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California “Constructor” / Volume 36 / Number 11 / November 2006 Click on any heading to view text Chief Executive Officer What Does This All Mean To Us? State Board Highlights AGC State Board Holds Final 2006 Business Meeting Joint Division Highlights Infrastructure Construction Tops Board’s Discussion Building Division Highlights Insurance, Legislative Issues Top Meeting Agenda

SF Airport/FCI Team Up To Deliver Complex Retrofit

AGC Spearheads Reform Effort in San Francisco

Success Story: San Jose Public Works Industrial Relations Member Involvement Critical to Negotiating Process Government Relations A Good Legislative Year for AGC Huge SR-22 Project Heading to Successful Completion New Sanctions for Commission Targets Local Governments

California “Constructor” / Volume 36 / Number 11 / November 2006

Chief Executive Officer

What Does This All Mean To Us? The 2006 general elections were pivotal to the construction industry as so many important ballot measures were up for consideration. We thank our members and the industry for stepping up one more time in leading the efforts to educate our employees and the public on the importance of improving California’s infrastructure. In a short period of time, a broad coalition of business, construction and labor organizations came together and passed a comprehensive infrastructure funding plan to improve the quality of life, economy and safety in California for generations to come. In fact AGC employer members can take great pride in knowing they stepped up to the plate by contributing over $3 million to the 1A-1E bonds passage, more than any other single organization.

Propositions 1A & 1B were important to the state’s future infrastructure programs. The passage of Prop. 1A put into place additional safe guards to protect and ensure the gas tax moneys collected at the pump will be used for their intended purpose, transportation programs. It will restore those funds that were previously diverted / borrowed and used to balance the state’s budget back into the transportation budget. The passage of Prop. 1B will provide more than $19 billion in new funding for transportation improvement projects ranging from road repair, to expansion projects, and port safety improvements. As you have heard several times over the years, California leads the nation in highway congestion and poor pavement conditions.

The more than $42 billion in funding for the state’s infrastructure provided through the bonds not only means the projects in the pipeline and on the drawing broads will now receive some much needed funding, but it also means an improved economy overall. It is estimated that every dollar spent on construction in California generates another $1.40 in economic activity and supports an additional 1.76 jobs in the workforce.

All this said, AGC’s Legislative Committee met the Thursday following the big win and began planning for the next year. First off AGC has set in place a grassroots network plan to introduce AGC to the 38 new legislators (term limits created this significant turnover in legislators) set to take power in 2007. Next the plan calls for legislation to protect the funding needed for major projects already well into the design process and set for bid. Among the legislation planned will be increased funding for vocational training programs in our state’s high schools, ROP and promoting apprenticeship training programs. Our strategies must include working with the opponents to any growth, air quality issues and finally labor organizations proposing laws which continue to over engineer employment regulations…..

AGC has a full plate, and members will need to remain engaged to help advocate and ensure they remain in business…. Stay tuned! And thank you again to our members for your support in the successful passage of the Infrastructure Bond package.

-- Thomas T. Holsman


State Board Highlights

AGC State Board Holds Final 2006 Business Meeting

AGC of California held its Fall State Board of Directors and Annual meeting October 11 at the Hyatt Grand Champions in Indian Wells.

Annual Meeting

AGC of America (AGCA) President Harry Mashburn provided a report on activities at the National level, including the new strategic plan. Several objectives of the new plan require working toward a more focused collaboration with the chapters in the important areas of marketing, communication, membership and products and services.

AGCA’s CEO Steve Sandherr following up with a report on the state of the national organization and a review of the recent National Midyear meeting in San Francisco. During that meeting, items of discussion included the Construction Inflation Report and the increase of construction material costs; the unveiling of the AGCA “Contractors’ Guide,” which gives members the ability to create virtual projects; and recent and upcoming activity in Congress. It is forecasted that the big ticket items for next year will include immigration reform and the appeal on death tax reform.

AGC of California President Mark Lindquist provided an update on the association’s financial status, which has remained strong. He noted that the one-time financial windfall from the Old Republic workers’ comp program will improve the 2006 financial performance; provide funds to retire some pension obligations; fund a task force to address improving communications; and create a more interactive web site. In other financial news, the building owned by AGC’s for-profit subsidiary CIAG is fully leased with a positive cash flow.

CEO Tom Holsman provided an update on the chapter’s Strategic Plan. He touched on some of the association’s key accomplishments in the areas of marketing, organizational effectiveness, and services. He noted that recent legislative successes include the infrastructure package and fundraising for Propositions 1A-1E. Major legislative issues defeated this year include construction defects (SB 1581) - Type 1 indemnity agreements; apprenticeship legislation (AB2929) – restrictions on new apprenticeship programs; and workers’ compensation increase (SB 815) – increase permanent disability benefits. In marketing efforts, AGC has seen an increase in press contacts and public relations. Mr. Holsman recognized two professional staff positions that were filled this year: Mike Rodriguez was brought on board earlier this year as the Director, Industrial Relations South, and Bo Bradley was recently named Director, Safety and Health Services.

Special Guest Speakers

Two invited speakers addressed AGC’s State Board of Directors during the meeting: Samuel J. Wallace, Small Business Enterprise Officer for California, and Senator Jim Battin, 37th District.

Mr. Wallace discussed how disadvantaged businesses play a key role in rebuilding the state’s transportation infrastructure. He noted that the Small Business Plan is outlined in the Governor’s strategic growth plan and encouraged competition among firms to bid on DBE projects to control the costs of infrastructure. The Small Business Plan will focus on helping to grow small businesses into mid-size companies so they can compete for larger projects. Both the Governor and Secretary of Transportation are committed to this idea and hope to improve the partnerships to stimulate the economy.

