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JH&S

Construction is so much more than being out in a job site. In fact, the success of a company can hinge on a properly performed construction contract. That’s why it’s important to have experts with a deep and wide knowledge of the construction industry.

Jones, Henle & Schunck (JH&S) started 35 years ago with two partners. One of the two, Kay Jones, was a chief financial officer for a construction company, which created the groundwork for a firm that focused on the construction industry’s accounting, income tax and general business consulting needs.

Tom Henle and Karl Schunck joined very shortly after the firm opened. While Schunck’s years with a “Big 8” firm primarily involved publicly traded companies and SEC compliance oriented work, he was ready for a change. “Although I valued that experience, I wanted to have a closer relationship with my clients, to make a difference,” Schunck says. Most of the privately-owned companies the firm serves do not have CPAs as controllers or CFOs. “This provides the opportunity to have an impact on their operations,” says Schunck. “It’s a very satisfying experience to save large sums of money by properly structuring events or transactions involving their operations.”

Schunck remembers one construction company who was having trouble obtaining surety bonds, because it was having a difficult time “making its case” with the surety bond underwriter and broker. One of the new client’s problems was a failure to understand and thus properly report in their financial statements the concept of “under” and “over” billing.

Schunck and the company president/majority stockholder cleared a conference table and analyzed how every line on their jobs in progress schedule worked, and how it impacted the balance sheet and income statement. After that meeting, the company’s issues with its bonding company and bank vanished, and it went on to be awarded honors in Washington, DC as the National Minority Contractor of the year.

Another key for owners and their financial personnel is understanding what’s in their financial statements and corporate income tax returns. It can be downright embarrassing to not be able to answer a banker’s question, for example, why gross revenues in the financial statement are different from what’s reported in the tax return. The owner needs to understand that one may be based on percentage of completion reporting, and the other on the completed contracts or cash method of reporting revenues.

Owners and their financial personnel also need to understand the impact of accounting transactions and how they “flow” into their balance sheets and income statements. They should be able to visualize how approval of a project change order, for example, affects under or overbillings, the working capital ratio, stockholders’ equity or any of a number of factors used by banks and surety companies in granting credit. Demonstrating such an understanding with a surety bond underwriter or a banker greatly enhances creditability with those business partners.

Almost all of JH&S’s construction clients emerged successfully from the downturn, including those in residential construction such as grading and paving, plumbing, electrical, landscape and the like. Yes, construction volumes generally decreased but the firm’s residential construction clients are poised for expected volume increases.

To assist them in processing their accounting data and construction activities, JH&S’s construction clients utilize a variety of accounting software, which are fully integrated and provide proper cut off and audit trails, work in progress or “bonding company reports” and estimating and construction equipment modules often necessary to contractors.

With its proven expertise in construction, it’s no surprise that JH&S has partnered with Merriwether & Williams for over ten years. Over the years, the firm has given construction accounting classes for their current and prospective clients and participated in MWIS’s contractor networking events. It’s a mutually beneficial partnership that yields great results on both sides.

JH&S serves its clients with over 25 employees, including over 20 professionals, from its Danville, California and Orange, Southern California offices.

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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.

Pier 35Alphonso Rhodes, owner of AJS Painting & Decorating, doesn’t like turning down jobs. But that’s exactly what happened when he got offers for big projects that needed bonding that were over his capacity.

But everything changed when he bid on a project for a million-dollar water plant project in San Bruno. with Keiwiet Infrastructure. They liked his company, which he started in 2001, but they told him they needed a bond.

Something clicked for Rhodes. He had known about the San Francisco Bond Assistance Program for a long time through his network, but never really needed to apply. Now he did.

He applied, was accepted, and got the job. He got paid, and got to work. It was his first bond. A little procrastination aside, he says that the process was relatively quick and easy. The folks at the Bond Assistance Program not only made things easy, but also helped him better understand his contract, working out details on topics like liquidated damage.

He started the four-year job in December 2012, and plans to hire at least two more employees in the near future. “It’s a beginning, a new birth,” he said. “I was like a little kid waiting for the paperwork to come in, and when I got it, it was like Christmas,” he says.

The bonding has already helped him tremendously. And he’s confident that it will keep paying off. “If you want to make it out here with the big boys, you have to get one,” he says, noting that it will help him with bidding on a job as a prime. “I can bid on other jobs that I’ve been turning down.”

Sometimes things get a little bumpy on a job. That’s the experience for John Wilson, the General Manager at TT Commercial, a company that recently worked as a subcontractor on LAUSD South Region High School #12, doing tile surfaces.

Wilson found out about BAP through the GC on a different project that his company worked on. When brought to their attention, the company jumped on the chance to get involved. “I don’t know that it would’ve been feasible without the program,” says Wilson. “It gave us the ability to perform the job.”

