeSanct is Gregory Juwa James AxonMichael Carney Wilder Parks Michael Gi lber t

Bryan Juwa David Boutiet te Paul Patalano Dick Caruso

Adam DeSanct is Gregory Juwa James AxonMichael Carney Wilder Parks Michael Gi lber t

Bryan Juwa David Boutiet te Paul Patalano Dick Caruso

with your lender before you actually need the money. This added safety net will really come in handy if the com-pany hits a rough patch.

A Strong Balance Sheet can Weather the Storm

As important as these two docu-ments are, it is the balance sheet that serves as the cornerstone of your finan-cial statements. This is the instrument that answers the question, among other things, how leveraged is my com-pany? The ratio “debt to equity” is the key barometer that measures leverage.

A ratio of under three to one usually indicates that a company has enough resources to withstand a downturn in business. A higher ratio shows that the company is more highly leveraged, and that it may be operating under growing financial stress.

Even if a company shows a net loss on its P&L, or if it reports a negative cash flow on its year-end cash flow statement, it can still continue to op-erate provided it has a strong balance sheet. A weak balance sheet makes it more difficult to continue because there will likely be fewer resources available to fund operations, pay bills, and make the kind of investments nec-essary to return to profitability.

Generally, if your balance sheet is strong, your lender will be less likely to pull your line of credit or send you through the work-out process. In fact, it is one of the factors that has al-lowed healthier (i.e., less-leveraged) construction companies to absorb the downturn in business these past few years.

And as these same companies pre-pare themselves for improving market conditions, a strong balance sheet will be a key in securing the resources to fund their future growth. s

Financescontinued from 9

says Carter. “It helps support our com-mitment to leading-edge training that keeps our members in the forefront of green technology.”

The solar thermal systems, which are used to pre-heat the hot water in the training center, consist of both traditional flat panel conductors and newer, more efficient evacuated tube collectors. The rainwater capture sys-tem collects water that would have otherwise gone into the building’s gutters and saves it to flush water clos-ets and urinals. The fixtures are dem-onstration units in the training center, and class participants learn how to in-stall, test and maintain the rainwater reuse systems. Part of the training, for example, focuses on proper pipe labeling to prevent cross-connections.

Local 12 and the PHCC brought Kimberly Garside on board to help oversee construction of the systems, develop the curriculum and manage the green technology training pro-gram. A member of the union for 14 years, with experience on many green installations, Garside has been an instructor at the training center for nine years. She is one of three instructors who teach the green tech-nology courses, which began in early 2011. “There is lots of interest among contractors and members for the pro-gram,” Garside says.

Each class includes 12 to 15 stu-dents, and the modules, which offer 18 hours of training, are open to both apprentices and journeymen. Eventu-ally, Carter notes, the classes will be required for all apprentices. He fore-sees 250 journeymen enrolling in the training.

“We are seeing more and more de-mand for solar thermal,” says Carter. “In addition to new construction and retrofitting green technology to ex-isting buildings, there will be a great need for trained plumbers to main-tain and repair these systems. This grant is helping us prepare for the future.” s

28 Spring 2012

Acadia Insurance (Marlborough) announced in February that the ASM Insurance Program would re-turn $353,597 in dividends to qualifying ASM members for the 2009 and 2010 plan years. Approximately 100 members have since received dividend checks, averaging more than $3,500 each! Since the start of the program in 2003, Acadia has distributed over $4 million in dividends to qualifying members.

1 2 3 American Contractors Corporation (Randolph), an acoustical wall and ceiling subcontractor, recently completed a 140,000 square foot renovation and construction project for JetBlue in Terminal C at Logan International Airport. The space required major renovations and the construction of a secure, cross-terminal walkway that would enable travelers from multiple airlines to seamlessly pass between the terminal’s 21 gates without passing through multiple security checkpoints. American Contractors fabricated all the custom metal work and installed the custom perforated metal ceiling panels and wall system. The project received two renovation awards in April from the Ceiling and Interiors Systems Construction Association (CISCA).

4 J.F. Shine Mechanical, Inc. (West Roxbury) recently completed the installation of a unique rain-water harvesting system at Terminal B at Logan International Airport. The system will capture rainwater that will be used to irrigate landscaping throughout the airport. Members of the J.F. Shine Mechanical team carried out the challenging installation under the direction of foreman Frank Sullivan.

5 6 7 Marr Scaffolding, Aerial Lifts Division (Boston) recently designed and installed an Altrex suspended scaffolding system to erect Microsoft signage to the façade of One Cambridge Center. The suspended scaffold system was comprised of 46 feet of Altrex platform with a 24-foot counterweighted rolling roof beam. Marr & Son Company also installed the miscellaneous steel to support the sign’s structure.