In his address to the board, Senator Battin reflected on his 12-year run in the California Legislature and discussed the upcoming election, political issues and political faces to watch for. He was confident that the Republicans will not lose any seats in the California Legislature.

Strategic Planning

Sr. Vice President Steve Blois reviewed the association’s 2007-11 Strategic Plan and provided an overview of how it was developed. These goals were developed during AGC’s Strategic Planning Session in July. The plan included goals in the areas of membership, marketing, organizational effectiveness and services, with each goal containing strategies and tasks/initiatives.

President’s Report

President Lindquist reported on the Executive Committee’s three meetings since May. The first of the three meetings was the Strategic Planning Session in July, where the Committee established the five-year strategic plan, approved the membership report, and received updated financials among other things.

The second meeting was held on September 29, 2006 as a special called Executive Committee meeting during the National Midyear meeting, for the primary purpose of assigning responsibilities and tasks created in the new 2007-11 strategic plan.

During the third meeting, held that morning, the Executive Committee approved the creation of a task force to be composed of representatives from the respective divisions and AGC San Diego to serve and review Public Works Procurement legislation anticipated for 2007. The Committee also reviewed a request to establish an AGC Disaster Emergency Network, which was then referred to the Joint Engineering Division for review and action. The Committee received reports that included an update on Legal Advisory Committee activities, an update on the 2006 Strategic Plan, and a report on the association’s financial standing.

In other discussion, the Executive Committee recommended that the State Board of Directors approve a partnering agreement between AGC of America and AGC of California to work together to achieve higher performances in the areas of marketing, communication, membership and products and services. The State Board of Directors approved the partnering agreement as submitted.

2007 Standing State Committees/Councils

The Board approved continuation for the following committees/councils for 2007: Associates Council, Awards Committee, Fiscal Insurance & Risk Management Committee, Legal Advisory Committee, Membership Development Committee, National Affairs Committee, Nominating Committee, Open Shop Council, Safety & Health Council, and Union Contractors Councils North and South.

Safety & Health Council Report

Council Chair Don Bradway requested that the State Board entertain discussion to encourage greater contractor member participation on the Safety and Health Council. It was reported that only 10% of the current AGC contractor members are active on the council. President Lindquist achieved Board census in support of the Council’s effort and reported that new strategic plan will help to improve communications, including improving member participation on the Safety Council.

A motion to endorse the Cal/OSHA Golden State Program was also brought forward and approved by the board. This endorsement would include the AGC logo on Cal/OSHA Golden State Program materials and would allow AGC to market the literature with the goal of increasing AGC member companies with successful safety programs, which would ultimately result in lower insurance rates and greater profit.

Membership Report

Vice President Wayne Lindholm, Hensel Phelps Construction Co., reviewed the third quarter membership report. He announced that Barry Corea, McGraw-Hill, has rejoined the President’s Club. He also reported that the Membership Development Committee has met twice this year and has made recommendations for retention, growth and dues structure.

Government Relations

Legislative Advocate Dave Ackerman provided an overview of the association’s legislative activities throughout the year and provided an update on the infrastructure bond measure campaign. The State Board of Directors had an opportunity to listen to the commercial radio ads and view the television spots that were to run in both Northern and Southern California as a result of all the contribution monies.

Political Action Committee (PAC) Chair John Messner, Harbison Mahony Higgins Builders, provided a PAC update, and announced that $70,000 has been contributed toward the PAC raffle. He gave special recognition to Dave McCosker, Independent Construction Company, for single handedly recruiting members to participate in the PAC raffle. Mr. Messner noted that the PAC income has remained steady despite the cost of legislation, which has quadrupled. Mark Rodgers, Herzog Contracting Corp., was announced as the winner of the PAC raffle and recipient of a 2006 Ford Escape Hybrid.

California Construction Education & Research Foundation (CCERF): Director Adrienne Monroe and Chair Frank Schipper, Schipper Construction Company, reviewed CCERF’s strategic planning efforts and activities. CCERF plans to expand a Construction Career Awareness Day to Central California, as well as to roll out a new and improved

CCERF website in 2007. The website will provide AGC members access to AGC student chapter member resumes, as well as a resource to learn more about the Career Technical Education (CTE) Matrix that will include CTE bill summaries. Other goals include having an AGC representative on the California Apprenticeship Council and targeting more women and minorities into the industry. A presentation was given from the second annual CTE Student Demonstration held at the State Capitol on August 30, 2006. In upcoming events, CCERF plans a first annual “Oscar Night” fundraiser in March 2007.

Election of 2007 Officers: The State Board of Directors approved the Nominating committee’s slate of officer nominations for 2007 as follows: Treasurer, Bob Christenson, Panattoni Construction Inc.; Vice President – Tom Foss, Griffith Company; Sr. Vice President – Wayne Lindholm, Hensel Phelps Construction Co. and President – Steve Blois, Blois Construction Inc.


Joint Division Highlights

Infrastructure Construction Tops Board’s Discussion

Joint Division Vice Chair Gerry DiIoli, Herzog Contracting Corp., led the Division Board of Directors meeting on October 11.

Guest Speakers: Business, Transportation and Housing Agency Deputy Secretary Jim Bourgart and Small Business Enterprise Officer Sam Wallace addressed the Joint Engineering Division Board on the needs related to rebuilding California’s infrastructure.

Mr. Bourgart discussed California infrastructure and growth. Transportation infrastructure has lagged behind rapid population growth and automobile usage. He discussed Gov. Schwarzenagger’s proposed “Go California” strategy and the upcoming bond proposals, as well as a multifaceted mobility strategy detailed in a handout distributed at the meeting.

