The Official Publication of the Power & Communication Contractors Association 1st Quarter 2012 PCCA President Larry Libla October 9, 1943 - November 30, 2011
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1st Quarter 2012 Officer Directors Official Publication of the Power & Communication Contractors Association Board of Directors David Aubrey Okay Construction Robert Breeden ElectriCom, Inc. Tony Briggs Vermeer Manufacturing Ed Campbell Henkels & McCoy, Inc. James Dillahunty Henkels & McCoy, Inc. John Fluharty Mears Group, Inc. Mark Frosaker MasTec North America, Inc. Matthew Gabrielse Gabe’s Construction Co., Inc. John Hale John Deere Jerrod Henschel Michels Corporation Kevin Mason ElectriCom, Inc. Robert Orr Sherman & Reilly, Inc. Larry Pribyl MP Nexlevel, LLC Rob Pribyl MP Nexlevel, LLC Brad Radichel Condux International Lindsley Thulin Michels Corporation Ron Tagliapietra Michels Corporation Matt Trawick Trawick Construction Co., Inc. Publication Staff Publisher Timothy Wagner twagner@pccaweb.org Associate Publisher Cheryl Stratos stratosc@pccaweb.org Editor Michael Ancell mancell@pccaweb.org Advertising Sales Manager Stacy Bowdring sbowdring@pccaweb.org 1908 Mt. Vernon Avenue, 2nd Floor Alexandria, Virginia 22301 (800) 542-PCCA • www.pccaweb.org ©2012 Power & Communication Contractors Association President Larry Libla W & L Construction Acting President Tommy Muse Aubrey Silvey Enterprises, Inc. 1st Vice President Glen Amerine Amerine Utilities Construction, Inc. 2nd Vice President Steve Sellenriek Sellenriek Construction Treasurer Timothy D. Killoren CCI Systems, Inc. Secretary Todd Myers Kenneth G. Myers Construction In Memoriam: Larry Libla 7 Ethics Programs: Federal Imperative, Cultural Opportunity 15 By Sabine Hoover When contractors speak of their success, they rarely mention ethics policies, though ethics has become a defining issue for the design and construction industry. Driven in part by regulatory pressure, ethics programs are gaining prominence within firms whose leadership has made it a priority. Trench and Excavation Safety 24 By Phillip Metcalf Unprotected trenches continue to be one of the most dangerous hazards on construction sites, especially in underground utility construction. Since 2003 more than 200 workers have died in cave-ins, and hundreds more have been seriously injured. With a little knowledge and proactive effort, we can eliminate the risks of working in and around trenches. Effective Communications in Critical Times 27 By Gerard Braud Managing a business and making money are too often the only characteristics executives consider as the mark of a good leader. Another important factor is how he or she performs in critical times—when “it” hits the fan. This article discusses how a leader uses effective communications in critical times to get through the darkest hours. News Briefs 9 Safety News 25 Member News 29 Industry Calendar 38 Advertiser Index 38
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PCCA Journal|1st Quarter 2012 7 PCCA is deeply saddened to report that PCCA President, respected colleague, and good friend Larry Libla passed away on November 30 at Barnes Jewish Hospital North in St. Louis, Mo. Our thoughts and prayers go out to Larry’s wife of 39 years Pam, his daughters Anna Whitlow, Christina Miller, and Alicia Libla, his sons-in-law Jerry Whitlow and Kurt Miller, his four grandchildren Rylee, Aidan, Addysen, and Emeri, his mother Marglie, and his entire family. Larry was born October 9, 1943, in Fredricktown, Mo. He began his construction career with ElectriCom in Paoli, Ind., and in 1972 he and Pam began L&P Contractors. In 1977, they formed Libla Communications of Poplar Bluff, Mo. Larry joined PCCA in 1990, was elected to the Board of Directors in 1998, and served the last six years as an officer of the association, becoming president in March 2011. Anybody who knows Larry knows how he loved to sit with folks and visit, telling stories that made you laugh so hard your stomach hurt. That’s surely what those of us on the PCCA staff remember and will miss so very much. At PCCA events, he would find a seat near our registration desk or in the hotel lobby, work on that toothpick, and regale us with stories about the old days on the job, crazy things that happened out on a horse trail, and, of course, about his daughters and grandchildren that he loved so much. Larry enjoyed the outdoors and was an avid horseman, enjoying barrel racing and trail riding. He was a member of the Easy Rider Saddle Club in Illinois and the Elks Lodge. Larry was an avid supporter of education and beamed with pride when talking about his daughters’ graduate degrees. He also served in the Army and Army National Guard for 25 years. Memorials can be made to Larry W. Libla Memorial Scholarship Fund: First Missouri State Bank, 1902 Sunset Drive, Poplar Bluff, MO 63901. In Memoriam: Larry Libla
