Project Management: From Design Through Closeout

Editor's Note: This is the third of six Industry Speaks™ installments reviewing sections of PSMJ's updated Ultimate Project Management Manual.

The Ultimate Project Management Manual (UPMM) is an excellent reference and “how to manual” for design professionals, project managers, business management consultants, and owners. The templates, checklists, and diagrams are exceptional in their applicability, simplicity, and usefulness, and they correspond well with individual chapter and overall manual content.
To read the full review, click here.

Contractor Licensing Law: The High Price of Being An Unlicensed Contractor

California courts strictly enforce the disgorgement provisions of the contractor licensing law. A new California case underscores this reality. In Twenty-Nine Palms Enterprises Corporation v. Paul Bardos the California Court of Appeal upheld a trial court ruling which ordered an unlicensed contractor to return ("disgorge") over $750,000 back to the project owner.

In February 2007, Twenty-Nine Palms Enterprises Corporation ("Palms"), a tribal corporation, undertook construction improvements to the Spotlight 29 Casino. Palms hired Paul Bardos as its construction manager. Palms also hired the Worth Group as its general contractor. Worth Group submitted a bid to Palms in excess of $1.7 million for a portion of the work. At the request of Palms, Bardos submitted his own bid for approximately $750,000 to perform the same work. Palms accepted Bardos' bid and requested that he perform the work under a different name to hide the fact that Palms was awarding the contract to Bardos, Palms' current construction manager. Bardos agreed and created Cadmus Construction Co. ("Cadmus") to perform the work. Cadmus completed its work in June 2007 and subsequently obtained its contractor's license in October 2007. Palms thereafter sued Cadmus to recover all monies it paid to Cadmus as an unlicensed contractor. Palms prevailed and Cadmus was ordered to return all monies it had received for the work.

On appeal, the court rejected Cadmus' argument that the contractor licensing laws did not apply since the work was performed on tribal land. The court also rejected Cadmus' equitable arguments, notwithstanding the fact that Palms told Cadmus it did not need to be licensed. The court held that equity cannot circumvent the licensing requirements. The Court of Appeal therefore affirmed the trial court, ordering Cadmus to return all monies paid to it by Palms – a disgorgement in excess of $750,000.

Twenty-Nine Palms Enterprises Corporation v. Paul Bardos is the most recent case to reinforce the serious consequences for failing to comply with California's contractor licensing laws. Given the outcome of this case, the price of being an unlicensed contractor in California does not appear to be getting any cheaper.

Aaron Flores, Esq., is an Associate Attorney with Hunt Ortmann. Republished with permission from Hunt Ortmann Palffy Nieves Darling & Mah, Inc., a leader in California construction law and one of our many Industry Speaks™ consultants. If you have any questions about this bulletin or contractor license law, please contact him at flores@huntortmann.com.

Stop, Look, and… READ! Don't Sign That Subcontract Just Yet

You've just been informed that your subcontract bid has been accepted on a public works project and your company will receive a subcontract agreement shortly.  When you receive the draft agreement, you look it over and confirm that the scope of work and exclusions are consistent with your bid.  As to the rest of the "boilerplate" clauses, you do a cursory review and assume that the terms and conditions are customary and consistent with other agreements that you have seen and reviewed in the past.  So you sign it.

This approach to executing subcontract agreements is risky, to say the least.  Not all subcontracts are the same and can vary significantly.  There are often material differences which can be found in clauses ranging from indemnification to attorney's fees provisions.  Subcontractors should closely review and, when warranted, negotiate the terms and conditions in subcontract agreements.

In one case, the failure to review the subcontract terms almost had the unintended consequence of changing the very core of a subcontractor's business from a non-union shop to a union shop.  In this example, the subcontract agreement contained the following provision:

"Subcontractor agrees that it is bound to and shall comply with all the terms and conditions of the Master Labor Agreement including wages, trust fund contributions, working rules, the grievance/arbitration procedure and any other mechanism for the resolution of dispute contained in the Master Labor Agreement, whether or not the work is performed for the contractor.  Subcontractor further agrees to bind all its subcontractors performing job site work of the type covered by the Master Labor Agreement referenced above and to become bound and comply with all of the terms and conditions of the Master Labor Agreement.  Subcontractor acknowledges that the [Unions] are the intended third party beneficiaries of this contractual provision and may enforce the provision directly against Subcontractor."