Sam Wallace was appointed Small Business Enterprise Officer of Business, Transportation and Housing on July 1, 2006. Mr. Wallace discussed the partnership between government and industry and noted that he was pleased to see how many contractors were present on August 5, 2006 during the inaugural press conference with Gov. Schwarzenegger to kick of the Executive Order regarding small business enterprises. He reported that Gov. Schwarzenegger is pushing for a total reinvigoration of California and the infrastructure that supports it.

The recent Caltrans directive to raise the insurance requirements was also discussed, and Mr. Wallace indicated that Caltrans Director Will Kempton is committed to ensuring that small business can participate in this work. Steve Rados, Steve P. Rados, encouraged agencies and both prime and sub contractors to work together through mentoring new subcontractors.

Legislative Report: AGC Advocate Dave Ackerman discussed Propositions 1A through 1E as the biggest thing to happen to the industry in years. He commended AGC for stepping up to the challenge. In addition to the bonds, AGC’s focused its efforts on a variety of other issues in the legislative arena. Those efforts were successful in limiting a proposal for Type 1 indemnity agreements, and securing a veto of onerous apprenticeship legislation that would have negatively impacted AGC of San Diego’s apprenticeship program. AGC was also successful in getting a veto in rolling back workers’ compensation reform, among other things.

Hauling Issue/Recent DIR Ruling: CEO Tom Holsman provided an update on the DIR hauling issue. It was noted that a favorable decision was received which said that hauling

of materials to a public job from a private entity would not be considered part of the contractor as it relates to prevailing wage. The next issue was “immediately incorporated therein,” which the decision said “could” be considered prevailing wage. This required some clarification, and the feeling is that this is a very narrow interpretation. The decision AGC believed was favorable to its position was the “Alameda Corridor” decision, in which the association prevailed.

A recent Caltrans bulletin seems to interpret the decision differently than AGC, and the association is in the process of meeting with Caltrans to clarify that issue. The next course of action is to meet with Caltrans and DIR to get this matter resolved.

Rocky Miller, Cox, Castle & Nicholson, provided additional insight on the issue and reported that when the hauler leaves the “pure hauling role” and participates in construction activity, the worker is entitled to prevailing wages. This also applies to the time the worker is on the site. If it is hauled from an adjacent, dedicated site, then that hauling is covered, an outgrowth of the “Tow Boat” decision in San Diego. Anything else is not. Caltrans’ interpretation has removed the word “adjacent,” and it is not clear why. Caltrans also has said that if the hauling is between two public works sites, even if unrelated, is covered work. AGC also considers this interpretation a problem.

California Air Resources Board (CARB) Update: Gary Rohman, ECCO Equipment, discussed the Portable Equipment Registration Program, a voluntary program that required registration of such equipment. Some key points of the presentation included:

• Definition of portable equipment

• Registration program

• Penalties and deadlines

• What to do if you missed the deadline

• Recent $34 million lawsuit against a California contractor filed by the California Attorney General

• CARB is developing off-road diesel emission reduction regulation

• 182,000 pieces of off-road diesel equipment are operating in California, according to CARB

• An estimated 50% are not in compliance.

• Concerns: dollars, engines, manpower, time.

• Engine Funding Examples (Carl Moyer program)

In summary, members need to be educated about this important issue. It was noted that the ARB will have a small-business component to help small businesses continue to work.

Nomination of Officers: Nominating Committee Chair Doug Duplisea conducted Nominations for Chair and Vice Chair of the Joint Engineering Division, and Specialty

and Associate Representatives for 2007. Gerry DiIoli of Herzog Contracting Corp. will serve as the Chair, and Chris Hickey of Agee Construction Co. will serve as Vice Chair of the Joint Engineering Division.

Associate nominations include: Eileen Diepenbrock, Diepenbrock Harrison, as State Director and Kathy Skeen, Excel Bonds & Insurance Services Inc., as Division Director.

Specialty nominations include: Ken Coate, Inland Surety, as State Director and Gary Rohman, ECCO Equipment as Division Director.

Prepared by Sam Hassoun, Jt. Engineering Division Director


Building Division Highlights

Insurance, Legislative Issues Top Meeting Agenda Chair Mike Viola, Viola Incorporated, led the Building Division Board of Directors meeting on October 11 in Indian Wells.

Non Conforming Insurance Issues: Ralph Fletcher, managing director of Allied North American Insurance Brokerage, discussed non-conforming insurance issues. The issues discussed included “does coverage meet contract terms?” and “watch the policy’s expiration or cancellation language.” Non-conforming insurance has difficult coverage issues, subsidence, prior work, pollution, OCIP’s, and claims made. Mr. Fletcher noted that it is imperative that general contractors have in place best practices procedures. All companies should have certificate administration and develop and follow certificate checklists of all required coverage. It was advised to keep certificates and additional insurance endorsements for 10 years.

Notice of Completion: Attorney Aaron Silberman of Rogers, Joseph, O’Donnell & Phillips outlined the legal description of how to classify if a job is truly completed. Items discussed included: meeting contract requirements; getting paid; record a notice of completion; when to record a mechanics lien; notice of cessation or actual completion; prime-sue on a payment bond; and sub or supplier sue on a stop notice or payment bond. Mr. Silberman hosted a Frequently Asked Questions discussion on this topic. Members can receive a copy of Mr. Silberman’s presentation by contacting John Hakel at [email protected].

Legislative Updates: Dave Ackerman, DGA Associates, provided a legislative update. He spoke about several bills as well the bond measure on the November 7th ballot.

AGC supported 24 of the 26 bills signed into law this year. Three bills of particular interest to the Building Division that were vetoed by the Governor include: SB 815 (Perata) – would have increased workers’ compensation benefits; SB 1523 (Alarcon) – would have made it more difficult to build big box stores; and AB 2992 (Evans) – would have required pre-qualification of mechanical contractors for all state university construction.