PCCA Journal|1st Quarter 2012 9 FCC Blocks LightSquared Broadband System In a move widely supported by PCCA members, the Federal Communications Commission said it plans to “suspend indefinitely” LightSquared’s conditional waiver to operate as a ground-based broadband network after a new government report said there didn’t immediately appear to be a way for the network to avoid interference with global positioning systems. Following is a statement on the issue from FCC spokesperson Tammy Sun on February 14. “To drive economic growth, job creation, and to promote competition, the FCC has been focused on freeing up spectrum for mobile broadband. This includes our efforts to remove regulatory barriers that preclude the use of spectrum for mobile services. To advance these goals, the commission runs open processes—the success of which relies on the active, timely, and full participation of all stakeholders. “LightSquared’s proposal to provide ground-based mobile service offered the potential to unleash new spectrum for mobile broadband and enhance competition. The commission clearly stated from the outset that harmful interference to GPS would not be permitted. This is why the Conditional Waiver Order issued by the commission’s International Bureau prohibited LightSquared from beginning commercial operations unless harmful interference issues were resolved. “NTIA, the federal agency that coordinates spectrum uses for the military and other federal government entities, has now concluded that there is no practical way to mitigate potential interference at this time. Consequently, the commission will not lift the prohibition on LightSquared. The International Bureau of the commission is proposing to (1) vacate the Conditional Waiver Order, and (2) suspend indefinitely LightSquared’s Ancillary Terrestrial Component authority to an extent consistent with the NTIA letter. A Public Notice seeking comment on NTIA’s conclusions and on these proposals will be released tomorrow (February 15, www.ntia.gov). “This proceeding has revealed challenges to maximizing the opportunities of mobile broadband for our economy. In particular, it has revealed challenges to removing regulatory barriers on spectrum that restrict use of that spectrum for mobile broadband. This includes receivers that pick up signals from spectrum uses in neighboring bands. There are very substantial costs to our economy and to consumers of preventing the use of this and other spectrum for mobile broadband. Congress, the FCC, other federal agencies, and private sector stakeholders must work together in a concerted effort to reduce regulatory barriers and free up spectrum for mobile broadband. Part of this effort should address receiver performance to help ensure the most efficient use of all spectrum to drive our economy and best serve American consumers.” FCC Announces Connect America Fund to Help Expand Broadband The Federal Communications Commission has released what it calls “comprehensive reforms to expand access to high-speed internet and voice services nationwide and benefit consumers by accelerating deployment of modern communications networks.” Adopted unanimously by the commissioners in October, the overhaul transforms the FCC’s universal service and intercarrier compensations systems into a new Connect America Fund, or CAF, which the agency claims is “the most significant policy step ever taken to connect all Americans to broadband.” The following is from an FCC media release on the subject: The CAF—with an annual budget set at no more than $4.5 billion, the same as the current universal service funding level—is expected to help connect 7 million Americans to high-speed internet and voice in rural America over the next six years, generating approximately 500,000 jobs and $50 billion in economic growth over this period. Main Street businesses across the country will benefit from the opportunity to sell to new customers throughout the U.S. The order adopted by the FCC recognizes the growing importance of mobile broadband and makes it an independent universal service objective for the first time. Dedicated support to expand mobile broadband nationwide to tens of thousands of road miles where millions of Americans live, work, and travel will be provided through a new Mobility Fund. The order also phases down antiquated, opaque, regulated charges for the exchange of voice traffic among carriers (known as intercarrier compensation) and transitions to a simplified, uniform “bill-and-keep” framework, which removes hidden subsidies on consumers’ bills, increases efficiency, and eliminates impediments to the deployment of modern networks. Intercarrier compensation reform will provide benefits to all Americans through improved service and News Briefs News Briefs continued on page 10
PCCA Journal|1st Quarter 2012 10 News Briefs Continued from page 9 lower costs. The Connect America Fund will put America on the path to universal broadband and advanced mobile coverage without increasing costs. By eliminating waste and targeting support where it is most needed, these reforms keep universal service funding on a firm budget, and they will ensure rigorous accountability for fund recipients. Broadband Delivers Strongest Growth Since 2009 Latest broadband and IPTV figures published by the Broadband Forum show a significant surge in worldwide growth in Q3 2011, with more new subscribers added in the quarter than at any time since early 2009. The figures also point to the growing importance of fiber as FTTH and hybrid FTTx deployments increase. Overall broadband growth during the quarter, according to figures prepared for the Broadband Forum by Point Topic (www.point-topic.com), is estimated at 17.4 million lines, bringing the global total to 581.3 million, a quarterly increase of 3.08 percent and an annual growth rate of 12.89 percent. “These are very healthy figures for Q3, and they demonstrate the ongoing strength of the broadband market,” said Broadband Forum CEO Robin Mersh. The figures show that FTTx is now gaining ground on more traditional technologies. DSL continues to be the most dominant technology, adding more lines than