On the job, Wilson found that things just went a little more smoothly than previous jobs when working with BAP and general contractor Suffolk Construction. He explains why: “It seems that because there is a third party [funds administrator] involved that is a mediator, it forces the GC to be more on their toes with things, and possibly more available than they would be without.” He says that having a third party helped move everything, including billing, change orders, and releasing funds, just a little more quickly.

That made a big difference to how efficiently TT Commercial could get the job done.  “The amount of paperwork in today’s world in construction is ridiculous,” he says. “It’s five to six-fold of what it was three years ago, and the ability to get paid is double to triple the time,” says Wilson. “I sit on the board of a contractor’s association, and we talk about these types of things. It’s not just going on in one region like LA, it’s going on throughout the country.”

Wilson says that working with BAP mitigated some of the problems in today’s construction landscape. As of late August, the company is 75% done with the project – the first with BAP, and hopefully the start of many more.

 

As owner of Birdi & Associates, Moninder Birdi has worked with LAWA over the past ten years. So it was through LAWA’s small business outreach that he learned about the Bond Assistance Program. The program gave him the confidence to bid on a $1,200,000 contract for the Turn Key Implementation of VMS/VSS IP Cameras. With BAP posting $180,000 collateral, he was awarded the contract.

Doing project management and systems design work for this security project is complex. But Birdi found invaluable help along the way. “LAWA really helps facilitate everything,” he says.

Canaan Hillery, from Canaan Insurance Agency, has similar kudos for the Bond Assistance Program at LAWA. “LAWA is an easy program partner,” he says. “They get their paperwork done, they are detailed and fast to respond, they call you back right away, and they are easy to work with.”

Hillery says that BAP has done more than offer contractors like Birdi financial support — it’s offered peace of mind. “When the whole real estate bubble burst, a lot of contractors used their properties for collateral, and some ended up losing their homes” he recalls. “BAP has helped quite a few people stay afloat.” He adds: “In the long run, it helps contractors who can’t bond on their own stay working.”

The Turn Key Implementation, which started in late August, is only the first step in a long relationship, according to Birdi. “BAP has really helped me,” he says. “In the future, I’ll be depending on that program.”

The purpose of a boot camp is to whip you into shape. That’s exactly what happened for Marco Rojas, owner of Rojas construction.

When he found out about a LAUSD boot camp, he jumped on the chance to attend. Until then, he had no bonding capacity and not-so-stellar credit. “I decided that we should take advantage of the free education,” he says. “I had no education as far as what was offered,” he said. He wasn’t disappointed. “Boot camps teach you exactly what to do and what to expect,” he says.

Now that he had a clear road map, he set upon making his business a success. To build capital, he started winning small LAUSD projects that didn’t need bonding. But he still didn’t have high hopes of getting bigger projects. “I just thought we couldn’t do it,” he says.

That changed when he connected with the folks at the Bonding Assistance Program. With BAP’s support, he embarked on his first bonding project ever. To date, he’s done five projects with BAP, the latest being the Port of Los Angeles’ Phase Two of Disney Cruise Terminal Improvements, with BAP posting $30,011.60 collateral for the $75,027 contract. Without bonding, he says he wouldn’t be able to bid on projects over $10,000.

“I’ve benefited tremendously,” he says. “I thank God for that program. Without it we wouldn’t be able to put food on the table.”

But the Program isn’t just about one job, or even five jobs. It’s about a sustained effort to help companies get — and stay — successful. “With just a few more projects, I can repair my credit,” he says.  “My whole life I’ve had doors closed. But you have to persevere. Without the BAP, we wouldn’t be able to be where we at right now. Don’t give up.”

How do you create a community? Ask Pinner Construction. When they were awarded the role of Prime contractor for South Region High School #15 with the help of the Bond Assistance Program, they needed a subcontractor for insulation and acoustical work.

That’s when they turned to Hamilton Ceiling Systems. “When we approached them, we found that they were having some difficulty getting bonded,” says Gary A. Riehle, Insurance & Risk Manager, Pinner Construction CO., Inc. Riehle recommended they get in touch with MWIS. “We’ve had a long history of working with small business contractors  and we value that relationship,” he explains. “We looked at the potential they had and liked what they had to offer, and knew that they are the type of subcontractor we’d like to work with.”

For Hamilton, it was a welcome introduction: “BAP was a great help,” says office manager Jessica Turner. “Without it we wouldn’t have been able to move forward with the bond or the project. We were very happy and relieved to learn of the program.”

Turning them over to LAUSD and BAP, Riehle knew they were in good hands. And he felt good about that: “It’s a proud moment to look at Hamilton and know that we helped them.” He adds: “The system can work if it’s done right and the people are willing to work within it.”

And it’s working. With the project about halfway done, they are well on their way to a beautiful new high school with a view of Catalina Island. But the benefits will extend way beyond this particular project. “It adds growth to your company by increasing your bond-power,” says Turner. Says Riehle: “If you help somebody out, you are helping that contractor get future work, helping out the building community, and our public works system. This creates jobs and helps businesses flourish.”