Boots on the Ground

Subcontractors, The Heartbeat of Construction

Tag: NC Subcontractors Alliance

NC Subcontractors Select New Leadership

The North Carolina Subcontractors Alliance (NCSA), an affiliate of the National Subcontractors Alliance (NSA), has selected its new officers for the 2018-2019 fiscal year. The new officers are:

President, Joseph Teeter, Senior Project Manager at Axiom Foundations, LLC.

Vice-President, Billy Graves, President/CEO at W. B. Moore Electric Company

Treasurer, Michelle Frankum, Controller at Horsepower Site Services

Secretary, Don Hanson, Partner at Noble Insurance Advisors

Director At-Large, Brady Nails, Contract Coordinator at Binswanger Glass

Additionally, the NCSA created a Board of Advisors to assist the Board of Directors:

Legal Advisor, B David Carson, Partner at Johnston Allison & Hord

GC Council Representative to the Board, Josh Freeman, Project Manager at Miles-McClellan Construction

Past President, Chris Paone, Christopher Bryan Company

Past President, Duff Regan, Regan and Associates

Past President, Art Rouse, Director at National Subcontractors Alliance

GC Council Members for 2018-2019:

Edifice, Inc

Messer Construction

Miles-McClellan Construction

Myers & Chapman, Inc.

The NCSA was originally incorporated in 1976 as the Metrolina Charlotte Chapter of the American Subcontractors Association and was later incorporated into the ASA of the Carolinas. In 2013, upset with the financial strain of supporting a large Washington DC based organization with a national focus, the NCSA voted to leave the ASA and in 2014 became an affiliate of the National Subcontractors Alliance. The NSA is an alliance of independent associations across the country representing over 3,500 subcontractors nationally. The NSA provides support to its affiliates to provide networking, education and advocacy to their members. The NSA also has an Attorney’s council consisting of all the chapter attorneys that meets twice a year to discuss legal issues that affect subcontractors. The NSA affiliation allows the NCSA to emphasize local and state issues with the strength of a national organization.

The NCSA provides networking events, educational meetings and seminars, general contractor access and local advocacy. For membership information, please visit www.ncsubcontractors.com

 

Outstanding Subcontractors

Handford PS

The closing speaker at the annual meeting of the North Carolina Subcontractors Alliance was Rick Handford, president of Myers and Chapman, Inc. Myers and Chapman is one of the larger general contractors based in Charlotte and serves North Carolina and the surrounding states. Mr. Handford has been and is very supportive of subcontractors in general and the NCSA in particular, which endowed him with their Golden Boot award in November, 2013.

Mr. Handford began by stating that Myers and Chapman, like most commercial general contractors today, does not do any of the work. Their function is to facilitate the construction of a building. They put together the bid, negotiate the contracts, manage the actual construction and manage the risks. The actual work is done by subcontractors and their suppliers. Without subcontractors, the general contractors would be unable to perform their job. And, without outstanding subcontractors, the jobs can’t be performed on time, as specified and profitable.

He said that Myers and Chapman believes that the Charlotte market has depleted its inventory of desirable commercial properties and is predicting a ten year period of continuous growth. He also believes, based on past experience, that this will be a perilous time for subcontractors and encouraged the NCSA to reach out to the small subcontractors that will attempt to perform larger work and residential subcontractors that attempt to move up to commercial work without the proper knowledge.

He also cautions subcontractors to not try to take on more work than they can do comfortably. There is a shortage of skilled tradesmen, and vendors have longer lead times and are raising prices. And, the big thing is you may end up with all your working capital tied up in inventory and retainage. Without available working capital, you are out of business.

Mr. Handford also presented a poster that hangs in Myers & Chapman jobsite trailers. It details what Myers and Chapman expects from subcontractors and what it takes to be on their team:

1. Are committed to safety. – The costs of safety and insurance can be substantial.
2. Communicate well with the team. – Advise them if there are delivery or money problems, they may be able to help you through a temporary condition.
3. Meet schedules. – The schedule is important to the profitability of the job and the failure to meet them impacts everyone who comes after you.
4. Know the job. – Your workmen should arrive with drawings and all the tools and equipment to do their job.
5. Do it right the first time. – The cost of doing it right is always less than re-doing defective work.
6. Represent us well with our clients. – Workmen should always be presentable and respectful on the job. They not only represent the subcontractor, but Myers and Chapman as well.

I put a copy of these in my company’s conference/training room and I strongly advise everyone to do likewise.

Report on National Affiliation

The following report on National Affiliation was delivered my me (Art Rouse) at the NCSA Annual Business Meeting on June 18, 2014:

North Carolina Subcontractors Alliance, Inc.

