Watch your thoughts for they become words.

Watch your words for they become actions.

Watch your actions for they become habits.

Watch your habits for they become your character.

And watch your character for it becomes your destiny. What we think, we become.

My father always said that… and I think I am fine.

–Margaret Thatcher

The Friday March 22 edition of the Wall Street Journal contained a nice surprise for us. The front page of the Marketplace section had the following headline “Plywood Becomes Hot Item as Housing Market Recovers”. What a breath of fresh air.

Not be a political but I lean toward skepticism regarding official government statistics. The WSJ article and mention of potential plywood shortages in the near term was the first legitimate sign of a housing recovery I’ve come across.

We need the housing market to recover. It is starting. Next we need the job market to recover. The commercial real estate market is not going to heat up significantly until employment gets going and more companies need office space.

We have a long ways to go but the sun is finally starting to break through.

Note from Ron: We have a guest posting today. The post is not a sales piece however I believe they offer a great service.

Healthcare reform is here to stay. The short answer to “Does healthcare reform apply to me?” is: YES.
Large Employers: Employers with 50 or more full-time equivalent employees are required to provide health insurance for their workers or face fines (which can range from $2,000-3,000 per employee)beginning in 2014.
Small Employers: On prevailing wage jobs, large contractors with the mandate for coverage will have a lower payroll burden than small contractors because they are using the fringe to pay for health insurance. And don’t overlook the importance of attracting and retaining talented workers – they will be looking for jobs which provide health insurance.
Individuals: All individuals are required to have health insurance beginning in 2014. Those who do not will face penalties which will be included on their income tax returns.
Plus, providing benefits to your employees is the right thing to do. Coverage provided with fringe dollars is paid with pre-tax money and employees who are not covered at work must be underwritten on their own and pay potentially higher rates with their after tax dollars. You have fringe dollars specifically earmarked to provide benefits and significant payroll and insurance costs savings when you do.
You have just over a year to get into compliance with PPACA (also called the Affordable Care Act or ACA). The good news? As a government contractor working on prevailing wage jobs, the funds to cover providing health insurance for your workers are already there – included in the wage determinations!  In addition to avoiding penalties, when you use the fringe portion of the prevailing wage to provide benefits like retirement plans or health insurance for your employees, these dollars are not subject to payroll burden. This can result in significant savings over the life of a project.
Some contractors may believe the fringe to be “the employee’s money” but this is not so!  The fringe is an employer contribution; therefore, the employer is in the driver’s seat when it comes to deciding how to allocate it. Letting employees know that the decision to use the fringe for health insurance is a healthcare reform requirement may ease their objections to not receiving the fringe as cash.
There is no doubt that the ACA and all of its new regulations add a whole new level of complexity for government contractors who already have to worry about prevailing wage laws. Paying fines in addition to the expense of paying fringes as additional cash wages is a double hit on your bottom line. Can you afford to take that hit? If other bidders are benefiting from savings on payroll burden and you’re not, will your bids be competitive?

Contractors can no longer afford to wait on implementing the new mandates. It’s time to start figuring out how to price in the additional costs for bids you have already won and those you are bidding on right now. What if your company currently has less than 50 full-time employees, but the project you just won will take it over 50?  Now what?  There are many, many questions around implementing the ACA. Fortunately, The Contractors Plan, powered by Fringe Benefit Group (an ABC Business Partner), is prepared to help government contractors understand the new legislation and how to comply with the multitude of new requirements. Fringe Benefit Group has specialized in providing quality benefits for prevailing wage workers for more than 30 years and we are fully prepared to help contactors navigate the maze of health care reform.

About the author:

John G. Allen, CRPS, is a regional vice president for Fringe Benefit Group, which has been helping government contractors design and administer fringe benefit programs since 1983.  He can be reached at 800-635-6912 or jallen@fibi.com.

We have a guest blogger today.  His name is Vic Lance, owner of Lance Surety Bonds.

By Vic Lance:

Starting a new construction project requires endless amounts of legal documentation and working through the proverbial “red tape.” Most often one of the starting points for beginning a construction project is to acquire at least one (typically two) contractor bonds, also known as surety bonds. Even though they are required on virtually all projects, much is still unknown about what they do, how they came to fruition and how much they cost. The following is an inside look at the most common questions regarding surety bonding:

Why are surety bond required?

The history of surety began around 1935 with the passage of the Miller Act. This law required both performance bonds and payment bonds on federal construction projects costing more than $100,000. Following this, several states adopted their own regulations which were deemed “Little Miller Acts.” Because of this, surety laws can vary widely from one region to another.