any other in Q3. However in percentage terms, both FTTH and FTTx/ hybrid technologies showed the largest growth with more than 8 percent overall, compared to 2.2 percent for cable modems and 2 percent for DSL. FTTx added just under 19 million lines in Q3 2011; this is more than double the number in the same period last year, and it continues to accelerate. This means that market share for fiber technologies, now at 16 percent, is fast catching up with cable’s 19.5 percent. “Hybrid FTTx will be where the action is over the next few years,” Point Topic CEO Oliver Johnson said. “Consumers are showing signs of being ready to pay for faster connections, and the hybrid solution set is a cost-effective way of getting relatively high speeds to them.” With a rise of almost 1.5 percent in the year, the proportion of broadband subscribers in Asia continues to increase. Results from other regions were more muted, although both Europe and the Middle East & Africa returned better numbers compared to the same period in 2011. The Americas also performed better in Q3 than Q2, with overall net additions in subscriber lines rising by 309,518. The National Broadband Map Goes Mobile At the end of January, the National Telecommunications and Information Administration (NTIA) announced a new feature of the National Broadband Map that will make it easier to use on a mobile device. The new feature allows users to more easily search broadband availability, summarize and rank data, and view a map of community anchor institutions, all optimized for their mobile device. The mobile browser version of the National Broadband Map is designed to provide a clean, intuitive experience on the screen size of a smartphone. Users swipe across panels of information and can always access additional information by sliding the footer panel up. A sharing panel is also available at the top of each page. Users can search for local broadband data with their smart phones’ GPS capabilities, if available. Traditional search is also supported, and the results are presented in a new format for mobile devices: in search results, just tap on a broadband provider to see further details and to access the NTIA’s crowdsource voting links. The Community Anchor Institutions map is the first map the NTIA is deploying for a mobile environment. Tap “Search” to enter an address and find the 25 closest facilities. The map will zoom to the request location, and each point will offer information about the facility and any known broadband service details. Watch for additional maps to be included in the future. To use the mobile interface, visit www.broadbandmap.gov with a mobile device, and the interface will appear automatically. Links to the complete desktop version are always available on the page footer. Regulatory Policy Limits Growth of Competitive Electricity Markets Significant changes in the regulatory structure of the 125-yearold electric utility industry have allowed for competitive sales of electricity by a new set of restructured retail power sellers and service providers. As a result, the past decade has seen a steady increase in commercial and industrial customers that can purchase electricity from sellers other than their incumbent utility. Since the California power crisis a decade ago, though, no additional state has opened its market to competitive providers. In fact, several states and regulators have imposed limits and financial requirements as well as increased their scrutiny of competitive players, with the
PCCA Journal|1st Quarter 2012 11 goal of protecting consumers. According to a recent report from Pike Research, the competitive market is poised for further growth in the coming decade, as competitive electricity purchases will nearly double from $29.4 billion in 2009 to $55.9 billion by 2020. Regulatory policy, however, remains the single biggest limiting factor on the development of an open and competitive market for electricity supplies to commercial and industrial customers. “Even though some 20 jurisdictions have enacted restructuring laws and policies designed to open their electricity market to new competitors, only about a dozen states allow for full-scale access to competitive markets for all customers,” said Pike’s Vice President of Research Bob Gohn. “Even in these states, laws and regulations tend to impose costs that are meant to ensure that expenses caused by the departure of other customers to competitive suppliers are not passed on to customers who remain with incumbent providers.” A decade after suspending new retail competition in the wake of the power crisis, California has begun opening the door slightly to further access to competitive providers in regulated utility territories. Because the Californian market is so large, this will have a significant impact on both the total national market and other states’ general perception of how much pent-up demand there is for competitive supplies. There are no indications that states that have previously avoided restructuring have intentions to reexamine their policies. However, several other states that have frozen their efforts may restore competitive options for larger customers. In particular, Arizona and Michigan represent strong potential markets for competitive procurement. In general, increases in market activity will take place over the next five years in states that already have favorable policies and in the 2015-20 period for areas that still need to reexamine their policies. Pike Research’s report, “Corporate and Institutional Procurement of Electricity,” examines the critical role that electricity plays in commercial and industrial operations, explores the motivations for seeking non-utility and green power among a variety of business types, and identifies existing policies that promote competition as well as barriers that may inhibit further access to competitively priced power. The report includes profiles of key industry players and forecasts for the News Briefs continued on page 12 CableCon® One-Step Installation of Cable and Conduit CableCon® Cable-In-Conduit www.duraline.com 0ARKSIDE $R 3UITE s +NOXVILLE 4. s s ,ISTED TO 5, s 0RE INSTALL 3INGLE OR -ULTIPLE #ABLES s #USTOMIZE #ONDUIT 3IZE #OLOR AND 3TRIPE s $ELIVERED IN A #ONTINUOUS ,ENGTH ON A 2EEL s ($0% #ONDUIT IS &LEXIBLE ,IGHTWEIGHT FOR %ASY )NSTALLATIONS