Annual Meeting – June 18, 2014

Topic: National Affiliation

One year ago, the ASAC Charlotte Chapter changed its name and disaffiliated with the American Subcontractors Association and ASA of the Carolinas. At the Board of Directors meeting about a week later, I was asked as Past President, to investigate the possibilities of national affiliation and make a recommendation.

My first meeting was with ASA. Since my company had already paid for the ASAC Convention and July dues, I attended the convention. During the course of the convention, I was able to have a meeting with Walter Bazan, outgoing ASA president, Jack Austhof, incoming ASA president, Brian Johnson, incoming ASA vice president and Marty Swain, ASAC president. During the course of this meeting, we had a frank discussion of the reasons leading up to our decision to leave ASAC and our intention to affiliate with a national organization after NCSA stabilized its finances. I made it clear that an affiliation with ASA would need to be direct and not with ASAC. Bazan and Austhof asked to have further discussions when that happened to see if a direct membership would be available. Ensuing phone calls with Jack Austhof did not lead to an offer of direct affiliation, only an offer to review the charter with ASAC to see if it could be done in the Carolinas.

My next contact was to the National Subcontractors Alliance. I spoke to Lynne Black, executive director of NSA for several hours over the course of two days and for a couple hours more with Pete Snider, executive director of the Subcontractors Association of the Metroplex (Dallas-Fort Worth.) I got a good feeling for how NSA operates and how it differs from ASA.

The NSA has two meetings per year. One is the Executive Directors Meeting in Chicago in the fall. They invited us to send our ED to the meeting to get to know the other ED’s and how the NSA functions. We sent Margaret to the meeting and she came back with a very favorable report.

The other meeting is the annual Spring Conference. This year it was held in Denver, Colorado. I attended on behalf of the NCSA. There were two excellent seminars, one on building your business’ brand and the other on embracing technology as tools rather than toys. An example would be utilizing video conferencing to broaden the associations’ reach and how easily it can be done with Google Hangouts.

There were also breakout groups. While the lawyers’ council was meeting, the ED’s were having their meetings and the volunteer leaders had a workshop on increasing and retaining membership. There was plenty of time to network with the other chapter leaders as well as a great dinner at a steakhouse overlooking the Denver and an entertaining tour of the ghosts and scandals of Denver. Since the NSA is for the benefit of the members, the NSA only charges the actual cost of the conference to members. It is not a profit making venture like the ASAC convention. The total cost for me, including the airfare, was less that it cost to attend the ASAC convention last year. At the end of the conference, the NSA board held a special meeting and voted to offer membership to the NCSA. After my report and recommendation to the NCSA board, it was voted to affiliate with NSA.

That is really how the NSA works. Rather than a big national organization headquartered in the most exclusive section of the Washington DC area, the NSA staff consists of only the Executive Director and her assistant. They work out of space donated by one of the member companies. What makes them great is the network of business and legal contacts across the country to lean on for advice and guidance. Almost everyone came up to introduce themselves, give me a business card and an offer of help anytime it is needed. I have been able to use those offers twice already to check out general contractors from out-of-town.

All of the NSA member chapters are disassociated ASA chapters. Unlike ASA, you are members of your local organization, not the national association. The NSA is an umbrella organization of member associations. The NSA represents over 3,500 member companies. The local association pays an annual membership fee of $800 to $2500 depending on the size of the association. The rest of the local members’ dues stays with the local association. That means the local association is solidly funded and can spend their efforts on living up to the NSA motto: “Our business is helping you do yours,” and the NCSA pledge of Advocacy, Education and Networking.
The NSA itself is a member organization of ASC, the Associated Specialty Contractors. The ASC is an umbrella organization of 9 national associations with over 25,000 members. So, when we need representation in Washington, we carry the voice of 25,000 companies.

The NSA is a stakeholder and on the governing committee of Consensus Docs. The NSA has a benefit package of negotiated discounts and special rates for UPS, Fedex, Office Max, YRC Freight and other national service vendors and suppliers.

The NSA is the antithesis of ASA. It is locally focused and low overhead. Each local association is independent and self-governing. It is low overhead so the NCSA can have the benefits of a national affiliation without breaking the bank.

Legislative Committee Annual Report

The following is the Legislative Committee Annual Report as presented by Association Counsel Edward McNaughton at the NCSA Annual Business Meeting on June 18, 2014:

Legislative Committee 2013-2014 Summary Report

The NCSA Legislative Committee has been very busy over the last year, both in keeping the membership current with the recent changes to NC law, and in actively advocating for subcontractor rights with the state legislature in Raleigh.