What is a surety bond?

In simple terms, surety bonds are a form of a contract. They promise that work will be completed per agreed upon terms and payments will be given to subcontractors and material suppliers.

In all cases, surety bonds are an agreement involving three parties:

• Obligee – the project owner
• Principal – the bond purchaser or bond owner
• Surety – the agency selling the bond and overseeing work is performed per the bond’s protections

How much does a surety bond cost?

There is not one set fee associated with surety bonds. Rather, premiums and prices range depending on the applicant’s credit history, the type of bond being purchased and the geographic region the bond is required in.  Applicants with almost flawless financial backgrounds will be granted the most competitive rates. Those with less than average credit history can also apply through several organizations high-risk bond programs. On average the lowest rates offered are between 1 and 3 percent, while bad-credit individuals may  pay anywhere between 5 to 20 percent of the contract amount.

How do contract bonds and construction bonds differ?

The simple answer to this is, there is no difference between the two bonds. In fact, these are simple nicknames or terms used interchangeably to refer to various types of contractor surety bonds. The most common types of contract surety bonds are bid bonds, performance bonds and payment bonds, which are often sold together.

• Payment Bonds: these ensure that all parties who should be compensated will be even in the event of a contract default
• Performance Bonds: these protect project owners from contractor negligence if work is not performed to the agreed upon statements in the contract

How do surety bond differ from insurance?

The biggest difference between bonds and insurance is due to risk assessment. For insurance most of the risk associated with protecting a client lies with the insurance agency. On the other hand, bonds are issued under the expectation a claim will never have to be filed. If however a principal is found to be in violation of his/her bond protections, the surety agency will pay reparations to the claimant and then seek reimbursement from the bond purchaser. Due to this, risk always lies on the side of the principal – the bond owner.

Vic Lance (vic@suretybonds.org) is the owner of Lance Surety Bonds a nationwide surety agency. He helps advise contractors and small businesses on the bonding process.

The following was penned by Danielle Rodabaugh of www.SuretyBonds.com.

New contractors have a plethora of regulations to learn about in a short time, and oftentimes they’re left to sort through them on their own. The use of surety bonds in the construction industry is one such regulation. There are many things every contractor should understand about surety bonds in the construction industry, but here are the five most crucial.

1) Government agencies require different surety bond types to protect consumer interests.

The basic idea behind contractor bonding is to protect project owners from financial loss due to a contractor’s inability to complete a project and/or follow industry regulations. Contract bond requirements help regulate the industry, reduce fraud and keep financially unstable contractors out of the market.

Although there are a number of specific surety bond types out there,  government agencies typically make use of three major ones when it comes to the construction industry.

• Bid bonds guarantee a contractor won’t increase the initial price of the bid submitted to the project owner. If a contractor should try to raise the price of the bid later on, then the project owner can make a claim on the bond.
• Payment bonds guarantee a contractor will pay for all materials and subcontractors used on a project. If a material or labor provider should remain unpaid after a project is completed, the business can make a claim on the bond to gain reparation.
• Performance bonds guarantee a certain quality of work will be completed. If a contractor should fail to meet a contract’s stipulations such as deadlines, then the project owner can make a claim on the bond to recover losses.

2) Contractor bonds should not be confused with insurance policies.

Although surety bonds are categorized as a type of insurance, contractors should understand that contract bonds and insurance policies are two entirely different products. The two are essentially different in that insurance policies generally protect policyholders (i.e. contractors) whereas surety bonds generally protect the bond’s obligee, which is typically the project owner. As noted earlier, though, payment bonds protect contractors who have been subcontracted by a prime contractor.

3) Contractor bonds act as legally binding contracts.

Each contractor bond that’s issued legally binds together three parties.

• A contractor purchases a surety bond as a guarantee that work on a project will be performed according to the project’s contract.
• An obligee requires a surety bond to protect the investments made in a project. A government agency such as a state’s contractor licensing board often acts as the bond’s obligee.
• A surety executes the bond by providing a financial guarantee of the contractor’s ability to complete work on the project.

4) Contractors undergo a thorough background check before they can get surety bonds.

Before contractors can purchase a surety bond, they must go through an application process. The exact process will vary depending on the surety provider, but it oftentimes includes a review of the applicant’s credit score and other financial records. Contractors with poor credit usually pay a significantly higher price for their bonds because sureties take a greater risk in backing the work of a financially unstable principal.

5) Contractors should look for the surety that will best serve their needs.

