Archive

Tag Archives: Bond Assistance Programs

Some things get better with age. The City and County of San Francisco Surety Bond Program has been active since 1997 and became permanent in 2000, when it was under the Human Rights Commission (HRC). “The idea was conceived to take away the barriers for the local contractor community to be able to access bidding opportunities in the city contracting process, and to provide tools and education to be successful,” says Matt Hansen, Director, Risk Management Division. “It’s a pathway to break down the barriers and allow a larger group of contractors to participate in the public process.”

 The responsibility for the Bond Program has recently switched from the HRC to the Risk Management Division. “We were asked to administer the program about a year and a half ago. Given that our office is comprised of insurance subject matter experts, it made more sense for us to work with the bonding piece of the program,” explains Hansen. His office facilitates the approval processes, administration of the program, and approval of the guarantees.

Hansen appreciates the close involvement with MWIS. “It’s been a fantastic relationship,” he says. While he’s been involved with the program for six years, he’s spent the last year and a half working closely with the MWIS team to try and streamline the processes required in order to perfect the program. “Various public processes under the city contracting rules can appear somewhat onerous, and our goal is to ensure that the bonding requirements do not have a negative impact on the contractor community so that everyone can benefit.”

The work with MWIS is an ongoing collaborative effort that directly benefits small and minority contractors. It could be a simple phone call to MWIS that changes the course of a contractor’s bidding process. Once they have more information, says Hansen, they can more easily compete. And after they graduate from the Bond Program, they are much more equipped to move on and compete on their own. “They have a newly learned sophistication,” he says.

Looking toward the future, the Risk Management Division will continue to work both with the internal stakeholder and program administrators to streamline the processes and work to make them even more efficient than they are today. He points to past successes, such as passing legislation that removed the sunset clause, a historical provision that was creating inefficiencies regarding the letter of credit and bond approval processes.

There are even more positive results on the horizon, as the division constantly reviews its processes to make sure they are in compliance with the regulations and laws, while also becoming as efficient as possible. “We will work for years to come, working with internal city departments who utilize the bond program, to better characterize the nature of the program, and invite feed
back on what’s working and what’s not.”

 

Advertisements

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.

Susan Muranishi is the County Administrator. As the “CEO” for the County, Susan watches over many crucial departments, including Risk Management, and oversees many services such as welfare, health, probation, and more. We caught up with Susan to ask her a few questions:

MWIS: What is Alameda County is doing to improve outcomes in the community for local workers and local businesses?

SM: Alameda County promotes business development throughout the County through collaborative efforts with other local organizations and its own contracting and procurement activities. It also recognizes the need to conduct business in a manner that preserves our resources for future generations, and is very active in promoting sustainable business practices in the region.

As a social services provider to the County’s most vulnerable populations, we link residents and employers via employment resources such as The East Bay Works One-Stop Career Center Programs through our Social Services Agency. We also work with local youth to ensure they are prepared for the new economy through training programs at Youth Uprising in Oakland, and our New Beginnings program, which works to provide job training and opportunities to foster youth and youth in our juvenile justice system.

MWIS: What made the County adopt an Owner Controlled Insurance Program for Alameda County construction projects?

SM: The County continually strives to utilize its resources in a fiscally prudent manner while encouraging local business development. Under an owner controlled insurance program (OCIP) the County provides standardized insurance coverage for all covered subcontractors at a lower cost than would be possible for the subcontractors to do on their own without the benefit of the pooling of risk. The County and the subcontractors both benefit from the more uniform coverage that is provided at a lower total project costs.

MWIS: What are some other programs creating jobs in Alameda County?

SM: The Small, Local and Emerging Business (SLEB) program is designed to enhance contracting and procurement opportunities for small, local and emerging businesses within Alameda County by providing up to 10% bid preferences on eligible contracts. The program was developed to promote and foster inclusiveness, diversity and economic development, as well as provide on-going evaluation to ensure that all local businesses are provided equal opportunities in County contracting and procurement activities. The SLEB program is administered by the Office of Contract Compliance (OCC), which is located in the Auditor-Controller’s Agency.

And of course, The Contractor Bonding Assistance Program was established by the County Administrator’s Office Risk Management Unit in July, 2008 to reduce barriers and assist eligible contractors to obtain bid, performance, and payment surety bonds for work on Alameda County contracts.  Guarantees up to 40% of the bond amount or $750,000 (whichever is less) are available for qualified contractors.  Each contractor receives one-on-one consultation and assistance to identify their barriers to bonding. The program links them to the resources they need to avail themselves of program services to obtain bonds needed to bid on County contracts. CBAP also provides contractor-focused group workshops and seminars and regularly communicates with CBAP participants to inform them of upcoming bid opportunities, resources for business growth and news and other information to help them grow their businesses.

The County is actively engaged with labor to develop project labor agreements for the East County Courthouse.

SM: The First Source Program assists County vendors in fulfilling staffing needs, places County residents in sustainable, local jobs, and provides workforce education and training. The program was developed to link Alameda County residents with employment opportunities provided through the County’s relationships with businesses, including contracts that have been awarded to vendors through the competitive process, and economic development activity in the County. The First Source Program allows the County to create and sustain these connections. Vendors awarded contracts for goods, services and/or professional services for $100,000 and over are automatically qualified to take advantage of the First Source Program — there are no additional enrollment requirements. The success of the First Source Program represents a valuable service to vendors by effectively and efficiently delivering a qualified, local worker in response to an employer’s workforce request.