The Legislative Committee monitored changes in statutes and case law for issues that would affect subcontractors and the construction industry, and kept the NCSA board and the membership up to date through regular presentations and Q&As at the monthly meeting. The changes discussed included:

1. Legislative:
a. Changes to the lien agent requirements for single-family residential property;
b. Expanded workers’ compensation liability for a subcontractor’s employees;
c. New e-verify requirements;
d. New underground utility damage prevention law.
2. Case Law:
a. Allowing the 6 year statute of repose overriding longer express warranty periods;
b. Elimination of the “open and obvious” defense to unsafe site conditions;
c. Allowing subsequent behavior to modify a construction contract, despite a written clause in the contract requiring all changes to be in writing;
d. Holding the director of a GC liable to a subcontractor for non-payment under a fiduciary duty to creditors, where “circumstances amounting to a winding up or dissolution” of the GC.

The biggest victory was NCSA’s advocating for subcontractors during the latest legislative changes to NC’s mechanics’ lien laws. Under current application of NC law, contractors do not have a lien on the actual real property when their contract was with a tenant. Two years ago, however, NC Court of Appeals Judge Sanford L. Steelman wrote in an case dismissing a subcontractor’s lien for work done for a terminated Section 8 housing developer that: “the present state of our law does not provide adequate protection to suppliers of labor and materials as envisioned by Article X, section 3 of the North Carolina Constitution” and that “the increasingly complex real estate arrangements now being used make it virtually impossible for a supplier of labor or materials to protect themselves under our lien laws.”

Fearing that this judicial observation could set a legal precedent for liens attaching to rental property, the NC Land Title Association lobbied the legislature to “clarify” the state’s mechanics lien laws to expressly exempt rental property from liens for work performed under a contract with a tenant.

NCSA became aware of the NCLTA’s proposed changes through its legal counsel and immediately reacted to protect subcontractors’ rights. NCSA published a detailed position paper on February 19, 2104, dubbing the issue the “Hidden Owner” and calling on the legislature to formally extend mechanics liens to rental property to satisfy contractors’ constitutional right to an “adequate lien.” This position paper was formally submitted to the assigned Legislative Research Commission, and copies were sent to various trade organizations and individuals. The “Hidden Owner” name was picked up by numerous blogs and by the NC Construction News editors.

Two delegations of NCSA members went to Raleigh, one in February and one in March, to participate in the Legislative Research Commission hearings on the proposed changes. NCSA’s attorney was one of the speakers the March meeting. While NCSA was ultimately unable to get the legislature to agree to formally extend contractor’s lien rights to rental property, it was instrumental in defeating both the NCLTA’s proposal, along with a second “compromise” proposal, that would have required contractors and subcontractors to give written notice to a landlord of any work being performed for a tenant, while still allow the landlord to avoid liability.

Moving forward, the Legislative Committee plans to continue monitoring legislative changes and case law, and to mobilize advocacy efforts as needed. Issues being considered as the membership continues to grow are establishing a PAC to actively advocate for subcontractor sights and interests, and hiring a Raleigh based lobbyist.

NCSA aligns with National Subcontractors Alliance

In March, the NC Subcontractors Alliance sent me to the National Subcontractors Alliance 2014 Spring Leadership Conference in Denver to see if the NSA would be a good fit for us to ally with as a national organization. After my report to the April Board meeting, the Board voted unanimously to affiliate with the National Subcontractors Alliance (NSA).

The NSA is a confederation of independent subcontractor trade organizations. Its focus is on Advocacy, Education and Networking. They provide a network of organizations and attorneys for advice and representation across the country. They provide access to information and the lowest cost possible and the member organizations represent over 3,500 companies nationwide.

We realized the focus on Advocacy, Education and Networking were the same 3 items we identified as important when we first disaffiliated with the American Subcontractors Association in June, 2013. The NCSA has achieved success in all three areas:

Advocacy – The NCSA produced a position paper on proposed changes on the lien law. With the position paper and the representation the NCSA sent to Raleigh for the study committee meetings, we were successful in getting 4 of the 5 detrimental changes postponed until the 2015 session, when we will be back proposed alternative legislation for consideration.

Education – Through Lunch and Learn meetings, we have provided a quarterly platform for Subcontractors to have lunch and meet with the preconstruction and safety representatives with major General Contractors in the area. The GC’s who participated this year were Myers & Chapman, Rodgers Builders, Balfour Beatty and Edifice. They have been so successful that we now have to limit them to members only.

Networking – We have provided open events for Subcontractors, General Contractors and Suppliers with our two big networking events, Subtoberfest and Sub Paddy’s Day held at local craft breweries. We also held a joint meeting with NAWC in November at the Carolinas Aviation Museum under the wings of the “Miracle on the Hudson” airliner where 95 were in attendance to hear NC Secretary of Labor Cherie Berry speak. Our next networking event will be a golf outing for Subcontractors, General Contractors and Suppliers in May.