MeMber News

1 2 3

4

5 6 7

The Professional contractor 29

MeMber News8 9 10 11 Robert B. Our Company (Harwich) is pleased to announce two new projects,

one in Orleans, Mass., and the other in Barnstable, Mass. They were selected to replace the River Road Boat Ramp in Orleans with a new ramp implementing their cofferdam systems to assist in the dewatering efforts. They were also selected as the prime contractors for the construction of the Barnstable Sewer Pump Station.

Marr Equipment (Boston) is pleased to announce that John S. Rob-ertson III was named general manager in charge of crane and rig-ging operations. He will be responsible for the management of all operational functions including the development of new business, the direction and oversight of the sales function and overall growth of business. Robertson is a fully-trained crane operator with over 19 years of experience in the equipment and construction industry.

United Solutions (Marlborough), a Sage business partner, is pleased to announce that they were named by Sage to their prestigious Chairman’s Club, President’s Circle and Mil-lion Dollar Club for 2011. The Chairman’s Club is a level of distinction for exceptional Sage business partners who develop a high level of new business through defined sales and marketing. The President’s Circle designation was awarded for top sales and service of Sage construction and real estate software products.

Jim Herlihy CIC, CRISjimherlihy@herlihygroup.com

Mark Herlihy CIC, CRISmherlihy@herlihygroup.com

888-756-5159 www.herlihygroup.com/construction

51 Pullman Street, Worcester, MA 01606

The Herlihy

Construction Division

We speak your language.

Our Construction Division has specialized in your industry for over 85 years.

Contact us today and see the difference an expert can make in your business.

Member: Associated Subcontractors of MA | Builders Association of Central MA

Property/Liability | Fleet Automobile | Workers Compensation | Surety Bonding Contractors Equipment | Group Health | Subcontractors Design E&O

Pollution Liability | Railroad Protective

Three Generations of People Protecting People

HIG.Contractor2012.F.indd 1 1/25/12 10:24 AM

8

9

10

11

30 Spring 2012

12 13 ASM members enjoyed a fabulous evening at Gillette Stadium where they were treated to private tours of the stadium, not open to the general public, including time on the playing field, which was a special treat for many members! Patriots alumni and Super Bowl champions Rosevelt (Rosey) Colvin and Joe Andruzzi captivated the audience with their personal stories, witty repertoire and very popular Q&A session.

14 Wayne J. Griffin Electric, Inc. (Holliston) has completed the electrical installation at the new East Greenwich Middle School in East Greenwich, Rhode Island. The three-story, 105,000 square foot institution will accommodate students, house administration, gymnasium, cafete-ria, music suite, kitchen and classrooms. In addition to complete electrical, fire alarm, telecom and security systems installation, Griffin also provided a 50 KVA utility interactive photovoltaic system and a data acquisitions system, responsible for the display of various “green” building features and more. s

MeMber News

Temple Beth ElohimWellesley, MACredit: Bruce Martin Photographer

Training is Our StrengthGrif�n Electric provides ongoing training and education for all of our employees. Prepar-ing our team to be leaders in the electrical industry is the commitment we make to ourselves and to our clients. We �rmly believe our opportunity to be the best stems from the continuous improvement of our most valuable resource – our people. This dedication to training is evident in the quality of the work we do.

MA Lic A8999

Corporate Headquarters: 116 Hopping Brook Road Holliston, MA 01746(508) 429-8830

Regional Of�ces: Charlotte, NCRaleigh, NC Duluth, GAPelham, AL

www.waynejgrif�nelectric.com

The_Professional_Contractor_1st_quarter_2012.pdf 1 3/26/2012 5:07:39 PM

12

13

14

PUBLISHER OF BANKER & TRADESMAN

THREE TIMES THE REACH!Bay State Apartment Owner magazine now reaches THREE TIMES the amount of Massachusetts landlords.

With the addition of 1,000 APARTMENT OWNERS to the Bay State Apartment Owner mailing list, you have the potential to reach 1,525 targeted multi-unit property owners. In total distribution, your message can REACH MORE THAN 8,000 TARGETED PROSPECTS within a content rich publication.

But, these powerful decision makers will only receive the magazine in 2012. DON’T DELAY. Showcase your business in the Rental Housing Association’s official magazine, which reaches Bay State apartment owners, typically of larger apartment complexes, and additional owners through the insertion of the magazine into Banker & Tradesman.

READERSHIP *Apartment owners *Property managers *Condominium managers *Subsidized housing owners *Rental and condominium property developers *REALTORS® *Brokers and rental agents *Service providers

Your consistent advertising message will speak directly to the decision makers for hundreds of different products and services.

BE WHERE THESE PROFESSIONALS GET THEIR NEWS. • Thedeadlinetoreserve

advertising space is May 17. • Copywillbedueby

Thursday, May 24. • Don’tforgetaboutour

affordable directory ads. • Call617-896-5344ore-mailcustompubs@thewarrengroup.com for more information.

Helping You Build Your Future

Proud SponsorASM / Acadia Insurance Program

401 Edgewater Place, Suite 220, Wakefield, MA 01880Toll Free: 1-800-531-5211

w w w . T G A C r o s s . c o m