UCC Update: John Hakel reported that the UCC would again be meeting with the AGC on November 8th in Oakland. Items to be discussed will be delivery methods, payment schedules, and bonds and insurance for subcontractors.

OSHPD Update: The Division reviewed the “new twelve steps” to expedite the construction process with the Office of Statewide Health Planning and Development. The next meeting between OSHPD and AGC is slated for early December.

mailto:[email protected]

Nominating Committee: Nominating Committee Chair Doug Duplisea of Kiewit conducted the nominations for Chair, Vice Chair, Specialty and Associate representatives for 2007. Claire Koenig, McNely Construction Company, will serve as the 2007 Chair and John Nunan, Unger Construction Company, will be Vice Chair.

Associate nominations include: Timothy Truax, Cox, Castle & Nicholson as State Director.

Specialty nominations include: Wyatt Jones, Airco Mechanical Inc., as State Director.

Public Works Procurement: Vice Chair Claire Koenig, McNely Construction Company, asked for members of the Building Division to join a task force regarding public works procurement. Those from the Building Division will include:

Claire Koenig – McNely Construction Company

Wayne Lindholm – Hensel Phelps Construction Co.

John Nunan – Unger Construction Company

John Cosgrove – Turner Construction Company

Sam Brusco – The Clark Construction Group

Prepared by Building Division Director John Hakel


SF Airport/FCI Team Up To Deliver Complex Retrofit

By Russell W. Snyder

Building public works projects in San Francisco in recent years, as one contractor put it delicately, “presents a unique set of challenges.” Tangled bureaucracy. Tight construction windows. Drawn-out payment procedures. Snarling lawyers at every turn. It’s no wonder the City by the Bay developed a reputation as one of the worst places in the nation for contractors to do business.

But that didn’t stop AGC contractor Flatiron Construction Corp., known by its initials FCI, from taking on a complex seismic retrofit job at perennially busy San Francisco International Airport.

So far, the results have been impressive, and both contractor and owner are praising a new spirit of cooperation that could become a model for others to follow.

To take a tour of the $17 million project is like imagining what it would be like to undergo heart bypass surgery while still going to work every day. The project includes strengthening 50 concrete columns of an elevated viaduct in the heart of the domestic terminal that saw 24 million passengers and countless wheeled suitcases pass through in 2005.

The project goal is simple: retrofit the viaduct to modern earthquake safety standards, but minimize disruption as much as possible. But that entails excavation, welding, concrete pours and other conspicuous activities. Considering that the viaduct looms over the median that taxis, shuttles and others use as they go to and from their flights, the potential for a traffic nightmare was huge.

“The first six months we were here, we were under close scrutiny,” says FCI Project Manager Robert Ferrouge. “The airport confined us to a very small space, retrofitting three columns at a time.”

But after FCI proved that they could maintain a tidy jobsite and keep disruptions at an absolute minimum, the city agreed to allow them to enlarge the construction footprint to become more efficient.

“They learned they can be flexible with us,” Ferrouge says. “They listened to our concerns. We understand how we can move around here.”

FCI, too, has gone the extra mile to work with the city to minimize claims and change-orders in the spirit of cooperation.

The jobsite footprint is now 11 columns, which gives FCI greater flexibility and efficiencies in scheduling subcontractors. Everything is done with the understanding that the city will pull back if there are complaints.

Part of the success, Ferrouge says, is that FCI did not approach the job with a low-bid mindset.

“It was not like a low-bid contract. They are our clients. They have an image to protect,” he said. “But it did take some trust-building on both sides.”

FCI field engineer Diego Melchert agreed. “The contract works both ways – it can work for you or against you,” he says. “It is just a guide. There has to be a give and take.”

Walking the job just as a delivery of concrete arrives, Superintendent Mick Wilson surveys the beehive of activity.

“The owner’s job is to save money. Our job is to make money,” he says matter-of-factly. “They need the project built. That’s what we’re here for. We tell them what is different than the design and they are listening.”

Mike Towle, Airport Operations Manager in Charge of Construction, gives FCI high marks. A veteran of many high-profile construction projects at the airport, Towle knows all too well how disruptions can result in an avalanche of complaints from already harried travelers.

“When it goes bad, it can be like death by 10,000 cuts,” he says with a shudder. But Towle has nothing but praise for FCI.

“These guys have been really excellent,” he says. “We haven’t had one complaint from the traveling public. This is a rotten, dirty job. So far, it’s just been excellent.”

“They’ve come up with some innovative ideas,” he says. “We tried to make it safe so grandpa and grandma can come down here and pick someone up or travel and not lose their bags.”

City Project Manager Hassan Nowrozi agreed. “In general, the contractor has been responsive in what we have asked them to do. We try to listen to them. We try to keep it a two-way street-type of conversation between the contractor and the owner.”

That’s not to say it’s always a big love-fest.

“We have never hesitated to ask for credit when we, in our opinion, deserve it,” Nowrozi said. “And we have, in our opinion, fairly compensated the contractor when things come up that fall outside the scope of work. We try to reach consensus. We try to minimize piling up.”

As for advice to others seeking to repeat the formula for success, Nowrozi offered the following: “Be available. I was on-call 24-hours a day. Also, we always had someone on site from 6 a.m. to 6 p.m. who is knowledgeable about the project.” He also says it is important to keep focused on the project. “Our main purpose was not to stop the project. We tried to resolve issues right away.”

Nowrozi also took it upon himself to help the contractor navigate the city bureaucracy. “If issues got stuck in another area of the city, we would follow-up,” he said. “It’s a very tangled web. From time to time, even I get lost in it.”