PCCA Journal|1st Quarter 2012 12 News Briefs Continued from page 11 competitive electricity market through 2020. An executive summary is available at www.pikeresearch.com. FERC Issues First Pilot License for Tidal Power Project in New York The Federal Energy Regulatory Commission (FERC) recently issued its first pilot project license for a tidal energy project located in New York City’s East River. The project, owned by Verdant Power and known as the Roosevelt Island Tidal Energy (RITE) Project, is 1,050 kilowatts and uses the East River’s natural tidal currents to generate electricity. Turbine generator units are mounted on the riverbed and capture energy from the tidal flow. The pilot license issued to Verdant Power is for 10 years. “Issuing a pilot license for an innovative technology is a major step in the effort to help our country meet our renewable energy goals,” FERC Chairman Jon Wellinghoff said. “FERC’s pilot process is doing what it should: allow for exploration of new renewable technologies while protecting the environment.” FERC developed the pilot license process in 2008 to allow developers to test new hydrokinetic technologies, to determine appropriate sites for these technologies, and to confirm the technologies’ environmental effects without compromising FERC’s oversight. Projects eligible for a pilot license must be (1) small; (2) short term; (3) located in an environmentally non-sensitive area; (4) removable and able to be shut down on short notice; (5) removed, with the site restored, before the end of the license term unless the licensee obtains a new license; and (6) initiated by a draft application with appropriate environmental analysis. FERC has seen rising interest in the possibility of developing hydrokinetic projects. FERC has issued 100 preliminary permits to study the feasibility of developing a specific project. Another nine entities are in the pre-filing stages of developing license applications, and three entities have filed license applications. USDA Announces Funding for Two Renewable Energy Programs Agriculture Secretary Tom Vilsack on February 3 announced the availability of FY 2012 funds for two key programs to encourage the use of renewable biomass and production of advanced biofuels. About $25 million will be made available through each program. The Repowering Assistance Program provides approximately $25 million in funding to biorefineries that have been in existence on or before June 18, 2008. The purpose of the program is to provide a financial incentive to biorefineries to use renewable biomass in place of fossil fuels used to produce heat or power. By providing this assistance, USDA is helping these facilities install new systems that use renewable biomass. The amount of the payment will be based on the cost effectiveness of the renewable biomass system and the percentage reduction in fossil fuels used by that biorefinery. The maximum amount an individual biorefinery can receive under the notice is 50 percent of total eligible project costs up to a maximum of $10 million. Eligible costs must be related to construction or repowering improvements, such as engineering design, equipment installation, and professional fees. The application deadline to receive funds for fiscal year 2012 is June 1, 2012. AWEA Hails Council on Jobs and Competitiveness Endorsement of Production Tax Credit American Wind Energy Association CEO Denise Bode recently applauded the President’s Council on Jobs and Competitiveness Road Map to Renewal report’s endorsement of extending the Production Tax Credit for wind energy, which is the top legislative goal of the U.S. wind industry, to keep Americans working in wind energy. The jobs council’s report recommends that, “Making the R&D tax credit permanent and extending production tax credits will also promote the type of innovation and investment America needs to diversify its generation portfolio and prepare for rising levels of energy demand.” “This endorsement of an extension for wind energy’s key Production Tax Credit (PTC) is yet another indication of how vital wind power has become as a source of American jobs and how important fast action on the PTC is to keeping this economic success story going,” Bode said. “Business leaders such as the members of the President’s Council on Jobs and Competitiveness recognize that wind power has installed more than a third of all new electric generation in recent years and has created one of America’s fastest growing manufacturing sectors. With a stable PTC, the wind industry is poised to grow to almost 100,000 jobs four years from now and stay on track to support 500,000 American jobs by 2030, as projected during the George W. Bush administration.”
