JPM Construction Consultants, Inc.

The Surety & Fidelity Association of America (SFAA) testified today (Tuesday, March 9, 2010) before a U.S. House subcommittee regarding its assessment of how and to what extent the surety bond provisions of the Veteran-Owned Small Business Promotion Act of 2009 would achieve the legislation’s objective of promoting small veteran-owned business.

FOR IMMEDIATE RELEASE
Contact: Lenore Marema
(202) 778-3637
lmarema@surety.org

PORTIONS OF VETERANS AFFAIRS’ BILL HURTS SMALL VETERAN-OWNED CONSTRUCTION CONTRACTORS, SFAA TELLS U.S. HOUSE SUBCOMMITTEE

SEPTEMBER 24, 2009, WASHINGTON, DC—The Surety & Fidelity Association of America (SFAA) testified before a U.S. House Veterans’ Affairs subcommittee that a bill aimed at helping small veteran-owned contractors obtain surety bonding, as drafted, would not achieve its intended purposes, and in fact, would hurt the very businesses it is designed to help.

Among other provisions, H.R. 294, the Veteran-Owned Small Business Promotion Act of 2009, would cut in half the size of performance and payment bonds required from small veteran-owned contractors when bidding on federal construction projects.

SFAA President Lynn M. Schubert testified today that the bill falls short in assisting such small contractors for several reasons. Since a performance bond secures the contractor’s obligation to perform the entire contract, a surety company’s financial and other underwriting thresholds are based on the size of the contract, not the size of the bond. For a million dollar project, for example, the surety would assess the contractor’s capability to perform the obligations of the entire contract, regardless of whether a $500,000 bond would be permitted under H.R. 294. A surety’s evaluation of a contractor is designed to prevent defaults on public construction projects. Reducing the required amount of the surety bonds does not affect availability to any significant degree.

In addition, Schubert noted that requiring a performance and payment bond of less than 100% of the contract unnecessarily exposes the government and taxpayers to additional costs and subcontractors and suppliers to the risk of nonpayment if there is a default.

As the recipient of the 2007 “Lane Evans Veteran Entrepreneur Public Service Award” for its program providing access to surety bonding for service-disabled veterans, SFAA supports the intent of the legislation – to help small veteran-owned and controlled businesses participate in federal construction projects – and is committed to helping accomplish this.

Schubert offered SFAA’s suggestions for helping small veteran-owned and controlled businesses obtain surety bonding:

• Qualifications. Enhance the contractor’s financial and operational capabilities. SFAA’s Model Contractor Development Program has been implemented successfully in a number of states to help small and emerging contractors become ready for and obtain surety bonding through educational workshops and a bond readiness component. SFAA also has entered into several Memorandums of Understanding with partners to assist small and emerging contractors with becoming bondable or increasing their bonding capacity.
• Capital. Implement a capital access component to provide small veteran-owned and controlled contractors with the working capital and collateral guarantees they need to provide the financial stability in their businesses that would make them bondable. “Many times, what is perceived as a surety bonding problem is the inability of the contractors to get the lines of credit that they need,” Schubert said.
• Procurement Reform. Create federal mandates and incentives to break construction contracts into smaller parts to create genuine opportunities for small and emerging contractors. “We see a disconnect between the size of federal projects that are advertised to meet small business goals and the size of construction projects that these small contractors are qualified to perform,” Schubert said. “We see $50 million federal contracts being designated for small business participation. That is not realistic for a small contractor.”

Schubert also urged that federal procurement rules be changed to allow small businesses to perform the work that they can on federal construction project. Small veteran-owned contractors should be permitted to joint venture with larger contractors, using the larger contractor’s surety bond relationship to obtain the bonds for the project and develop an independent relationship with the surety for future projects. Under current regulations, small contractors lose their status as a small contractor and are no longer qualified for projects designated for small business participation.

 The Subcommittee on Economic Opportunity of the House Committee on Veterans’ Affairs invited SFAA to testify on the legislation to provide its assessment of how and to what extent the bill’s surety bond provisions would achieve the legislation’s objective of promoting small veteran-owned business, to offer guidance on how performance and payment bonds are underwritten and to provide solutions for enhancing the bonding of small veteran-owned and controlled contractors.

Hospital Shares the construction pie; Minorities, women get shot at work

Published on http://www.nj.com
By Anthony Coleman
March 07, 2009, 10:46PM

TRENTON — The way Derrick Wilson sees it, you get one chance to build your foundation.

Cie Stroud/For The TimesDerrick Wilson stands on one of the landings his company built between construction trailers at the Capital Health hospital going up in Hopewell Township.

“You are getting that first opportunity to prove yourself,” said the 37-year-old Ewing carpenter, “and then you can go on to other firms and other projects.”

Wilson, who has been in business with his wife, Chantel, for approximately six years, is taking advantage of just such an opportunity. He recently won a $70,000 contract to do interior and exterior carpentry for trailers at the construction site of the new Capital Health hospital being built in Hopewell Township.

The work is part of a commitment the Trenton-based hospital made to funnel some of the work on its $555 million hospital toward minority- and women-owned businesses.

The general contractor on the project, Skanska USA Building of New York, has a diversity program and is committed to such a goal, according to project director George Mote.

Without such a commitment, according to Derrick Wilson, he and other minority business people would miss out on the opportunity to prove they can do the same kind of quality work as larger, established businesses.

