Contract with America – Sounds Good Here’s How You Get One Gene Kalb, Fencebids John Feerick, Premier Fence LLC February 8, 2011

Introduction Millions of dollars are spent by federal, state and local governments on fences and access control products. This session gives a brief overview on how to find the bids; what to do once you find them; how procurement officers evaluate and award the bids; how to get paid; and more. Your participation is encouraged. We want to hear from you what your experiences have been.

Agenda What the government buys Finding the bids Bidding on the bids Winning the bids (secrets to success) Production What about the people? Job Hazards Cash Flow Closing

What the Government Buys Prisons Military Bases Playgrounds Post Offices Schools Borders What have you found that the government needs to be fenced?

Finding the Bids Federal State Local Military bases Post offices Department of Highway Prisons National Parks Bureau of Land Management State Highways Airports Local Schools Parks Playgrounds Conservation land

Federal Bids By law, all jobs >$25,000 must be published for bid Jobs are published on federal websites www.fedbizopps.gov Have you used this site?

Searching the Site: Challenges Basic vs. Advances search How do you sift through the hits? Search Fenc* = >900 hits Are the results meaningful? Geographic limits: what’s missed Data input What’s in a name? Misspellinggz Singular vs. plural Many sources put in the data Once the job is found, register and track a contract, amendment, and update

Tips & Techniques Start with a lot of stuff There’s only so much that can be weeded out electronically You really need a human eye

State Bids There is no single repository of state bids 50 states means 50 different procurement sites Some, but not all, work cooperatively All States have different rules & techniques Focus on the ones you’re interested in Limitations Not very good Not intuitive States contract out with private vendors to do their procurement databases Some require registration and a fee to search

Local Bids Some have websites for procurement Some just advertise in local newspapers Challenges Each has their own rules There is no uniform format Very few are computer-savvy: many are procurement people from a different era who have been thrust into the electronic age

What Can You Do? What do YOU do? Search the federal, state, local sites yourself Alternatively….

What Else Can You Do? Use Paid Services Alternatively…. Monthly fees add up (start at ~$30-$50 each and go up from there) Many still contain a lot of “noise” Alternatively….

Fencebids Organized by region Minimizes noise Links to all jobs Emailed every Friday Free subscription www.fencebids.com

Agenda What the government buys Finding the bids Bidding on the bids Winning the bids (secrets to success) Production What about the people? Job Hazards Cash Flow Closing

Bidding on the Bids (aka, You Can’t Go Broke Saying No!) What to do after getting the plans and specs or receiving an invitation to bid? Construction risks include: Business relationships – Production Economy – People/Work Force The Contract – Job Hazards Bid Errors – Cash Flow All risks must be identified & managed

Look at Risks: Business Relationships Business relationships must be solid Bank Officer Lines of credit & insights into current financial markets Construction Lawyer Contract terms & conditions Insurance Agent Contract Insurance requirements, indemnification & risk transfer Bonding Company Bonding program based on financial strength to bid on the job Suppliers Availability of materials & payment terms on some projects Don’t forget: they’re managing their own risks Identify and quantify your capital needs to obtain the growth you require Business Relationships:   The first thing a contractor should do before venturing into the commercial market is to establish solid relationships with a Bank Officer, Construction Lawyer, Insurance Agent, Bonding Company and Suppliers. You must keep these people involved in your business and provide them with accurate information even if you are experiencing problems. They will provide you with help or guidance through good times and bad. The Bank Officer will help you establish lines of credits to carry you through low cash flow periods as well as provide insight into the current financial markets. The Construction Lawyer will help you manage risks associated with various contract terms and conditions. The Insurance Agent will assist you in identifying risks involved with contract insurance requirements, indemnification and risk transfer. The Bonding Company will establish a bonding program based on current financial strength to bid on jobs. Your Suppliers may be able to assist you with the availability of materials and payment terms on certain projects. But you have to remember they are also concerned with managing their own risks. Identify and quantify your capital needs to obtain the growth you desire. There are a number of companies that go out of business, not because they are losing money, but because they do not have the adequate capital to provide positive cash flow through a rapid growth cycle. An example of this would be successfully completing a large number of projects in which the typical payments are received, not within the 30 days you are hopeful for, but close to the typical 90 days creating a strain on payroll needs and the payment of suppliers within the credit terms established. On paper they are showing a strong profit margin but they are starving for cash to pay the bills and loose employees and get shut off by suppliers.