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PCCA Journal|1st Quarter 2012 15 When contractors speak of their success, they rarely mention ethics policies, though ethics has become a defining issue for the design and construction industry. Driven in part by regulatory pressure, ethics programs are gaining prominence within firms whose leadership has made it a priority, and further throughout the industry, supported by associations like the Construction Industry Ethics and Compliance Initiative (CIECI) and the Associated General Contractors of America (AGC). Adhering to Federal Acquisition Regulation (FAR) is only a small part of instituting a formal ethics program. (See sidebar explaining FAR on page 22.) Breathing life into a written program so that it permeates the culture of a company is the true challenge and test of an effective ethics program and requires superb leadership. The firms that have already made a commitment to building a vibrant ethical culture have taken great steps to counter negative perceptions of the industry. They have also paved the way for others to create formal ethics programs, and in doing so invest in their own long-term survival and vitality. To date, little research has focused on ethical practices within the design and construction industry, though we know the costs of unethical behavior are significant. FMI’s 2004 ethics survey of individuals within the construction industry estimated a loss of between $5,000 and $50,000 per million dollars spent on a project due to unethical behavior. FMI has conducted preliminary research to explore what motivates architectural, engineering, and construction (AEC) firms to invest in ethics programs and how they facilitate awareness and enforcement of ethics policies. Members of the CIECI and clients of FMI spoke about their experiences piloting ethics and compliance programs, the result of which is this article, designed to isolate best practices for developing an ethical culture. Why Ethics Matter The AEC industry is grappling with ethics at present much in the same way it once did with mandatory safety standards. Some firms are ahead of the curve and have already instituted ethics training programs and internal audit mechanisms, while others are scoping out the interplay of legal requirements and cultural values. Increasingly stringent federal reporting standards and ongoing modification of FAR language burdens both federal contractors and public companies. The Federal Sentencing Guidelines and the 1996 Caremark case prompted many companies to develop compliance and ethics programs. (See sidebar for commentary on current requirements.) Private owners are also beginning to pay attention to ethics during selection of contractors; the government might have provided the nudge, but the entire industry has moved into an era in which ethical conduct is a non-negotiable. While the recession may have stalled the rapid development of ethics programs outside of federal work, sustained competition as the industry recovers will likely place an even greater emphasis on differentiation strategies, of which ethics is central. It is clear that the industry has an image problem. In 2004, FMI surveyed 270 owners, architects, construction managers, and contractors, and 61 percent of them thought the industry was “tainted” by unethical acts. Further, there is systemic failure within the industry to prevent unethical behavior: 84 percent reported that they had experienced, encountered, or observed construction industry-related acts or transactions in the past year that they would consider unethical. The 2010 Global Economic Crime Survey published by Price Waterhouse Coopers reported that 24 percent of engineering and construction (E&C) companies had experienced economic crime in the last three years, most commonly asset misappropriation, accounting fraud, and bribery and corruption (see Exhibit A). The findings of Price Waterhouse Coopers also showed that bribery and corruption are more prevalent in the E&C industry than the global industry standard: of all respondents Ethics Programs: Federal Imperative, Cultural Opportunity By Sabine Hoover Continued on page 16
PCCA Journal|1st Quarter 2012 16 who reported some form of economic crime, 13 percent were impacted by bribery and corruption. Within the E&C industry, that figure grew to 29 percent. Added to the significant financial costs of unethical behavior was an identifiable cost to employee morale: according to findings, morale within the E&C industry is impacted more greatly by fraud than in other industries (see Exhibit B). Clearly, there is cause for countering these issues, both at a human and company level. Firms are motivated to implement a formal ethics program by a variety of factors: • Company leadership might recognize a need to preserve integrity, honesty, fairness, and ethics in the company culture, especially after a period of growth. • A firm pursuing federal work must comply with FAR when competing for and fulfilling contracts. • A firm has experienced an ethical and/or legal breech and wishes to insure against a damaged reputation, heavy fines, penalties or lawsuits, and criminal action against employees. • Companies identify a vulnerability to unethical behavior through a risk assessment or find that there is no process or mechanism for handling reports from employees of wrongdoing. Unethical behavior inhibits healthy competition and impacts the financial bottom line and reputation of the industry. When one contractor takes shortcuts or performs work of poor quality, they put other contractors at a disadvantage and betray the owner’s trust. Ethical violations also have very real ramifications for safety and quality. For example, use of unspecified materials or shortcuts in procedure can compromise structural integrity in the long-term. There are ways to mitigate unethical behavior. The federal ethics mandate is part of a larger trend toward incorporating and improving corporate governance, risk management, and compliance. Bill Skelley, human resources director at ColonialWebb, believes an ethics program can offer tangible savings. “One thing you can measure in terms of cost is the number of employee complaints that go beyond our internal resolution processes and result in formal charges,” he said. “By providing training and counsel to our leaders, we have been able to diffuse potential litigation and the high cost associated with it.” Ethics programs provide a bridge between corporate culture and operational accountability. More than just added red tape, a well-managed ethics program provides