Some minority contractors are at a competitive disadvantage, Wilson said, because they lack the deep pockets, the track record, the union ties, and the networking that help land lucrative contracts.

So far Skanska has awarded $23 million in project work, of which $2.6 million has gone to minority-owned businesses and $9.5 million to women-owned businesses, Don MacNeill, spokesman for the hospital, said last week. With the hospital project in Hopewell still in its infancy, with a 2011 completion target, there is potential for minorities and women to win a lot more work, MacNeill said.

MacNeill said in some cases construction jobs have been broken down into smaller chunks so that it’s easier for small minority- and women-owned businesses to qualify.

Similarly inclusive policies have been implemented for a $45 million Trenton Fuld hospital renovation going on currently, MacNeill added.

Karen Hickey, president of Ed-O Insulation Co. of Ewing, says her business has been very fortunate to have landed contracts for work on both the Fuld and Hopewell projects.

The combined work, for insulating temperature control and ventilation systems, amounts to $1.5 million, and Hickey, a subcontractor on both projects, thinks this might just be the beginning. There is the potential for more work, she says.

“It’s very important to have a contract, to have this employment. During very difficult economic times it has been a fabulous opportunity and we are very happy to get these jobs,” Hickey said. They mean full employment for her 32 workers and she expects to hire more from the union hall as the work progresses.

The level of minority contractor participation in major projects in central New Jersey has frequently been an issue over the last 15 years. Minority contractors complained they largely were left out of two major building projects in Trenton in the 1990s — Waterfront Park baseball stadium and Sovereign Bank Arena.

Capital Health officials said the hospital is trying to address those market disparities while being cognizant of the fact that they must award contracts to the lowest qualified bidder. In addition, Capital Health has made its new hospital a union project, and is not only working to steer work toward minorities, but to ensure they are part of a union as well.

Toward that end, the hospital hired QWIC Inc., a Palmyra-based consultant.

QWIC, which stands for Qualified Women/Minorities in Construction, essentially gets the word out to minority businesses that the work is available, and it helps to coordinate training programs and workshops to educate contractors on such basic things as how to bid on projects and how to become part of labor unions.

Nancy Myers, the president of QWIC, said, “Through our network, we provide small, minority- and woman-owned businesses with technical assistance, support services, customized training and professional managerial counseling.”

QWIC, in cooperation with JPM Construction Consultants Inc. of Spring Lake, conducted a 26-hour class that met on weeknights to educate minority contractors on compiling bid specifications, meeting deadlines, filling out forms, and other basics.
Eleven such contractors recently successfully completed one such class, the importance of which cannot be overstated, some contractors said.

For minority contractors who may not have a track record of achievement, completion of the course serves as a kind of Good Housekeeping seal of approval that they can handle the work, said QWIC vice president Joan Walker and JPM president Joseph Majewski.

And, it puts them on an equal footing with more established firms when it comes time to bid for a job, Walker and Majewski said.

“Now it’s up to the contractors to take it a step further, and do their due diligence,” said Campbell, who served with the Marines in Iraq, then returned home to go into business for himself several years ago.

James Fulmore of Fulmore Construction in Trenton agreed. “I’m honored to have a chance to bid on some of this work and have a chance to be as big as some of these other contractors,” he said.

Fulmore was unsuccessful in his bid, but managed to obtain work on the project through another contractor, according to MacNeill.

Construction is a relationship business, some said, and the minority contractor training program helps out those workers who have not had the opportunity to establish those relationships.

“You are an equal contractor to others in the bidding process,” Majewski said, who remains available as a mentor to minority contractors after they have completed the class. QWIC does follow-up to monitor how many minority contractors actually get some of the work.

Larry DiSanto, executive vice president and chief operating officer at Capital Health, said the hospital has not specified what percentage of the new hospital work it would like to see go to minority- or women-owned businesses.

“We are using a best effort to be as inclusive as possible,” DiSanto said. “This is completely voluntary on our part. This is not a requirement by any governmental agency.”

It is also not an attempt to mend fences, according to DiSanto. When Capital Health announced several years ago that it intended to leave its century-old hospital on Bellevue Avenue in Trenton and built a hospital somewhere outside the capital city, there was criticism that it was abandoning poorer, urban patients for wealthier suburban customers.

“We really didn’t look at it that way at all,” DiSanto said about the effort to channel work toward minority or women-owned businesses. “We wanted to make as meaningful a difference as possible to the economy of the region. This was the right thing to do.”

David Sulkin, vice president of sales and marketing for Billows Electric, which is owned by a woman, agreed. “It is a great statement,” Sulkin said, “that they feel compelled to give back to the community.”

Billows has supplied furniture for trailers to Skanska, the project’s general contractor, and according to Sulkin, they hope to win a bigger contract down the road to provide some of the office and administrative type furniture for the hospital itself.

Winning such a contract would mean a great deal for the Trenton-based Billows. “We don’t know yet what the scope will be from a furniture standpoint, but this project is going to run for three or four years,” Sulkin said.

The legacy will last longer than that, according to Derrick Wilson. “This is gonna be history here,” he said. Minority firms such as his will have a chance with the Capital Health project to prove themselves to other potential employers in the future.

Growing up, Derrick Wilson said, he learned that, “If they try to slam the door in your face, keep sticking your foot in the door.” In the case of Capital Health’s new hospital, he said, “Someone opened the door for us.”

Staff writer Tony Hagen contributed to this report.