For Contractors, a Level Playing Field

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Goodman’s Money Game

This stories by Barbara Fox were published in U.S. 1 Newspaper on March 31, 1999. All rights reserved.

If and when interest rates start to rise, start to worry.

"We may be living in a fool’s paradise," says billionaire

financier George Soros. "We may now be in that boom phase

that makes us feel good, and eventually when the price is paid, it

will be too late."

Soros is interviewed by Adam Smith on a public television special,

"How to Survive and Prosper in the World Financial Crisis,"

to be aired on WNET on Friday, April 2, at 9 p.m.

Smith, a.k.a. George J.W. "Jerry" Goodman, will preview

that program at Princeton University’s Woodrow Wilson School on Thursday,

April 1, at 4:30 p.m., in Robertson Hall, Bowl 1. He will be joined

by Robert Hormats, vice chair of Goldman Sachs and former assistant

secretary of state for economic and business affairs and also senior

economic adviser to Henry Kissinger, Brent Scowcroft, and Zbigniew

Brzezinksi.

On the television program Goodman and cohost Linda O’Bryon,

executive editor of Nightly Business Report, investigate how global

ills might affect American business and/or create opportunities for

personal investments. They interview such power brokers and experts

as United States Secretary of the Treasury Robert Rubin; Paul

Krugman of MIT; Jeffrey Sachs of Harvard; Stanley Fischer

of the International Monetary Fund, and economic ministers from Malaysia,

Russia, Singapore, and Argentina. Also among the guests is Rocky Hill

resident Ron Hill, partner and strategist with Manhattan-based

Brown Brothers Harriman and Company.

A Harvard alumnus and a Rhodes scholar, Goodman was a portfolio manager

when he adopted the pseudonym of the 18th century economist and titled

one of his books "The Wealth of Nations." Other well-known

titles are "The Money Game," "Supermoney," and "Powers

of Mind." Goodman is the host and editor in chief of "Adam

Smith’s Money World," an Emmy-winning weekly PBS show that ran

from 1985 to 1998 and continues now as an occasional special. In 1990

the show had the distinction of being the only American public affairs

series to be regularly broadcast to the Soviet Union. Goodman is also

a founder of New York magazine, the founding editor of Institutional

Investor, and the husband of Sallie B. Goodman of Public Presentations

Inc.

As a television essayist on the economy, Goodman has seen his audience

grow from a limited circle of investors to an amazingly large crowd

swelled by the ranks of baby boomers buying mutual funds for their

retirement accounts. The investors, says Goodman in a telephone interview,

"have multiplied like rabbits — there are so many more of

them than there used to be."

The age of the new investing crowd could cause a potential problem.

Goodman’s book "The Money Game" gave both an historical and

a psychological perspective on the market, and he points out now that

"lack of historical memory can definitely lead you to euphoria

at the end of a long bull run."

This euphoria is particularly troubling when one-third of the world

— from South America to Asia — is floundering. These ills

briefly affected Wall Street in a period starting last July, when

the financial crisis became acute in Thailand and then spread. "One

country fell into hard straits, and then another, and even the American

market went into a temporary cardiac arrest," says Goodman, noting

that the Dow Jones Industrial Average dropped 20 percent in a matter

of weeks.

"The treasury secretary was saying this is a new phenomenon, the

first of the post cold war financial phenomenon, related to the globalization

of the world, computerization, and telecommunications and instantaneous

communication," says Goodman.

When Hill was interviewed for the special, he suggested that the average

investor should keep a sharp lookout for rising interest rates. "We

have been floating on the sea of liquidity," explains Goodman.

"Central banks were afraid that the world would tip into a very

deep depression, and not just our country but 37 different countries

cut interest rates. That creates a lot of money."

The result of lower interest rates is that more money is available

than the various economies of the world can use. "A lot of this

flow goes into securities markets. If this money begins to evaporate

— if the interest rates start to tick up, then the party is over."

"Ironically, the end of the crisis is the possible beginning of

trouble for markets," says Goodman. It’s one of those economic

truths that is counter-intuitive: "If the economy is doing well

— so well that you have drained the money out — then the markets

will go down even as the economy booms and the money will go into

the real world."

— Barbara Fox

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For Contractors, a Level Playing Field

Builders know that the "set-aside" provisions

for affirmative action in the construction industry are churning.

For many years, any federal construction contract required from 10

to 17 percent of the work to be done by a "disadvantaged"

subcontractor, a firm owned by a minority person, a woman, or even

just a small company.

But because those old government guidelines for "set-aside"

contracts have been struck down in recent court decisions, it’s getting

to be a whole new ball game. The government is replacing ethnic, sexual,

and racial qualifiers with economic standards. Now gross sales or

net worth will be determining factor for certifying an individual

or a business as disadvantaged.