an opportunity to maximize your firm’s performance. Making Ethics Tangible FMI spoke with 20 CEOs and compliance managers at leading design and construction firms to establish a picture of the ethics and compliance initiatives currently in practice. Some interviewees had been with the same firm for decades and were associated with long-established ethics programs, while others were shaping relatively new ethics programs. Worth noting is that all participants reported ongoing refinement of their corporate policies and practices regarding ethics and that all had fashioned the associated collateral (code of conduct, code of ethics, employee handbook, training modules, scenarios, etc.) through a largely internal process. Although many aspects of their programs are comparable, each firm developed its own program based on experience, research, and risk assessments and through trial and error. Following are a list of best practices FMI has extracted from the interviews. Ethics starts at the top; the leader must champion ethics policies, practices, and attitude. Mitch Haddon, president and CEO of ColonialWebb, implemented a values system and leadership playbook in 2005 after a period of company growth. The leadership playbook details exact behaviors managers should exhibit throughout the organization, a cue for the entire staff. “Common sense doesn’t appear ‘common’ until you have it written that way,” he explained. “The playbook for leadership behaviors creates the value system at all levels.” To counter the risk of ethics initiatives coming off as simply more bureaucracy, a demonstration of personal investment by leadership can invigorate staff. Granite Construction Inc. had its CEO introduce ethics training sessions to demonstrate that the initiative was important to the company. Doug Woods, president of DPR Construction, is blunt about the importance of leading by example: “If leadership is not committed to something, you know lip service will never make it happen.” Keep your ethics policy clear, and tie it back to key values. Factors like integrity, honesty, fairness, and ethics are often Ethics Programs Continued from page 15 Continued on page 18
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PCCA Journal|1st Quarter 2012 18 a part of company culture in multigenerational firms, but as a company grows, instilling those values into the culture becomes more difficult. Many firms interviewed went about drafting a formal ethics policy that incorporated long-standing values that employees already identified with. Peter Beaupre, president and COO of U.S. operations for PCL, explained the importance of a clear policy. “In the dozens of decisions that each person is making each day, there are many that are made on the spur of the moment by people at all levels of the organization,” he said. “When they are making those decisions, we want the whole notion of ethics—what is right and what is wrong—at the front of their minds.” Most firms use a combination of a code of conduct, ethics and compliance policy, and annual training to communicate the basics of their ethics program to employees. Get buy-in from everyone in the company. Mike Futch, vice president and chief counsel at Granite Construction Inc., emphasized the importance of driving corporate policy out into the field. “You’re always going to get resistance from people in operations because they feel it is a soft mandate from management, but you have to convince them that it is everything to do with the project,” he said. Sentencing guidelines also require continued involvement of the board of a company. “A well-documented board resolution adopting the program and appointing the compliance officer, periodic reporting by the compliance officer to the board or the audit committee with respect to compliance activities, and periodic board training on compliance demonstrate personal investment and buy-in at the highest level of the company,” Futch said. Self-report measures, on-site training, and field audits are good ways to promote awareness of ethics on the jobsite. Many companies get employees to sign paperwork to signal that they have read and comprehended the ethics policy or code of conduct. Dominick Servedio, chairman and CEO of STV, believes that “ethics are critical in our business, and the code of conduct is the foundation. You have to live what you preach. There has to be transparency at every level, and you have to educate employees before you ask them to sign on the dotted line.” An ethical culture starts with hiring the right people. Good corporate parenting is responsible for the strong ethical culture at Sundt. Check references and explore a potential hire’s values on a job application and during the interview. “As you grow and hire and expand, if you bring people from Company X, maybe they have the same training, but maybe they don’t,” said Sundt Chairman and CEO Doug Pruitt. “You’re the one setting an example.” New hires also offer a company an opportunity to build certain values into a generation. “If you already are an ethical company and you’re training the young people who join you in what is expected of them, then when they’re in management roles 20 years from now, it’s completely engrained,” said Jim Moynihan, chairman, president, and CEO of Balfour Beatty Infrastructure and Balfour Beatty Rail. Take the next step by implementing mentoring programs to foster a rich understanding of corporate accountability. Ethics can be taught. Many of the games played by various entities on a project can be circumvented by addressing them up front on the contract or through a partnering agreement. Setting down specific language around change order expectations can limit the latitude a project partner can take. Likewise, addressing ambiguous situations directly can help employees avoid making the wrong decision in the future. Practicing ethical rationalization through scenarios equips employees with the tools to avoid unethical behavior. “Sometimes there is no black and white answer,” said Doug Woods. “So you have discussions about those kinds of things and how you might want to be treated and how you might want to handle the situation.” Review, monitor and report ethics behavior. Regulations give federal contractors responsibility for discovering and reporting unethical practices within their firms. However, for firms choosing to implement ethics programs at their own behest, accountability is still an important component. Build multiple feedback mechanisms into your program; an open-door policy, hotline, self-report measures, risk assessments, 360-degree reviews, and internal audits are all worth considering. Many firms view their hotline as more of a helpline, offering employees the opportunity to ask questions and avoid unethical behavior, as well as report incidents. Update training in response to issues that crop up to insure the firm against repeated violations and to adapt training to the current areas of risk within your company. “It’s not just a written program; it’s a living program,” Mike Futch said. Take action on ethical violations. “We’ve had incidents that we reported to the Department of Justice,” recalled one counsel, “and they’ve been very appreciative, but at the same time they said, ‘You did the right thing because we certainly might have had that on our radar.’” If a report comes in through the hotline or any other avenue, ensure that you have the resources to duly investigate Ethics Programs Continued from page 16
