Monthly Archives: January 2013

Leavitt Logo

There are many groups that help make the City and County of San Francisco Surety Bond & Finance Program a success.  One of those is with Kenneth Goodwin and John Daley of The Leavitt Group, also one of our longest standing partnerships. We want to celebrate their efforts in helping our small business contractors here in San Francisco and help you understand what they are all about.

Q. What is your relationship with the City and County of San Francisco Surety Bond and Finance program? 

We have been a strategic partner of the San Francisco Surety Bond and Finance program for the past seven years. We provide surety expertise and brokerage services to contractors requiring performance and bid bonds on projects qualifying for assistance under the Program.

Q. How has the program assisted your clients with obtaining bonding? Have there been any memorable success stories for any of your clients?

The program has allowed a number of our clients the opportunity to bid larger projects than would not ordinarily be approved in the standard surety market. With the Program’s support, a contractor can gain experience managing larger projects. This can help sustain financial growth and increase bonding capacity, with the goal of transitioning the contractor into a suitable program with a non-collateral surety market.

We consider every bond issued with the support of The San Francisco Surety Bond and Finance Program a memorable success for our clients.

Q. How do you advise your clients to prepare for obtaining their first bond?

Sureties require a good deal of information to properly underwrite a first submission. Be prepared to submit business and personal financial statements, resumes, project and credit references, etc. Have information readily available in order to respond quickly to inquiries about yourself, your business and the job you are interested in bidding. Most importantly, make sure the project you wish to bid on is within your scope of expertise; never bite off more than you can chew.

Q. What are some of the key ingredients for a contractor to increase their bonding capacity?

  • Successful completion of bonded and un-bonded projects
  • Slow and sustained growth.
  • Bid sensibly; do not “buy” (bidding only at cost in order to be determined the lowest bidder to keep your crews working) work.
  • Maintain sustainable gross profit margins and be sure you can cash flow your entire backlog.
  • Reinvest profits in the company – do not unnecessarily drain equity.
  • Engage an experienced construction oriented CPA to prepare compiled or reviewed financial statements
  • Utilizing resources like the bonding assistance program for support.

Q. Have you had any contractors significantly increase their bonding capacity to a level beyond the parameters of the program?

A number of our clients previously requiring support from the program have transitioned into the standard surety markets. Some of them have bonding capacities beyond the thresholds of the Contract Monitoring Division LBE Program.

Contact our Leavitt Group representatives for more information on their services:

Kenneth J. Goodwin

Vice President, Surety

1390 Willow Pass Road, Suite 800

Concord, CA 94520

Phone: (925) 822-9050

Fax: (925) 309-8076


John J. Daley

Vice President, Surety

1390 Willow Pass Road, Suite 800

Concord, CA 94520

Phone: (925) 822-9007

Fax: (925) 309-8075


ContractWhat is Job Order Contracting?

In 1981, Harry H. Mellon was serving as Chief Engineer in the Army Corps of Engineers for NATO operations in Europe. Faced with a number of high-priority projects that needed to be completed quickly with limited resources, he became frustrated with the sluggishness of the standard bid process for construction. So he invented a new process by devising, bidding, and implementing the first ever JOC system. By definition, JOC is a type of contract that allows owners to accomplish a large number of repair, maintenance, and construction projects with a single, competitively bid contract.

After JOC proved successful for NATO, Mellon was asked to do the same for the Department of Defense. When he realized the process was not only effective at the federal level, but cities and counties would benefit as well, Mellon founded The Gordian Group. Currently, The Gordian Group is working on the San Francisco International Airport project and in the bay area as a consulting firm specializing in JOC Management.

Project Manager Rob Garner explains the benefits of the JOC process: “JOC has always fit a niche. It allows a city or county to be more efficient and complete critical projects quickly, without having to go through the design process. The only information required is what is permitted. So for smaller projects like changing doors or hardware or doing a remodel, installing security – any of a thousand things – the city or county isn’t obligated to go through the long process of hiring an architect or design team. There are tremendous savings in both time and soft costs for those that are pressed to perform under these kinds of constraints.”

Often, JOC projects can seem intimidating to prime and subcontractors because of the many steps involved to qualify. Companies like The Gordian Group are there to help decipher the contracts that are based on each city’s administrative codes. “Developing the bid package and maintaining integrity of the process is one of our primary goals,” says Gardner. “We research, manage and publish the task catalog. For a client in the construction process, there could be 300,000 standard difficulty bid factors to our catalog prices.”