The National Subcontractors Alliance is a good fit for us because it is bottom up. Each member is an independent association and can relate to the issues at the state and local level better than a nationally focused one. The dues are paid locally and stay local where we can use the funds for the issues most important to the local members.

 

 

 

 

 

 

 

 

Leasehold Liens – A Coming Crisis to Subcontractors?

In North Carolina, in a tenant situation, common law limits the lien rights to the value of the leasehold, unless a connection to the landowner can be established. The NC Land Title Association (NCLTA) has proposed legislation in the current General Assembly short session to codify the common law. That, in itself, is not a bad thing. It’s the language in the changes that can cause the problem.

In effect, if you work for a tenant, you only have rights to lien the leasehold, that is the lease itself and the property of the tenant. In an ongoing business, there is value there. But, most commercial leases in NC have a clause that if the landlord cancels the lease for cause, such as non-payment of rent, all of the improvements become the property of the landlord. Some leases even contain a clause that a lien filed on the leasehold can trigger cancellation. In those cases there is no value remaining on the leasehold to collect against.

I attended a stakeholders meeting this past week at the Legislative Office Building in Raleigh. What I perceived is a lack of understanding as to the extent of leaseholds in commercial construction. The conversation would inevitably revert back to an extreme example of someone’s mother’s rental property where the tenant build a swimming pool and the contractor put a lien on his mother’s house. This is not the issue that subcontractors face. today.

When the facilitator posed the question, “How big a problem is this, really?” I spoke up and said that from the subcontractors’ point of view, this as a tremendous risk. I estimated that up to 90% of the work we do in commercial contracting involves a leasehold of some description. This can be as small as a retail tenant in a strip center to a multi-story office building being built by a developer for a single tenant. There are hidden owners like pension funds and real estate investment trusts that work through management companies. I argued for transparency up front so that the subcontractor can assess the risk before accepting the contract.

There were a couple of minor positives that came from the meeting. The study committee agreed to suggest to the legislative subcommittee that, in regards to leasehold liens, they add wording to separate commercial construction from single and two-family residential construction and to insert wording in the tenant code to make it against public policy and unenforceable for a landlord to cancel a lease because of a lien being filed.

Because a consensus of the stakeholders could not be reached, most of the NCLTA’s proposed changes were tabled until next year’s session to enable them to come up with a better way to explain the issue. I agree with the NCSA chapter attorney, Edward “Ned” McNaughton that we need to get ready and have our own legislative proposal prepared to present to next year’s session as an alternative to the NCLTA proposal.

There are even scarier things in the NCLTA’s proposed legislation, including the subcontractor’s right to a lien on real estate being subrogated (cut-off) by the general contractor’s lien waiver. As Ned has said on numerous occasions, “The title company gets paid to take risks, the subcontractor takes risks to get paid.” Much of what is contained in the proposed lien law revisions creates impediments to the subcontractors’ right to payment. It’s time for subcontractors to get involved.

Construction Trends – Green Globes and Net Zero

At a recent NC Subcontractors Alliance meet and greet, Bill Lorenzo, pre-construction manager with Balfour Beatty Construction’s Carolina Division, presented things that are trending in North Carolina. The most important is energy sustainability. He showed a chart showing that over the lifetime of a building, only 11% of the cost is related to construction and 85% is the cost of energy to power the building and its systems. It is becoming more accepted that an investment in sustainability saves money over the long run. More and more building owners and developers are requesting their new buildings be energy sustainable. But, they want to do it without all the rules and paperwork involved in the LEED program.

The big trend, now, is the movement away from LEED and toward a program called Green Globes. Green Globes is a web based program that began in Canada. The Green Building Initiative acquired the US rights to the program and administers it in the US. A building is awarded points for various attributes, the largest attribute being energy consumption. Upon verification by a third party, the building is awarded 1 to 4 globes. The use of Green Globes substantially reduces the administrative cost of obtaining a certified energy sustainable building.

The next thing to come will be Net Zero Sustainable. This is becoming common in California and Balfour Beatty is working on designs for the first one in Charlotte. In Net Zero, the building must produce as much renewable energy over the course of a year as it consumes. The building is connected to the grid and sells surplus energy to the grid on sunny days and buys energy from the grid on cloudy days, with the goal of achieving a net zero energy consumption. This is more challenging on the east coast because there are more cloudy days in the Carolinas than in California. We will have to wait and see how that works out.
Lunch n Learn at Balfor Beatty
The bottom line is that subcontractors need to be more aware of sustainability. It is not just a government mandate now, it is a trend coming from building owners and developers.