Look at Risks: The Economy Contractor should evaluate health & stability of overall economy How will outside factors affect business over the next 12 months? Access to credit for small business has been difficult (if not impossible) There has been some easing lately Ask yourself: What is the current environment for financing rates? Will it cost you more in the future to finance your contracts or receivables? Is the economy creating situations where your customers are taking on too much debt and may not be able to meet their obligations if there is a sudden downturn leaving you holding the bag? Economy   A contractor needs to evaluate the health and stability of the overall economy and how outside factors will affect its business over the next 12 month period. An example of this is the current economic conditions we are experiencing. The access to credit for small business has been difficult if not impossible, although we are seeing some easing. What is the current environment for financing rates? Will interest remain steady or do you see if rising. Will it cost you more in the future to finance your contracts or receivables? Is the economy creating situations where you customers are taking on too much debt and may not be able to meet their requirements if there is a sudden downturn leaving you holding the bag?

Look at Risks: The Contract Terms & Conditions contain more info than the technical specs Can be a minefield for the unwary Typically protects the owner (awarding authority) or General Contractor when things go wrong Look carefully at the “boiler plate”!!! Payment terms: “Payment to subcontractor is specifically contingent upon contractor receiving payment from owner.” May vary from state to state Be mindful when working with Awarding Authority (public agency) - What are the payment procedures? - Risk transfer: Are you responsible for indemnifying listed parties even if loss was caused by them? Are there increased limits or coverage? Do you have to have them as an additional insured on a primary and non-contributory basis? What is the “defend clause”? Expensive. Continued… The Contract   If you were to really look at the size of a contract and broke down The Terms and Conditions “Boiler Plate” and Specifications you will realize that the terms and conditions contain much more information than the actual technical specifications do. The Terms and Conditions section of the contract is the hidden minefield that a contract has to navigate. This is the section of the contract that historically has protected the owner (awarding authority) or General Contractor when things go wrong. Some Items contained in the “boiler plate” that need to be reviewed and assessed for risk are. Payment Terms i.e. “payment to subcontractor is specifically contingent upon contractor receiving payment from owner” in the event you are working with a general contractor. If he does not receive payment he does not have to pay you. This may vary depending on the State you are working in but is something you need to familiarize yourself with. In situations where you are working with an Awarding Authority (public agency) some contracts will authorize payments when certain conditions are met. Examples could include submittal of certified payrolls, certifications of compliance, lien waivers etc. In some instances you may not be contractually allowed to stop work if you have not received payments. Risk Transfer – this is where you may find that you are responsible for indemnifying or holding the listed parties harmless regardless of whether it is caused in part by them. Another could be where you are naming them as an additional insured on a primary and non-contributory basis. This is where your policy limits would be exhausted before any other policy. Another is where you have to defend the named parties in matters pursuant to the contract. The defend clause is the most costly portion of any claim brought forward. Is your current insurance adequate to meet the contract requirements? Increased limits or coverage for a specific job will increase your overall premium and must be accounted for.

More on the Contract Boiler Plate Change Order Procedures and Mark Ups What are they? Specifications Are there requirements for a performance spec? Is there an extended warranty or guarantee period? Are they explicit or vague? Completion Time Along with the Liquidated Damages, is it realistic? Do work hours impact your schedule? Continued… The Contract/Boiler Plate   Some more things about the boilerplate you need to be aware of include: Change Order Procedures and Mark Ups – A majority of jobs have some form of change and you must familiarize your self with the procedures outlined in the contract documents. If you do not meet all of the conditions you will be at risk of not getting paid for the changes. Specifications – Some specifications may require a performance spec is met or an extended warranty or guaranty period for installed product. Some specifications may be vague and if you do not obtain clarification prior to bid time you may be held to a higher standard depending on how a specification or boiler plate is written. Buy American clauses etc. Completion Time – Is the stated completion time along with Liquidated Damages realistic in allowing enough time to receive stock and complete the work? Will the permitted work hours stated hinder your schedule?

Finally, on the Contract Boiler Plate… Training Requirements Are there background checks? Do they have costs? Are there project safety training requirements? Additional Contract Provisions Federal Gov’t references various FAR rules Municipalities reference specific General Laws General Contractors reference “flow down provisions” If in doubt, walk away. You Can’t Go Broke Saying No! The Contract/Boiler Plate   Some final things about the boilerplate you need to be aware of include: Training Requirements – Does the contract require specific training requirements for personnel? Are there any background checks required? The training and background requirements could be an expense specific to the job that you may not have covered elsewhere in your business. Additional contract provisions – Federal Government references various FAR rules, Municipalities reference Specific General Laws, General Contractors reference flow down provisions as well as above in certain situations. Obtain the information if the language is in your contract you may be held to the same terms and conditions depending on the contract language. The above are only a small sampling of items contained in the contract documents. The recent trend is to pass along as much risk to the contractor or subcontractor as they will receive. Unfortunately, in today’s climate a lot of companies are willing to accept the risk just to keep working. The profit of a job will evaporate over night or worse case you can be put out of business if you miss a critical clause in the contract. If you see something in a contract that you don’t like, you may find that you are better off walking away from the opportunity than risking your business and hard worked for assets in the event that Murphy’s Law kicks in. You Can’t Go Broke Saying No!