To become more informed and prepared to bid on JOC projects, contractors and sub-contractors are encouraged to participate in outreach programs. When pre-bids are mandatory, contractors benefit from completing upfront analysis of the programs. In pre-bids, The Gordian Group helps explain the risk and rewards of JOC. “It’s not a new process, but not everyone understands it,” Gardner adds. “We would love to see an auditorium filled with people learning about how they can benefit from JOC.”

There are some clear advantages for contractors and sub-contractors bidding on JOC contracts. It’s all about growth. Since these are smaller projects, pre approved contractors perform like on-call resources, ready to execute quickly on fixed-price projects. Since the JOC model doesn’t rely on design components the way conventional contracts do, contractors complete multiple smaller jobs that roll up into the overall value of their contract. Of course, contractors must perform high-quality work in order to continue receiving projects. However, it is typical that those contractors and sub-contractors who become very proficient at JOC also become very successful in growing their business, often developing whole teams devoted to JOC. As a result, projects get completed quickly, fairly, and at a high quality level so that everyone wins.

Naomi KellyOn February 7, 2012, Naomi M. Kelly was sworn in by Mayor Edwin M. Lee to serve as the City Administrator for a five year term for the City and County of San Francisco. As City Administrator, Ms. Kelly oversees the City’s General Services Agency consisting of 20 departments, divisions, and programs including the Department of Public Works, Department of Technology, Administrative Services, Office of Contract Administration/Purchasing, Real Estate, County Clerk, 311, Fleet Management, Convention Facilities, Animal Care and Control, Medical Examiner, Treasure Island, and more. The General Services Agency has an annual budget of over $450 million and approximately 2,100 employees. In this capacity, Ms. Kelly’s objective is to ensure responsible fiscal management and accountability to those who pay taxes for our local government to provide essential services.

Prior to her appointment, Ms. Kelly was the Deputy City Administrator where she assisted Mayor Lee in rolling out the City’s new local hiring policy by preparing and working closely with City departments, contractors, and the broader community to ensure compliance with the new legislation. The new policy required contractors performing public works or other capital improvement projects to meet mandatory levels of San Francisco resident participation that support the local economy.

In 2004, Ms. Kelly was appointed the City Purchaser and Director of the Office of Contract Administration by Mayor Gavin Newsom. Ms. Kelly managed the procurement of approximately $250 million in materials and supplies and approved approximately $500 million of professional service contracts that support the operations of city services in a fair and transparent manner. She also improved the department’s performance by enhancing and streamlining the procurement procedures.

Q: Has the local hire policy had any documented impact on local contractors seeking work with the City and County of San Francisco?

No, there has been no documentation of the Local Hire Ordinance’s impact on local contractors. However, the Office of Economic and Workforce Development (OEWD) did release the San Francisco Local Hiring Policy for Construction 2011-12 Annual Report in March which found that 34% of total craft hours and 68% of apprentice hours for 22 active Public Works projects have been performed by local residents. The City’s Local Hire Ordinance was adopted in December of 2010. As more information on the legislation’s impact is released, the Contract Monitoring Division (CMD) will work with OEWD to gauge the ordinance’s effect on LBE-certified firms.
Q: How has the city been assisting small contractors with bidding on local contracts?

The Contract Monitoring Division works in collaboration with city departments when they award their contracts. For example, the City has a set-aside program that awards to Micro-LBEs depending on the size of the contracts. For public works contracts estimated to be equal to or less than $400,000, the amount will not be less than 50%. For public works contracts estimated to be equal to or less than $100,000, the set-aside award to Micro-LBEs will not be less than 25%.  In addition, during pre-bid, pre-proposal meetings, CMD encourages all contractors, including small and micro LBE firms to request technical assistance to ensure clarification on contracting requirements. Under the 12B, Equal Benefits Program, CMD ensures timely and efficient analysis of their 12B submittals, thereby increasing the pool of pre-qualified small contractors.
Q: How is the City prepared to assist small contractors with JOC contracts that are becoming more prevalent as a bidding mechanism throughout the City and County of San Francisco?

One of the main concerns by small contractors with respect to JOC contracts is the bonding requirement.  CMD worked with the PUC & DPW in order to set up a Micro Set-Aside JOC requirement that helps alleviate the bonding requirement concern (e.g. tying up small contractor bonding capacity). The City’s Bonding and Financial Assistance Program for small contractors assists in this endeavor.  The first JOC contract at the Airport will be advertised in early 2013.  CMD has set the Airport JOC contract with a 25% LBE sub-goal.  The license requirement is a “B” General Building trade.