By signing the agreement, the general contractor and Union contended that the subcontractor was now a full signatory member of the Union for all projects, which of course would have changed the very essence of the company.  As a result of not thoroughly reviewing the subcontract agreement before signing it, even though such provisions may arguably be unenforceable, the subcontractor ended up spending resources fighting the Union's attempt to audit its payroll, assess dues, and make the subcontractor a signatory member simply because it signed the subcontract agreement containing the Union clause.

Don't let this happen to you.  Review your contracts carefully before you sign them or have a qualified attorney do it for you.

Richard Mah, Esq., Contributor to Industry Speaks. Republished with permission from Hunt Ortmann Palffy Nieves Darling & Mah, Inc., a leader in California construction law and one of our many Industry Speaks consultants. If you have any questions about this bulletin or construction contracts, please contact him at mah@huntortmann.com.

REALLY? IT’S NOT ABOUT YOU

Networking. Most of us think of this “painful” experience as having to ‘work a room” to develop relationships with people that you don’t know, so that they can help you win work. WRONG.

Networking is the process of developing relationships with individuals that can help YOUR CLIENTS SOLVE THEIR PROBLEMS.  This may come as a shock, but, it’s not about you! It IS about your client.

If you can only ask your client one question, ask them what keeps them awake at night.  While you may secretly be hoping that it’s an engineering or design dilemma, don’t be surprised if it’s a business problem.  Maybe they just lost their city manager or administrative vice president; maybe they're facing a union negotiation or just “politics as usual.”  What keeps your clients awake may have nothing to do with your firm or its business line.  Yet, if you are able to solve it, offer a solution or point them in the direction of a resource, and you will become that thing we all want to be—the trusted advisor.  So, how do you do that?

Don’t limit your networking events to events where you will meet your peers and colleagues.  Peer to peer networking doesn’t get you very far.  This is peer to partner networking.  Consider tangential relationships—legal professionals, accountants, human resources, governance and leadership professional—the list is endless.  But, the rules are the same:

1.     Talk less about yourself and more about them; find out what do they do and for what type of client.

2.     Learn types of clients that are best for them.

3.     Understand how you might be of benefit to their business or their professional success.

4.     Finally, whether you see a partnership or not, take their card.

Last week, I had a client ask me if I could refer them to an attorney who could review their existing contract language to see where their agreements might be “weak”.  Believe it or not, I had some referrals and I solved their problem.  Can you solve your clients problems?

A New Idea in This Economy? Are you crazy?

Yes!  I am crazy!

In summer of 2010, phone calls kept streaming into our offices from architecture, engineering and construction clients (current and past) looking for consultants with special skills. They asked for marketing professionals, accountants with experience in the FAR, attorneys with specialties in water intrusion, and more. As if I “had the answers,” they were calling me! While each firm’s need was different, every referral request had one common criterion: “They must know our industry.”

We knew the industry, and we saw an opportunity to meet this demand. With a team of dedicated staff, we designed a searchable database that allows firm owners, small businesses, and emerging practices to find consultant and professional resources that fit their needs. They can read or post reviews of service providers or even recommend one. Today, this database is known as Industry Speaks.™ Our tag line is simple: “Consultants that speak your language.”

I later found out from friends of mine that lead professional associations that they can’t provide recommendations.  Their organizations are concerned about “conflict of interest” or being perceived as “playing favorites.”  So, where does that leave the millions of firms each day trying to find solutions?

The truth is, every day we each have a choice to make.  We can be part of the group of people who complain about why something doesn’t exist or why “they” can’t solve our problems.  Or we can do the thing that drove us to be creators—we can solve our own problems. 

Which choice did you make today?  It’s not too late…be part of a movement to change something that “they” haven’t.  Join us at IndustrySpeaks.  Be part of our Industry Ideas.  We’d love to have you.

Watch our instructional video to learn how you can increase the competitive advantage of your company today!