Agenda What the government buys Finding the bids Bidding on the bids Winning the bids (secrets to success) Production What about the people? Job Hazards Cash Flow Closing

Winning the Bid: Secrets to Success Watch out for Bid Errors or Omissions Probably the most common error for the novice commercial estimator as well as the over confident seasoned estimator. Don’t Assume! Contract Documents change over time and assumptions can be very expensive. Consider establishing an estimating checklist to ensure you are recovering overhead and job costs within your bid. The Secrets to Success involve being vigilant for BID ERRORS or OMISSIONS. Bid Errors and Omissions are probably the most common error for the novice commercial estimator as well as the over confident seasoned estimator. Contract Documents change over time and assumptions can be very expensive. You may want to consider establishing an estimating checklist to ensure you are recovering overhead and job costs within your bid.

Sample Estimating Checklist General Conditions Existing Site Conditions: Clearing, Access, Soil Conditions etc. Availability of Facilities : Water, Electricity, Emergency Services etc. Utility Obstructions: Overhead or Underground Permits, Fees & Taxes: Building Permit, Tax Exempt, Special Fees, etc. Weather: Winter Conditions, Water Tables, Wind etc. Insurance: Limits, Special Coverage, etc. Bonds: Are bonds required? Completion Time & Liquidated Damages: Do you need to account for stringent requirements? Are the risks worth it? Do you need to cover overtime costs for accelerated scheduling? Labor: Special labor requirements – Union, Prevailing Wage, Training etc.

Sample Estimating Checklist (continued) Bid Documents Have you reviewed the “boiler plate” Drawings – Review drawings for conflicts & completeness Specifications – Review specifications for conflicts & completeness Addenda – Received and Acknowledged all addenda Clarifications – Submit in writing any questions, you have . Document it!

Sample Estimating Checklist (continued) Check actual quantities versus bid quantities. Request supplier pricing and receive it in writing. Account for price escalations. Are materials readily available? Identify long lead items. Establish realistic production rates. Compare to historic. Establish job overhead recovery requirements. Identify equipment needs. Identify labor needs. Identify home office overhead. Check for math errors. Have all contingencies been accounted for?

Sample Estimating Checklist (continued) Bid Submission Have you supplied all required information for bid documents? Is bid form complete and accurate? Is bid bond, if required, signed? Is bid form signed by owner or officer? Deliver by specified time in accordance with contract documents.

Final Secrets to Success By establishing an estimating checklist you will establish a procedure for your self or your employees that will eliminate the oversight of costs that should have been factored into the bid. In some instances you will find that the costs associated with the general conditions will be a significant amount that will make or break a job if they are overlooked or omitted. To summarize, By establishing an estimating checklist you will establish a procedure for your self or your employees that will eliminate the oversight of costs that should have been factored into the bid.   In some instances you will find that the costs associated with the general conditions will be a significant amount that will make or break a job if they are overlooked or omitted.

Agenda What the government buys Finding the bids Bidding on the bids Winning the bids (secrets to success) Production What about the people? Job Hazards Cash Flow Closing

Production Complete the work on time & stay profitable Productivity is a key management role Productivity should be tracked & recorded Allows contractor to build historic database for future bidding opportunities Track through job costing process Record activities Measure contributing margin for job Helps you decide whether to bid again in future Production   If you are successful in obtaining the work you just bid you will now be held accountable for the projects successful completion. Production I realize everyone has a keen focus on. You have to complete the work within the time you have allotted to stay profitable. You must also ensure that the work is completed accurately and completely without any call backs, punch lists or back charges. Productivity is a key management role; the managers on a job not only include the owner and project manager but also the job superintendent or foreman. Estimators and Project Managers must spend the necessary time conveying the production rates factored into the bid to the Job Superintendent and Foreman along with the risks and general requirements so that they are fully familiar with the Company’s expectations and requirements during the execution of the contract. Productivity should also be tracked and recorded to allow the contractor to build a historic data base for future bidding opportunities. The tracking of the job should be done through a job costing process where are activities of a job are recorded and the contributing margin for the job can be measured and relied upon to make an informed decision whether to bid similar projects in the future. The job cost will not only identify lucrative opportunities for the company but it will also identify weaknesses for the company so that they can focus on improving on those weaknesses or exiting certain types of projects or market segments.