AGC Spearheads Reform Effort in San Francisco By Russell W. Snyder

The official city seal of San Francisco depicts a mythical phoenix rising from the ashes, which has come to symbolize the city’s rebirth from a devastating earthquake and fire in 1906. Builders, historians note, were a big part of that rebirth.

It’s now a century later and San Francisco enjoys the dubious distinction as being one of the country’s most hostile environments for contractors. As a result, many builders have moved across the bay and beyond, seeking more favorable markets and less financial risk.

But times may be changing.

City officials, borrowing from the phoenix image, are attempting to portray San Francisco as being reborn, returning to its can-do roots and partnering with the construction industry. This newfound attitude is not one of altruism, but of necessity: San Francisco is about to embark on an ambitious public infrastructure program not seen in generations, and it needs qualified builders to deliver.

Leading the way is the San Francisco Public Utilities Commission. The SFPUC manages a complex water supply system stretching from the Sierra to the City that serves some 2.4 million people. The Hetch Hetchy water system features a complex array of reservoirs, tunnels, pipelines and treatment systems – nearly all of it gravity-fed.

Most of the system is dire need of a seismic upgrade, and the PUC is moving forward with an ambitious $4.4 billion, 12-year Water System Improvement Program designed to seismically update the city’s aging water delivery system and enhance security. The system crisscrosses known earthquake faults, officials note, and just one large jolt could cut off water to the city for a month or more.

And that’s not all. The PUC also intends to embark on some $2 billion worth of sewer system improvements and hundreds of millions more worth of power-generation projects. It’s a lot of work, and it will need a lot of contractors.

Meanwhile, it’s a competitive out there. Many public owners, from venerable Caltrans to aggressive upstarts like San Jose, are aggressively courting contractors and have a proven track record of addressing the concerns of industry.

Appearing at AGC of America’s Mid-Year Conference in San Francisco in September, PUC Deputy General Manager Tony Irons was candid about the need for the PUC to tame its own bureaucracy to entice companies back to the city.

“My concern is not about the design of these projects or if they can be built,” said Irons, an architect and former contractor who now heads PUC’s capital programs. “My concern is whether we can have the positive relationships with the contracting community.”

“We need to improve,” he said. “San Francisco is very hard to contract in.”

Those comments were echoed on Oct. 11 when a group of representatives from San Francisco-based Mitchell Engineering, including co-founders Curt Mitchell and Mike Silva, testified at a PUC Commission hearing about how problems have dragged on unresolved for months and years.

“We are working to improve the construction environment, which is defective,” responded PUC Commission President Richard Sklar. “We agree with you that the system doesn’t work.”

Added Commissioner Ryan L. Brooks, who once contracted with the city: “We need to find a solution to this issue. The same problems I was having 10 years ago I’m hearing today. We talk about changing all the time but at the end of the day we’re hearing the same problems over and over again.”

And those problems are legion. The most often cited: the 88 different requirements the city places on contractors who seek to bid on public works, everything from banning the use of tropical hardwood to payment of benefits for domestic partners.

Fail to meet some reporting requirement, and the city’s notorious Office of Labor Standards Enforcement is ready to pounce with a hefty fine. And the Human Relations Commission is never far behind to pester contractors about meeting goals for local hires or disadvantaged businesses. Getting the project done always seems to be an afterthought.

Then there’s the wait – waiting to get responses back from the city on project plans that don’t match the site conditions, or unforeseen issues that crop up and create delay and additional costs. The culture of San Francisco has moved away from solving problems in the field and toward elevating them up through the bureaucracy and, oftentimes, to the City Attorney’s Office. Spice it up with gnarly union politics, tight construction footprints and activists on every street corner, and it’s easy to see why contractors have fled.

Doing business in the city, one weary contractor lamented, “is filled with risk.”

San Francisco City Attorney Dennis Herrera is the first to admit that he’s not a builder, and he thinks many of the issues that end up in his office could have been resolved much sooner.

Following a meeting with AGC in late 2005, and at the behest of AGC members and others, Herrera agreed to champion a citywide task force intended to take on this issue head-on.

AGC staff spent the next year meeting with city department heads, identifying problems and proposing solutions. At the forefront was the concept of a Dispute Resolution Board, which AGC has successfully helped implement with other public owners, including Caltrans and the City of San Jose.

Incorporating feedback from AGC members into the proposed DRB specification, the City Attorney’s Office ultimately embraced the concept and has already incorporated it into the first Hetch Hetchy water program contracts.

In September the task force finalized a thick report of recommendations – everything from prompt payments to conflict management training for city staff. Herrera and Mayor Gavin Newsom have both endorsed the report and have pledged to push through implementation.

“My administration has been committed to cutting red tape and making city government more efficient and responsive to the needs of our residents,” Newsom said. “I commend AGC and the industry for working with us to remove obstacles to delivering these important infrastructure projects that our residents expect and deserve.”

The PUC’s Irons went even further in praising AGC for its leadership, saying: “Fixing the contracting process in San Francisco could not be done without the invaluable assistance and participation of the AGC.”

That’s not to say that everything in the city these days is a bed of roses. Contractors are still reporting problems with inflexible bureaucrats and plenty of red tape. But others are willing to give the city a chance. One national contractor, a prominent AGC member who has shunned work in the city for more than 20 years, recently announced plans to bid on some PUC projects to test drive the new and improved city bureaucracy. How those projects progress will determine if the company will bid on others.

And that suits Irons just fine.

“We want to make it so you guys want to work with us,” he told a group of AGC members, “and that’s a big hurdle to overcome.”