And even though progress has been made, construction is still very

much an "old boy network" industry. "If there aren’t some

incentives to open this up to new players then you get a closed construction

society," says Bill Brooks, director of New Jersey operations

for the Regional Alliance for Small Contractors. His clients range

from the small and minority contracting organizations, to government

agencies, to mega construction firms.

"The Regional Alliance has a wide spectrum of clients, many minority

and women-owned firms whom we try to assist in a very difficult marketplace,"

says Brooks. "I also have government clients who are struggling

to create a level playing field for all businesses, including minority-owned,

and trying to hold onto these programs when they see the challenges."

Yes, these programs are still needed. "If I thought that all the

discrimination had come to an end, I suppose I could be 100 percent

in favor of neutrality in these programs. That simply is not the case,"

says Brooks, who is an African-American.

Brooks focuses on performance rather than a simple formula based on

quotas. "We assist all small businesses to meet the performance

standards of the industry," says Brooks. "We have long focused

in this area because we never had faith that the preferential programs

would remain intact for long."

A native of Chester, Pennsylvania, Brooks served in the intelligence

branch of the Air Force in the early ’60s, earned a business degree

from Temple, studied dispute resolution at Harvard, worked for INA,

Cigna, Penn Mutual, and Prudential, and joined the Regional Alliance

for Small Contractors in 1994. It is headquartered at the World Trade

Center and has an office at 150 West State Street in Trenton (609-392-5600).

The alliance offers some 32 training programs, each running 16 to

18 hours, around the state, and one starts at Mercer College’s James

Kerney Campus in Trenton on Wednesday, April 21, at 7 p.m. Tuition

for all eight two-hour workshops is $50, $25 for businesses located

in Mercer County. It is underwritten by the New Jersey Economic Development

Authority and the county. Anyone may register but do it soon because

the class is limited to 25 people; call 609-392-5600.

Topics range from marketing, contract law, and estimated,

to insurance and bonding, project management, and accounting principles.

Instructors include Patrick Guidotti of the state commerce department,

Nancy Myers of Qualified Women and Minorities in Construction,

Jack Sheak, an attorney with Sheak and Korzun, Greg Ryan

of Turner Construction, Lisa Post of Edward J. Post Company

Inc., Dan Anderson of Don Todd and Associates, Dennis Cornick

of Gilbane, Adam Mukeri of the New Jersey Economic Development

Authority, and Sy Henderson of Summit Bank.

The alliance also offers the Loaned Executive Assistance Program (LEAP),

which has 25 experienced professionals to troubleshoot specific management

or operational problems, helping contractors qualify for work and

providing preconstruction and on-site assistance to successful bidders.

A loan assistance program, Financing Small Contractors, helps prepare

applications for loans and bonds. "Through our participating banks,

sureties, and public lenders, contractors can receive working capital

at market rates," says Brooks. "Many loans have been approved,

and the aggregate value of bonds issued to small contractors exceeds

$50 million."

Another resource: the Opportunities Center, which distributes news

of public and private construction contracts through RASCAL, a database

of information on small contractors provided to project owners, construction

managers, and developers.

Some contractors are gifted in trades and skills but don’t have a

background in running a business, and others have a lot of technical

knowledge but little actual construction experience. "Those two

client groups perform differently in the industry and require different

support services to survive," says Brooks, who offers these tips:

Construction is a relationship business. Relationships

are built over time and must be sustained.

Construction is a reciprocal business. "You may ask

of others but you should be willing to give, because others will expect

that of you. Prime constructors delight when subcontractors who find

jobs too large to bid on can direct them to new work," says Brooks.

Construction businesses survive on a good reputation.

"There is rough and tumble in this industry, but if your integrity

is damaged, you will find it a very tough row to hoe. Banks and surety

firms look closely at reputation."

Construction businesses achieve success through growth.

Brooks quotes data provided by Emmons Drive-based Construction Financial

Management Association: To do well firms need to be on a growth curve.

New rules for small disadvantaged businesses (SDBs) were issued

by the federal transportation department in January. In response to

a 1995 Supreme Court decision, the department’s affirmative action

program will be more narrowly tailored and are likely to be based

on monetary and geographic categories.

Potentially, individuals exceeding $750,000 in personal net worth

will be excluded from the set-aside program. Businesses can qualify

for the program if they meet certain size standards: Some white males

who are socially and economically disadvantaged will also be able

to participate as SDBs, particularly those from extremely rural areas

such as Appalachia.

The contractors are getting a break too. Under the new rules, no contractor

is penalized for failing to make a particular numerical target of

SDB subcontractors. The low bidder can get the contract if it can

be determined that he or she has tried to make a good faith effort

to bring on a disadvantaged business enterprise.

Brooks points out that many private firms have strong internal policies

on affirmative action that will survive any changes the government

might make.

"Whether you represent a construction company, a union, or a subcontractor,

if you adopt a policy position that artificially constrains competition,

you are asking for special privilege," says Brooks. "The prevailing

interest of government is to assure that there is free and open competition

in commerce and society."

— Barbara Fox


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