Agenda What the government buys Finding the bids Bidding on the bids Winning the bids (secrets to success) Production What about the people? Job Hazards Cash Flow Closing

People Work Force: People in General Do you have a talent pool to draw from? Could a chain link crew install a high security fence? Evaluate your work force frequently Provide cross training as necessary If in doubt, walk away: You Can’t Go Broke Saying No! People in General Individual behaviors can impact project completion Unscrupulous individuals can ruin your reputation Competent Work Force Productivity is extremely difficult to increase if you do not have a competent work force to complete the work. This may not mean you don’t have great employees. You may have great employees with talents focused in different areas. Before undertaking a project you need to ensure you have the talent pool to draw from or provide training to your staff to complete the project successfully.   An example of this could be that you have a very experienced chain link crew that can install very good looking sports fencing. If you were to take this same crew and put them on a high security installation like a prison would they be able to overcome the additional constraints placed on an installation of this type? Could you take a wood crew and place them on a large right of way fencing project? Can a crew that has done guardrail work primarily in parking lots be put out on a major interstate and perform to the project requirements. Evaluate your work force frequently and provide the cross training you need to have them become competent in various types of installations and market segments. If you have any hesitations in taking on a job that will challenge your staff beyond their knowledge or training it may be better to walk away from it. Please take a look at the benefits the American Fence Association offers through its various schools as a way to train your employees. You Can’t Go Broke Saying No! People The people you are working with is extremely important. People have differing value systems and their behavior and actions can have a negative impact on a projects completion and your staff throughout the project. Are the people you are going to engage in a business transaction with they type of individuals that can work beneficially within your organizations culture? What are the impacts that an unscrupulous individual might have on your organization and its reputation if you found yourself in an uncomfortable or unethical situation?

Agenda What the government buys Finding the bids Bidding on the bids Winning the bids (secrets to success) Production What about the people? Job Hazards Cash Flow Closing

Job Hazards Identify and remove job hazards in workplace and job sites! Training helps manage costs Test yourself: What would the cost of an injury be to my company? Insurance? Lost productivity? Morale? Think of your loss ratio and safety record Train, train, train, then train again! Job Hazards   Identify and remove the job hazards in your workplace and on your job sites. There is no single cost that can escalate out of control than those associated with workplace injuries. These costs can be managed proactively through training. You as an owner, project manager or employee are morally required to provide a work environment that is free from hazards. Have you evaluated what the cost of an injury is to a company with the increased insurance costs, lost productivity, and employee moral? You will find that it is extremely expensive and you will be paying for it for a number of years with a higher Mod or ARAP rating by the workman’s compensation bureau. This increased cost will put you at a significant disadvantage in obtaining future work. Many companies and awarding authorities are denying contracts to contractors’ with a high loss ratio or poor safety record. There is not better return on your investment than training your staff in safety and other job specific duties.

Agenda What the government buys Finding the bids Bidding on the bids Winning the bids (secrets to success) Production What about the people? Job Hazards Cash Flow Closing

Cash Flow Set up cash flow projections for the job. Evaluate your customer’s ability to pay If working for an awarding authority (public entity), ensure funds are encumbered and appropriated If working as a subcontractor, know how the project is funded Familiarize yourself with payment clauses Stay on top of receivables Have a contingency plan if you don’t receive payments timely. If in doubt, walk away: You Can’t Go Broke Saying No! Cash Flow   Cash Flow is the life blood of any organization. What good is it to install miles of fence at a high profit margin if you don’t get paid for the work? You haven’t made a penny until you are paid. How would you feel to write of the balance owed you as a bad debt expense? Set up a cash flow projection on your jobs. Evaluate your customer’s abilities to pay you. If working for an awarding authority (public entity) ensure the funds have been encumbered and appropriated. If working as a sub contractor find out how the project is funded. Has the GC guaranteed his payment from the owner? Don’t be afraid to ask, they will respect you in the long run. Can you file a notice of contract, if permitted? Familiarize your self with the payment clauses in the contract documents. Stay on top of your receivables. Have a contingency plan to ensure you stay in business if cash flow is negatively affected. We are in a seasonal business throughout most of the country and positive cash flow is required to allow you to prepare for the busy season. If you have any doubts on the customers ability to pay you may find it less painful to walk away. You Can’t Go Broke Saying No!

Summary These are our experiences, but they may ring a bell Suggested Reading: Survival in the Construction Business: Checklists for Success. Thomas N. Frisby Use the AFA Many benefits offered by the Association Knowledge & relationships you develop will help you navigate through your business and life. Thank you Closing   I know this is a lot of information in such a short period of time. I have tried to touch on some of the experiences I have encountered throughout the years. A great book I recommend and have gathered some of the above information above is Survival in the Construction Business: Checklists for Success by Thomas N. Frisby. Also please be sure to take a look at and use the benefits offered through the American Fence Association. The knowledge and relationships you develop will help you navigate through your business and life. Thank You.