Success Story: San Jose Public Works

Editor’s Note: Katy Allen, the Director of Public Works for the City of San Jose, has led a dramatic turnaround in the state’s third largest city since arriving on the job in 2002. Previously, she worked for 25 years for the City of Spokane, Washington, rising to the position of director of engineering. San Jose, once scorned by the construction industry, now enjoys a reputation for fairness and openness that has resulted in many qualified bidders for each job, zero lawsuits and fewer claims then in past years. In an interview with AGC’s Russ Snyder, Allen talks about how San Jose got there.

California Constructor Magazine: Please share with us the story of your first encounter with AGC back in 2002.

Katy Allen: Shortly after starting as San Jose’s Public Works Director in March of 2002, AGC made an appointment to meet with me and, during that meeting, I learned of contractor concerns about bidding work in San Jose. At the same time, City Council had set as its No. 1 priority the need to develop a Dispute Resolution Board (DRB) policy. As both the Council and the contracting communities were expressing similar concerns, it became obvious that this was an area we needed to invest some time in seeking solution -- San Jose’s Capital Program was several billion dollars and we needed contractors interested in bidding our work.

CCM: So you developed a DRB policy and put it place.

KA: Yes, we developed a DRB policy, but the preamble to that is partnering. It’s a mindset, focusing on building projects and getting them completed – making the project a success for both the city and the contractor. We understood that contractors want successful projects, and so do we. It’s about defining what “success” is, working through project issues with open communication, and agreeing on the decision making process in advance so that success can be realized.

CCM: In San Jose, even though you have a DRB requirement, you’ve found that you don’t really need to use it that often, right?

KA: Once the policy was implemented, AGC and the City co-sponsored partnering training. With partnering there is a commitment on both sides to communicate openly, resolve issues in a timely manner, and to develop a strategy for completing the project in spite of any challenges that may arise. The value of partnering transcends through all of our projects.

CCM: When you spoke at AGC’s Bay Region Public Works Night event earlier this year, you noted that “no project is born in heaven,” but the key is how you work through the differences. Can you expand on that?

KA: What I meant is that all projects have challenges. What we have learned is not to resort to rhetoric and exchanging claims. We try to focus on completing the project and working on the issues so that can happen successfully. When we closeout a project, our goal is to do that without litigating or resorting to the DRB. Sometimes we let issues that develop over the course of a project detract from the goals that the city and the contractor have. To put it another way: Every project has issues, and every organization has to decide how they are going to manage them. Our focus is to figure out how to make the project a success for the City, the contractor, and the community.

CCM: It must be gratifying now to see so many well-qualified contractors bidding on your public works projects today. We understand you recently had seven established firms submit bids on a library project in the city.

KA: It’s very enjoyable to see bidders that we know and have success working with coming back to bid on projects. We appreciate the repeat business. They (contractors) understand the responsibility and the commitment the city makes to our community to deliver these projects on time and within budget. They understand that working in the public sector is different from working in the private sector. They also look to us to be very responsive to the needs that they have.

CCM: Contractors place a great deal of importance on public owners being responsive and answering questions when things come up so that problems don’t fester. But that can be easier said than done in a government bureaucracy. How have you handled that?

KA: We put a lot of responsibility on our project managers and our inspectors to make decisions in the field. We know that time is money and timely decisions are important to keeping projects moving forward. Making progress on projects is best for the City and the contractor.


Industrial Relations

Member Involvement Critical to Negotiating Process By Mike Rodriguez, Director, Industrial Relations - South

In both the North and the South Industrial Relations departments of AGC of California there is a Union Contractor Council (UCC). These Council members are invaluable when it comes to bringing to the negotiating table concerns, problems, areas where change is needed and input concerning the future economics of the agreements.

Those who participate in the UCC process and at the negotiating table reap the rewards of involvement, while those who do not ask why issues close to them were not addressed. Without you and your companies’ involvement in both processes, the UCC Council and negotiations, it is impossible to assist you with your concerns if we are not aware of what they are. Ultimately you end up having to decide if you want to accept wage increases and other changes to the agreement that affect your company. Many times these decisions are made by someone else whose interests may not be the same as yours.

While everyone is short of time and it isn’t always possible due to schedule conflicts to attend UCC meetings and negotiations personally, at a minimum send another representative from your company in your stead. When you are present or at least represented at the UCC meetings and are at negotiations, your issues are heard and addressed. When you are not available, others all too often make decisions you may not support. When economic proposals by the unions are considered and ultimately agreed to at the table, you may end up stuck with a package that could be damaging to your company.

We need your involvement and participation in all the committees and councils within the IR departments be it UCC, a craft committee, as a Trust Fund trustee or just making yourself available to attend and give input. This is your organization, and those who have chosen to assist you on a day-by-day basis must have and require your assistance and direction. These IR department councils and committees are how we know what your needs are and how to best attempt to meet them. Without your involvement, we are truly unable to feel that we are moving forward with your best interests at all times.

Get involved and stay involved. Contact your IR department and let them know you want to be part of the process that influences how agreements are reached and what language they contain. We need your help and involvement to insure these councils and committees continue to serve the needs of the association and, more importantly, you can insure that your voice is heard and you aren’t stuck with wage increases or language changes that someone else agreed to. You can contact either Mike Rodriguez or Carol Hackler in the Industrial Relations South

department at (626) 608-5800, email [email protected] or [email protected]. The IR Department North can be reached at (925) 827-2422 or email [email protected].




Government Relations

A Good Legislative Year for AGC

2006 has been a long and intense legislative year by any standards – starting with non-stop negotiations on the massive $222 billion infrastructure building program proposed by the Governor in January to actions taken by the Governor on legislation in the final hours he had to sign or veto bills.