PCCA Journal|1st Quarter 2012 19 and take action. Many firms start the process by interviewing involved parties or asking for written statements to determine the veracity of the claim. Perhaps the most important determination is whether and at what point to involve legal counsel. If a violation is determined to have occurred, internal or external legal counsel will typically handle the case to preserve attorney-client privilege. Granite Construction has established a strict Upjohn procedure (after the 1981 Supreme Court decision regarding company privilege) for initiating critical investigations. However, many incidents relate to human resources. Repercussions for violations of the ethics policy should be as clear as the policy itself: suspension, reprimand, or termination each have their place. “I learned from people I worked for in the past that nothing was tolerated,” said Jim Moynihan, “and it’s easier if you also don’t tolerate anything.” Forging the “Integrity Chain” Many of the firms FMI spoke to had established ethics policies or language well before it was a legal requirement to do so as part of the FAR. Others were contractors who do no federal work and have no punitive reason to make the significant investment in an ethics and compliance program, but they have put one in place. Given the current focus on overhead costs, what motivated firms to go the extra mile in designing training modules and online courses and assigning new roles and responsibilities for involved individuals at significant cost to the firm? Ralph James, Ph. D. and director of FMI, introduced the concept of the “integrity chain” in his 2002 book of the same name (see Exhibit C). “One way to understand the importance of the integrity chain is to break the chain,” James said, noting four consequences of poor integrity on business: • Increased investment in selling costs, • Increased risk, • Misunderstandings, and • Companies have to hide their past. The design and construction industry is based on trust and repeat clients so the costs of breaking the Continued on page 22
PCCA Journal|1st Quarter 2012 22 integrity chain, of being unethical, can build up quickly. Several firms stated that they cannot afford to not have an ethics program in place as both public and private owners are looking deeply at the reputation of bidders. “Do owners care?” Mark House, chief human resources officer at Beck Group, asked. “Yes. With the transparency of internet and newspapers, ethics are being reported on and paid attention to.” In a similar vein, Norm Holly, vice president of Kiewit Corporation, said, “It’s not profitable to be unethical. While our safety program has a significant cost associated with it, you can’t afford to have an unsafe project. Neither can we afford to have other than the highest degree of ethics, whatever the cost. Many owners are now going through more than a simple bidding process; they evaluate all aspects of our company and our reputation. Operating within the highest of ethical standards is not only the right way, but is sound business practice.” Many firms consider an effective ethics program crucial to their long-term survival. “It’s the right time in our industry for this to take off and take hold,” said Larry Cochran, vice president of quality and compliance at Kiewit. “It’s ever more challenging, but it’s absolutely the right thing to do and part of our sustainability in the long-term.” As firms look to joint ventures (JVs), strategic partnerships, and new clients to increase their backlog, integrity is coming to the fore. “Questionable ethical practices used to be far more prevalent than they are today,” said Tripp Ahern, president and CEO of J.F. Ahern Co. “I think other businesses have become more serious about the code of ethics within their firms.” Dom Servedio argued that ethics are especially important for culture and business at STV. “We rely a lot on JVs, and we have a diverse business, so we have to rely on customers, and it’s a small world.” Improving the Image of the Industry Spearheaded by Norm Holly and Mike Futch and with the support of the AGC, the CIECI was formally launched in April 2008, following a series of meetings and telephone conferences among legal counsel at several large firms. Formed in advance of, and independent to, the 2008 amendments to the FAR, the CIECI was primarily concerned with improving the image of the construction industry at large and investigating the way ethics and compliance issues fleck through operations and corporate governance. These leaders and others in the industry have recognized the importance of ethical issues for the continuance and success of their respective firms. They began their programs with no industry standard to refer to, locating resources within their own companies and building the rest from scratch. Their experiences will help others, and their work is setting the bar for standards of ethics programs in the design and construction industry. “This isn’t just an issue of compliance,” said FMI Senior Consultant Andrew Patron. “The industry is being incentivized to enrich its culture, to maximize operational efficiency and to develop the current generation into the ethical, informed leaders of tomorrow.” Those interviewed agreed that Ethics Programs Continued from page 19 Contractors turning to federal contracts for work will discover what many of the contractors we interviewed already know: there are many regulations with which to comply. The FAR document runs to 1,979 pages. Successful bidders on projects over $5 million must have a code of business ethics and conduct in place within 30 days of receipt of the award. That code must be available to all employees performing the contract, and