Our City’s Risk Manager has also been working with the contracting departments and the City Attorney’s office to secure options for bond duration modifications on these JOC contracts.  It is still a work in progress but is something that is at the forefront of our attention.

Q: What is your history with the City and County of San Francisco Surety Bond Program?

As the City Purchaser, I worked closely with the Risk Manager on the Surety Bond program. I have been intimately aware and supportive of the program. I worked daily on LBE contracting issues and while my direct interaction with the program was limited, the coordination of LBE outreach was central to our mission.  As City Administrator, I have taken the lead in updating the program’s legislation to make the administration more cost effective and efficient.  Additionally, I am currently overseeing the complete review of the program from both a process and cost perspective to ensure it provides the most effective support possible to the contracting community, which in turn, gives the City a more competitive pool of bidders.

Q: How is the new local hire policy expected to increase work for small and micro LBE contractors?

Local businesses are more likely to hire local employees. Prime contractors may be more inclined to hire LBE-certified firms as subcontractors to meet both their LBE and local hire goals. In 2010, the HRC surveyed over 90 LBE-certified General A & B licensed firms and found that over 40% of employees working for these firms were local residents

Q: With the transition of the LBE program to your jurisdiction, what are a few of your targeted objectives for 2013?

  • Continue to implement and expand the Elations Contract Compliance Tracking System to allow for online monitoring of contracts and certification of local firms.
  • Increase the total dollar amount of contracts awarded to LBE-certified firms through micro set-aside and Proposition Q purchases
  • Revise, update, and expand Chapter 14B of the administrative code to create greater opportunities for LBE-certified firms
  • Provide targeted outreach, such as fencing, roofing, etc. These are categories needed by departments that lack LBE availability
  • Continue to lower the barriers for LBEs to compete for City construction contracts through our Surety Bond Program. We want to improve program administration and increase access for local businesses. The Risk Management Office has a dedicated staff person working with city departments and companies. The Risk Management team understands the surety market and the many challenges that our LBE contractors are facing in the market place. They are currently working to streamline the bond approval process. We are exploring the possibility of expanding the eligibility of the participants from not just construction contracts to other contracts requiring performance and/or payment bonds.

Q: With the significant number of private major public/private projects like Block 6 and 7 of Transbay, 8 Washington, Warrior’s Project, what will LBE opportunities look like and how will the City capitalize on maximizing leverage negotiating with these private parties?

Under the current Chapter 14B Ordinance, CMD does not have jurisdiction over private development projects. However, the City has in the past negotiated agreements to include LBE subs and utilize the local hire process (Harding Park, AT&T Park, etc).  If the City negotiates an agreement to utilize LBE firms with private parties, CMD can provide technical assistance to developers on the program (e.g., setting LBE sub goals, good faith outreach, and contract monitoring, etc.).

SF Recreation and ParksWith goals of growing his San Francisco-based general engineering and building construction company exponentially, Bruce Giron realized he needed to focus on his business structure and then pursue partnerships to promote growth. He found companies in JOC projects that needed sub-contractors and developed a relationship with one, and then another. “It turned out they liked the work I did and with enough successful performances they recommended me for more jobs,” says Giron. Business is booming.

Getting prepared for JOC required Bruce to assess his current situation and available resources. “The small business program is well intentioned, but at the end of the day, businesses like mine don’t have a lot of administrative time. They are trying to work from the field,” he says. “It’s necessary to fly co-pilot with people who are willing to help. The assistance from the city’s surety bond program and Merriwether & Williams was much needed to secure the bond. I’ve talked to other small businesses that are overwhelmed by the amount of administrative tasks required to participate in these types of bids. In San Francisco the bar is pretty high. Bond assistance programs are essential. For me this made all the difference in taking the first step.”

Giron has more advice to other contractors looking to get into JOC: “Work on one problem at a time. If you think about the mountain all at once, you won’t climb it. You are going to have to find others that have traveled the path to assist you. They can help remind you that you are not alone and you don’t have to climb the mountain in a single bound.”  Bruce came to realize that there are a lot of steps necessary in acquiring a bond. He says “Merriwether & Williams has been extremely helpful. Their expertise allowed me to continue to focus on the administrative needs of my business while getting the bond. Now I can. That’s another mountain I’ve conquered.” For Bruce it’s on to the next mountain.