MWIS: How has the Contractor Bonding Assistance Program benefited the County?

SM: Small local contractors have successfully bid on County contracts through their participation in the program. Since the collateral pool and full complement of services became available in May, 2009, 20 have progressed through the process to obtain bonding or evidence of “bondability” in the aggregate amount exceeding $9 million. Over the past year, CBAP contractors have been awarded contracts with Alameda County, totaling over $9.4 million.  Most of these contractors did not have bonding prior to participating in the program.

The increase in awards to the local contractors has strengthened the local economy on multiple levels. One of CBAP’s contractors was awarded a job order contract (JOC) for $3 million.  As a result of that contract, the local business was able to hire two permanent employees.  Both employees are residents of Alameda County and were unemployed prior to being hired. Overall, in the last year, CBAP contractors report over 100 additional jobs resulting from CBAP assistance.

We have seen the program open the door to additional non-County contracting opportunities for small contractors within Alameda County. The technical assistance provided under the CBAP has enabled 12 local contractors to successfully bid on contracts with other public and private entities. One small, local, African–American male owned construction company has been awarded a contract by another entity in Alameda County, a solar project with Cal Trans, based on the improved bonding capacity achieved through technical assistance from the County’s program.  Another African-American male owned construction company was awarded a million dollar project with the City of San Jose based on a referral from CBAP. Since these contracts were not with the County, no bonding guarantees were provided.

The County benefits from the awarding of these non-County contracts to local firms through the overall strengthening of the local economy, the expansion of the bidding pool, the additional revenue flowing to small local businesses and the resulting increase in tax revenue to the County. The small businesses benefit by increasing and diversifying their revenue stream and building capacity that may lead to a future successful bid on a County project.

MWIS: Is Alameda County doing anything else to assist small businesses to compete on GSA or Public Works projects?

SM: The County has a very robust outreach program for local contractors. Information on contracting opportunities is readily accessible to the public via postings on its website, www.acgov.org.

The General Services Agency Enhanced Construction Outreach Program (ECOP) incorporates goals for local participation in County construction projects that encourage large contractors to fully utilize the small local contracting community and minority and women-owned businesses.

The Public Works Agency Building Opportunities for Business (BOB) program works to promote economic growth, local employment and business development within Alameda County through maximizing public contracting opportunities to local businesses and ensuring non-discrimination through outreach, education, and technical assistance. BOB periodically holds outreach meetings with local contractors to provide information regarding Public Works contracting opportunities. These meetings are usually held over breakfast, to accommodate the early work schedule of most contractors.

MWIS: What are some of the upcoming projects that small Alameda County contractors should be looking out for?

SM: There are three capital projects being managed by the General Services Agency that will provide opportunities for Alameda County contractors.

  1. There are still subcontracting opportunities for small contractors on the Highland Hospital Acute Tower Replacement Project, which is scheduled to be completed in 2017.
  2. The East County Hall of Justice, a $141 million project in Dublin, has prequalified bidders, but contracts have not yet been awarded.
  3. The seismic retrofit of Peralta Oaks, which will be the new home for the Sheriff’s crime lab, Coroner’s Office and Public Health lab will also have opportunities for local contractors.

MWIS: Tell us about The East Bay Economic Development Alliance

SM: The East Bay Economic Development Alliance (East Bay EDA) was established by Alameda County 22 years ago and is a vehicle through which the East Bay’s public and private leaders collaborate to achieve our shared goal of a healthy, vibrant economy able to create and sustain quality jobs. It has grown into a public/private partnership serving the San Francisco East Bay including Alameda and Contra Costa Counties. It seeks to establish the East Bay as a world-recognized place to grow businesses, attract capital, and create quality jobs.

East Bay EDA recently completed a comprehensive report on economic development and job creation in the East Bay “Building on our Assets”, which is being utilized by private and public partners to further encourage business development in the region. The study reveals that Alameda County is ranked second nationwide in the receipt of venture capital funding in three industries – industrial energy, semiconductors, and electronics equipment.

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.”

On April 19th, the Contractor’s Bonding Assistance Program (CBAP) held its second free seminar of the year. The seminar, which focused on implementing a quality infrastructure, was attended by small local contractors from Alameda County.

The event featured Deirdre Mercedes —  owner of OPAL, Quality Systems Management which she founded in 1998. OPAL is a service organization that provides consulting, training, coaching and program management assistance in support of organizational improvement and implementation of quality & environmental management system standards. Deirdré focuses on improving business processes, promoting continuous improvement and facilitating growth and development.

“The seminar was very helpful,” said attendee Gary King. “I have learned quite a bit and now understand what I need to establish my businesses infrastructure.”

Every seminar/workshop CBAP hosts gives contractors and vendors an opportunity to connect with professionals who do exactly what they do. CBAP takes a holistic approach to our services, helping contractors gain knowledge, strategies, and techniques to increase their bonding capacity and improve their administrative skills.

For more information about the Contractor’s Bonding Assistance Program (CBAP), be sure to visit our website or give us a call at 510-740-6922.