As with any major purchase, the decision to buy a surety bond should be carefully researched. Contractors should always verify the reputation of any surety provider they plan to work with. The agency should be able to explain all material clearly while also being well-versed in local, state and national market conditions, as laws and regulations change frequently. Experienced surety specialists have a thorough knowledge of the industry and also provide great service to their clients.

This article was provided by SuretyBonds.com, a nationwide surety bond producer that aims to help contractors understand the legal aspects of surety bonds and the bonding process.

You can reach Danielle at darodabaught@suretybonds.com.

While taking a break from our working weekend  to pick up a part for his motorcycle trailer, Guy and I met an interesting union contractor who shared a crazy story about his local chapter.  This story was so far out of the box that it took Guy and I a couple of minutes to verify we had heard it right.

Here’s the short version: this man’s union local was requiring members who owned a stake in their companies to pay union dues and benefits on at least 40 hours a week…whether they worked it or not!

The local’s goal was to drive the small union contractor out of business so that the larger union companies would have less competition. Crazy.

Doesn’t our industry have enough challenges these days with the economy and all? Don’t the unions have bigger fish to fry than hurting each others’ business? Crazy.

Just when you think you’ve heard it all, you come across a hard-working owner of a small company that shares a nearly impossible to believe story.

I’ve told dozens of people about this amazing presentation Frank Kern delivered a few years ago at Rich Schefren’s Business Acceleration Program work shop. I originally got access to it through one of Schefren’s DVDs and later through an online service offered by Frank.

Being a master of technology, Frank made it nearly impossible to copy and share with others. I’m not even sure Guy has seen it.

The presentation is a real eye opener. Frank calls it “Core Influence” but it really should be titled “Your Perfect Groundhog Day”. Frank leads the viewer through an exercise that helped him finally understand what he truly valued and enjoyed in life. It’s a fun little exercise that grows more and more difficult and valuable the more thought you put into it.

Frank’s exercise is perfect for every business owner who isn’t sure what his or her long term goal is. What life he or she is striving to build. What the end of the journey would ideally look like.

Frank has never before made this presentation available before outside of the one package I was involved with. He is now sharing it with the world. All it takes from you is an active email address and about 60 minutes of your time.

To watch the video, click on the link below. You don’t want to miss this. Frank is always good for dozens of laughs and he is at his most entertaining and most thought provoking in his Core Influence video.

Click here to watch the video.

You can thank me later.

Have a great night (day, afternoon, whatever).

Ron

While visiting with a contractor the other day, he mentioned sharing one of our recommendations for improving field performance to a friend and fellow contractor.

His friend shook his head and replied “I would never do that. Share the budgeted time with the crews? I’d never do that. If they realize they’re moving faster than the allowed time, they’ll slow down. I want them working as hard as they can.”

Wow.

I had forgotten how common that belief was among owners and project managers.

These people simply do not understand human behavior. A worker is FAR more likely to miss a deadline or budget because he was left in the dark than he is to dial it back when he’s ahead of the budget.

Heck, which hurts worse? Hitting the budget when we MIGHT have beat it by 10% or running 10% over budget?

If you only take one piece of advice from Guy and I make it this:

Tell your employees EXACTLY
what their performance targets are.

That one action alone will reduce costs, improve on-time performance, increase customer satisfaction and – believe it or not – improve employee satisfaction.

Never, ever keep your employees in the dark about the outcomes you need them to deliver.

The headline could, and maybe should, refer to punching out a job but today it refers to installing processes and systems in your business. Just like with construction projects, finishing off the last 5% of the implementation of a new business procedure seems to take 50% of the total time. The last 5% is painful, boring, and annoying…but it must be done!

A recent marking email I sent out to my newsletter reader list brought this point to mind. In the email I promised to share the secret to keeping crews on time and in budget. (Side Note: marketing emails to the list are few are far between.)

A bunch of contractors emailed or called in to learn the secret as they were struggling with their crews. A handful of these contractors had 95% of the solution in place yet they hadn’t completed the last few steps and therefore weren’t receiving the desired results.

It really drove home the point that if you don’t finish something 100% you will not receive the benefits you seek. In the case of construction projects that translates to not getting back your full retention.

So here’s my tip: Dad was right. If something is worth doing, it’s worth doing right.

Don’t let up until you’re done. In some cases, such as with keeping crews on budget and schedule, the follow through requires daily action.

Hope this helps you move forwards.

Take care,

Ron Roberts,
The Contractor’s Business Coach
913-961-1790