the contractor must exercise “due diligence to prevent and detect criminal conduct.” The contractor must “otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.” Specifically, ethics and compliance programs must: • Establish standards and procedures to prevent and discover wrongdoing, • Provide for periodic risk assessments, • Ensure corrective measures are carried out, • Promote periodic communication and awareness of the ethics code, • Provide an effective training program for ethics education, and • Provide and advertise an anonymous hotline for reporting breaches of conduct. It is nearly impossible to establish an acceptable program within the 30-day and 90-day windows provided in the FAR, and guidelines do little to instruct firms on how to go about establishing and enforcing ethics programs. The penalties for violating federal code either under civil or criminal circumstances are steep, including fines, debarment from federal contracts, and imprisonment. However, an established, effective ethics program provides a strong defense against undetected incidents of unethical behavior and can reduce company liability to nil. Ethics Goes FAR in Federal Contracting
PCCA Journal|1st Quarter 2012 23 an ethical reputation was crucial for attracting young talent, keeping repeat clients, and pursuing strategic partnerships. If customers do not require bidders to have and abide by an ethics code to compete for projects, why would a contractor spend precious resources to create and maintain an ethical program? The short answer is that many do not. That does not necessarily make those companies unethical. It means they have yet to understand the business need to institute an ethics program. For firms looking at developing an ethics program, some questions to ask include: • What are your firm’s core values? • How is your firm’s culture reinforced with those in the field or with new recruits? • Would you be able to identify ethical breaches if they were occurring in your firm? • What lines of communication are open to employees with feedback? What anonymous avenues are there? • Have you changed on-boarding or annual training programs significantly following bouts of company growth? • How might ethics tie into existing corporate priorities like leadership, corporate governance, compliance, and risk management? • Have you conducted a risk assessment recently? Do you know where your company’s vulnerabilities are? • Looking at your key competitors and clients, can you afford not to have an ethics program? While ethics programs can be a stand-alone component of corporate training, FMI’s experience is that the greatest return on investment is realized where the program is embedded in the corporate strategy. A program that calls attention to company goals, clarifies the company’s direction, and issues clear directives for staff can be galvanizing, especially during times of thin backlog and low morale. The integrity chain established the connection between profit and integrity through the relationships that constitute the design and construction industry and result in repeat business and, ultimately, profitability. Now more than ever, your reputation impacts our bottom line. Now is the time to focus on ethics within your company. Sabine Hoover is an FMI research consultant, www.fminet.com. GDNFFDKIIDHFMM © Dy zDy ~ Y z \x{ ey Ywx{ _ww Fast, reliable and safe fiber optic cable installation begins with fiber optic cable pullers and blowers from Condux. Each product is backed by decades of cable installation experience, field-proven success and the most knowledgeable technical service personnel in the industry. Put the most advanced and trusted fiber optic cable installation equipment to work on your next project. Choose precision fiber optic cable pullers and blowers from Condux.
PCCA Journal|1st Quarter 2012 24 Safety Watch Unprotected trenches continue to be one of the most dangerous hazards in construction sites, especially in underground utility construction. Since 2003 well over 200 workers have died in cave-ins, and hundreds more have been seriously injured. With a little knowledge and proactive effort, we can eliminate the risks of working in and around trenches. According to the OSHA construction safety and health standards, a trench is a narrow excavation made below the surface of the ground in which the depth is greater than the width—the width not exceeding 15 feet. An excavation is any man-made cut, cavity, trench, or depression in the earth’s surface formed by earth removal. This can include excavations for anything from cellars to highways. Below are a few basic rules for working in a trench or excavation. • Keep heavy equipment away from trench edges. • Identify other sources that might affect trench stability. • Keep excavated soil (spoils) and other materials at least 2 feet from trench edges. • Know where underground utilities are located before digging. • Test for atmospheric hazards such as low oxygen, hazardous fumes, and toxic gases when greater than 4-feet deep. • Inspect trenches at the start of each shift. • Inspect trenches following a rainstorm or other water intrusion. • Do not work under suspended or raised loads and materials. • Inspect trenches after any occurrence that could have changed conditions in the trench. • Ensure that personnel wear high-visibility or other suitable clothing when exposed to vehicular traffic. Competent Person Required We also must remember that OSHA states that every trench needs to be inspected daily by a “competent person.” OSHA’s definition of a competent person is an individual who is capable of identifying existing and predictable hazards or working conditions that are hazardous, unsanitary, or dangerous to workers, soil types, and protective systems required, and who is authorized to take prompt corrective measures to eliminate these hazards and conditions. The information we have covered is just a starting point for trench and excavation safety. Employers and employees engaged in trench and excavation work should seek out formal classes on the subject. Phillip Metcalf is the safety director for Trawick Construction (A Quanta Services Company), an award-winning infrastructure contractor with projects across the United States. Trench and Excavation Safety By Phillip Metcalf Pelsue makes tents for every use under the sun – or snow. Designed to keep you protected when you need it most. Don’t get caught using anything less – visit PELSUE.COM or call 1-800-525-8460. Pelsue Tents & Shelters Keep You Warm and Protected.
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