Infrastructure Package Landmark Accomplishment On November 7th, voters cast their ballots and decided the fate of the largest infrastructure package ever to go before the voters. Five propositions – one constitutional amendment and four separate bond measures – proposed to raise $37 billion for transportation, housing, school, and flood and levee construction and provide iron-clad protections for $1.4 billion in annual revenues generated by the passage of Proposition 42 in 2000.

The Governor and the Legislature, in a rare show of bipartisanship following months of negotiations, agreed to place the infrastructure package on the November ballot, and both Republican and Democratic leaders campaigned with the Governor in support of the package. AGC worked closely with Governor Schwarzenegger and Senate Leader Don Perata on details of the package to facilitate the bipartisan agreement.

AGC and its member companies were the leaders in the commercial construction industry in raising funds for the campaign, which cost an expected $10- to $15-million for all five measures.

Major Legislative Issues Decided

The infrastructure package may have been the most visible action taken by the Governor and the Legislature, but the legislature also considered thousands of other bills that had significant impact on the construction industry.

Construction Defect AGC was successful in sidetracking Senate Bill 1581, which would have prohibited Type 1 indemnity agreements in construction contracts. AGC has agreed to participate in meetings with the American Subcontractor’s Association other construction organizations to attempt to craft a proposal that can be supported by all groups next year.

Apprenticeship Legislation Vetoed AGC was successful in convincing Governor Schwarzenegger to veto AB 2929 (Laird), sponsored by the State Building Trades Union, that would have had a negative impact on new or expanding apprenticeship programs such as the program being run by AGC San

Diego and AGC California.

Workers’ Compensation Increases Vetoed Governor Schwarzenegger also vetoed SB 815 (Perata) that would have significantly increased permanent disability benefits under the workers compensation system and passed those costs back to the employer in the form of increased premiums.

Legislation Signed by the Governor and Supported by AGC includes: AB 372 (Nation) – Continues design-build contract authority for transit districts.

AB 463 (Tran) – Allows the use of power assisted equipment for excavating.

AB 521 (Runner) & AB 1467 (Nunez) – Authorizes Caltrans and the Transportation Commission to contract for Public Private Partnerships for transportation projects.

AB 1986 (De La Torre) – Prohibits the California State University from using a foundation or auxiliary organization to circumvent the public bidding process.

AB 2372 (Pavely) – Penalizes any public agency who violates the California Uniform Construction Cost Accounting Act in order to raise their force account limits.

AB 2419 (Wyland) – Enhances construction of career and vocational education facilities.

SB 535 (Runner) – Extends design-build authority to the city of Victorville.

SB 1359 (Torlakson) – Establishes safeguards and protections for contractors who perform underground excavation work.

SB 1605 (Margett) – Makes clarifications in the laws governing underground excavations.

Legislation Vetoed by the Governor and Opposed by AGC: AB 1020 (Hancock) – Would have subjected all transportation projects to a review as to whether they are “growth inducing” before they can be approved.

AB 1884 (Chu) – Would have given striking workers unemployment benefits.

AB 2992 (Evans) – Would have mandated the California State University to pre-qualify all mechanical contractors and required a prime to use subcontractors from this list.

SB 852 (Perata) – Would have increased employers exposure to punitive damages.

Bills Opposed by AGC That Were Killed During the Legislative Process: AB 411 (Yee) – Would have made it more difficult for prime contractors to withhold retention.

AB 2371 (Levine) – Would have invalidated arbitration agreements between employers and employees covered by the Fair Employment and Housing Act that are required as a condition of hiring.

AB 2621 (Strickland) – Would have eliminated the sales tax on gasoline and undermined Proposition 42.

AB 2833 (Runner) - Would have increased the force account limits and allow school districts to self-perform any construction work of up to $50,000.

SB 46 (Alarcon) – Would have required the OSHA Standards Board to adopt a standard concerning exposure of workers to masonry dust.

SB 655 (Ortiz) – Would have required public notice and other requirements where construction involved areas of naturally occurring asbestos.

SB 1456 (Lowenthal) – Would have allowed school districts to bid construction projects on a “best value” determination on a process determined by the school district.

Other Priority Legislation Legislation sponsored by AGC to require preliminary notice requirements by subcontractors prior to filing payment bond claims did not pass and will be considered next year following additional meetings with all subcontractor groups.

The Governor signed two bills that were opposed by AGC: SB 667 (Migden) - Allows the University of California San Francisco campus to conduct a demonstration program for the next five years to award construction contracts based on a “best value” determination that considers contractor qualifications rather than just the low bid.

AB 32 (Nunez) - Establishes reporting and reduction targets for greenhouse gas emissions. This bill was opposed by virtually every business group in California. The program will be administered by the State Air Resources Board and it is unclear how the new law will impact construction equipment.

Looking Ahead The 2007-2008 Legislature begins its session on December 4th and, due to term limits, 38 new Assembly members will be sworn into office – the largest turnover in Legislative history. In the Senate, of the 20 members standing for election, 13 will be new, though 12 of the “new” faces will have served in the Assembly before moving over to the Senate.

Each year seems to create new and greater challenges. 2007 promises to be no different.

Prepared by Dave Ackerman, Jamie Khan and Paul Gladfelty


Huge SR-22 Project Heading to Successful Completion By Carol Eaton

On November 30th, Southern California commuters will have reason to celebrate. That date marks the official completion of the state’s largest freeway improvement project, some three years earlier than originally planned and just 800 days after a trio of AGC member contractors began work on the mammoth design-build project.

Granite Construction Company, Watsonville, C.C. Myers, Incorporated, Rancho Cordova, and Steve P. Rados, Inc., Santa Ana, partnered as the joint venture design-build team on the Garden Grove Freeway State Route 22 (SR-22) Improvement Project for the Orange County Transportation Authority (OCTA). The owner estimates the total price tag at $550 million, with the majority of the project cost funded by Measure M, a half-cent sales tax for transportation improvements in Orange County. OCTA has asserted that the use of the design-build project delivery method has enabled the project to be completed three years ahead of the original schedule laid out by the state.

The project spans over 12 miles of freeway and extends through the cities of Westminster, Garden Grove, Santa Ana and Orange in central Orange County. The freeway is an east-west route linking the 55, 57, 5, I-405 and SR-605 freeways. As the first major improvement to the freeway since it was built in the mid 1960s, the project is intended to improve traffic flow, remove bottlenecks and enhance safety on this roadway that accommodates some 200,000 vehicles daily.

Construction has entailed the widening of more than 12 miles of freeway in both directions, including the addition of new high occupancy vehicle lanes and continuous auxiliary lanes; the widening or replacement of 55 separate bridge structures; the reconfiguration of the connector ramp from southbound Orange Freeway to westbound 22; upgraded on/off ramps; and the creation of 12 miles each of retaining walls, drainage pipes and sound walls.

The joint venture design-build team of Granite-Myers-Rados (GMR) provided design through lead designer, San Francisco-based URS Corporation, with support from various local consultants and a host of other firms.

Shortly after the project team received the notice to proceed in September of 2004, they encountered their first major hurdle: the state discovered a new earthquake fault in the area that changed the design criteria for all new as well as existing bridge structures on the project.

“That was a challenge; we lost a fair amount of time,” says Granite’s Heavy Construction Division Assistant Manager and corporate Vice President Darryl Goodson. “Ultimately the owner wrote a change order to help mitigate the cost of the seismic retrofit. Caltrans was actively involved in helping us get back on schedule, and we got there. That was a really excellent example of the state DOT and Caltrans locally working with the designers and manager at the OCTA as well as with our designers to help get the project back on track,” he comments.

Another early challenge to the schedule was the heavy rains in the winter of 2004, one of the wettest winters on record in the area. Additionally, a fair amount of scope was added along the way to improve the project’s aesthetics such as adding decorative designs to the sound walls, which the team incorporated into the original schedule. The only major change order that will not be completed by the November 30th completion date is the replacement of the Magnolia Street Bridge, which the city of Garden Grove changed from a widening to full replacement after receiving federal funding well into the project. That bridge is due for completion in early 2007.

Goodson likens that the sheer magnitude and logistics of the project to a military operation. “You’ve got to move in and optimize the time that weather allows you, pack up and get out,” he comments. The joint venture design-build team has worked in a spirit of true partnership and teamwork with a common focus on the project’s ultimate success. “All three partners contribute to every part of the project, from management personnel right down to the foremen and crews,” Goodson notes. “We show team colors but not company colors.”

GMR is also proud of the local and minority participation on the job, with minority contractors completing over 10% of the total contract value. Says Goodson, “It’s a combined team; there have been a lot of people out there working hard to make this a success.”


New Sanctions for Commission Targets Local Governments By David A. McCosker Last month, Governor Schwarzenegger signed AB 2372 (Pavley), a Construction Industry Force Account Council (CIFAC) sponsored, AGC supported bill that gives the California Uniform Construction Cost Accounting Commission (CUCCAC) sanctions against public agencies that violate the law. We all worked hard to get this very important language into the Public Contract Code (PCC) and I want to thank AGC for its support.

The 14-member Commission, evenly divided among public agencies and the construction industry, provides contractors with a place to solve force account and bidding grievances with government agencies outside of court.

Here’s How It Works

When a local governmental agency “opts into” CUCCAC, its force account limit jumps from $5,000 (standard) to $30,000 for informal bidding and to $125,000 for formal bidding. But, if it violates the law three times within 10 years, its limit drops back to $5,000 for five years.

A Brief History

In the late ‘70s, AGC’s former Legal Council Larry Kay and its Legal Advisory Committee worked on Assemblyman Elihu Harris’ Ad Hoc Committee to create the Public Contract Code (PCC). On January 1, 1983 we had a PCC. We still needed the Legislature’s help to set ground rules. We worked with special districts’, cities’ and counties’ public works officials until we hammered out a mutually beneficial idea – the creation of the California Uniform Cost Accounting Commission. Housed in the State Controller’s office, SCO staff could audit payroll records to make determinations.

The Commission also makes periodic recommendations, based on inflation, to increase California’s informal and formal bidding thresholds for public works construction.

What Triggers Commission Action?

An audit is done when an interested party presents evidence that:

(a) the work is to be performed by the public agency after rejecting all bids claiming the work can be done more cheaply by them.

(b) the agency has exceeded its force account limits

(c) the work has been improperly classified as maintenance

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Category (a) is like a “stop work notice.” It halts the project for 30 days for an audit. After 30 days, the work begins anew unless the jurisdiction is found to be out of compliance.

Violators Can’t Hide

When a city is out of compliance with the law, it must hold a public hearing at its next city council meeting. At that time, CUCCAC findings are presented to the elected officials and interested public. For example, the City of Redding, after ignoring the law and CIFAC warnings for six years, was caught and had its public hearing. “Redding out of compliance,” was the headline on the ABC Television 11 o’clock news that night. Major local newspapers picked up the story. This highly publicized example dramatized the need for these new sanctions. Redding officials are now working cooperatively with CIFAC and local contractors to do it right.

David A. McCosker is Chairman, Independent Construction Company; Commissioner, California Uniform Construction Cost Accounting Commission; President, Construction Industry for Account Council; and President, Construction Industry Crime Prevention Program.

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