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Staff | July 15, 2008

E-Verify to be Required of Federal Contractors

Following President Bush’s executive order requiring all federal contractors to use an electronic verification system to avoid employing illegal immigrants, the government published a proposed rule in the Federal Register on June 12. Comments from the public are accepted until Aug. 11 (see sidebar, “To Comment…”).

TO COMMENT...

To comment on the proposed regulation, submit written comments to the Federal Acquisition Regulation (FAR) Secretariat on or before Aug. 11. Comments may be submitted the following ways:

Online – Visit www.regulations.gov. Submit comments under the heading “Comment or Submission.” Use “FAR Case 2007–013.”

Fax: 202/501–4067. Cite FAR case 2007–013.

Mail: General Services Administration, Regulatory Secretariat (VPR), 1800 F Street, NW., Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405.
Cite FAR case 2007–013.

All comments received will be posted without change to www.regulations.gov, including any personal and/or business confidential information provided. For more information, contact Meredith Murphy, procurement analyst, at 202/208-6925.

The Department of Homeland Security Secretary Michael Chertoff designated E-Verify, the Web-based system, as the tool it will require contractors to use.

In a June state of immigration address, Chertoff said the administration hopes to implement the system by the end of the year.

The proposed rule requires that certain federal contracts (generally those over $3,000) contain a clause requiring the contractor and certain subcontractors use E-Verify to verify employment eligibility of all newly hired employees and all existing employees directly engaged in the federal work. The goal is to help federal agencies avoid contracting with companies that knowingly hire illegal workers. It also aims to protect U.S. workers by discouraging companies from hiring illegal immigrants, which may drive down wages, the rule says.

About 70,000 employers are currently enrolled in E-Verify, formerly known as Basic Pilot. From a federal standpoint, using the system is voluntary; however, 11 states have E-Verify requirements on the books. Arizona requires all businesses to use the system when making new hires; other states just require government contractors to do so.

DHS does not have an exact figure on how many businesses will be affected, but it may affect “hundreds of thousands, if not millions” of workers, Chertoff said.

One business that may be affected is Fox Run Nurseries, an Alexandria, Va.-based full-service landscape company. About 60 percent of Fox Run’s business comes from federal, state or local government contracts. Owner Lou Kobus says his company is not using E-Verify yet, but he’s prepared to move in that direction when it becomes a requirement. Fox Run has about 60 employees. “You won’t find the legitimate contractors are worried about this,” he says, adding he’s not concerned about the administrative side of it. “It’s just another cost of doing business.”

Senske Lawn & Tree Care/Senske Pest Control, a $19 million company in Kennewick, Wash., is another green industry firm with federal contracts.

Since learning of the executive order, the company’s human resources representative has begun the E-Verify registration process. “I really don’t see much impact on our hiring process,” says Gene Chafe, Senske’s federal contracts administrator. “We already require DMV records checks, drug screenings and criminal background checks. The E-Verify process seems pretty simple, and I wouldn’t anticipate the process to take more than a few minutes to complete.”

Though landscape contractors aren’t bracing for a big impact, the proposed rule has many critics. The American Civil Liberties Union is one of the most vocal in asserting the system will fuel the black market for identity theft.

“E-Verify or a similar electronic employment eligibility verification system will exacerbate, not decrease, the incidence of identity theft,” said Timothy Sparapani, ACLU’s senior legislative counsel, in a Congressional subcommittee hearing in early June. “Requiring each worker to present his or her identity to be granted permission to work will lead some desperate undocumented immigrants – and those who smuggle and illegally employ them – to steal the identities of work-eligible American workers. In short, the identities of work-eligible individuals will become commodities for borrowing and sale.”

Kobus agrees that the system isn’t foolproof. “You can find out if the Social Security Number is a good one, but that doesn’t tell you if the worker is legal or not,” he says.

Additionally, Kobus questions the government’s ability to enforce and administer such a requirement. On the other hand, he does say there may be some benefit: Leveling the playing field between “legitimate” companies and so-called “low-ballers.”

“Government contracts have been going for dirt cheap over the last two years,” he says, citing one multi-million contract where the lowest bidder came in 60 percent less than the second-lowest firm. Kobus says such companies must be paying illegal immigrants less than the required wages to bid this low. “Those are the things that are happening, so thank goodness those companies won’t be around for much longer.”

Tom Delaney, director of government affairs for the Professional Landcare Network, adds that such a rule may heat up the immigration debate once again. “But then again, McCain and Obama don’t even want to talk about immigration, so I guess we’ll see.” –Marisa Palmieri

Iowa’s Green Industry Exceeds $500M Mark

Iowa’s green industry has enjoyed 74 percent growth since 2004, a recent Iowa State University Extension survey reveals, making it the fastest growing segment of the state’s agriculture industry.

Since 2004, Iowa’s green industry went from $311.5 million in estimated value of sales and services to a $538.2 million economic impact, study the study, which was authored by extension specialists and ISU faculty Cynthia Haynes, Ann Marie VanDerZanden and Jeffery Iles. The researchers surveyed landscape contractors and designers, as well as arborists and garden center owners.

Most survey respondents expect their businesses to grow in employment, annual gross payroll and sales, and total annual expenses by 2010. Though the size and type of businesses varied, most had only one location, were family-owned and have been in business less than six years, Haynes says. “Respondents participating in our study were generally optimistic,” she points out.

“Those people and businesses that can afford to pay for [landscape] services have not scaled back their commitment to their properties,” agrees Bryan McGinness, president of Des Moines-based Write Outdoor Services. The company, which employs 116 employees, including 40 seasonal workers, forecasted more than 18 percent growth this year alone and plans to double in size by the year 2012. Growth will come organically and through continued mergers and acquisitions. The company purchased Des Moines-based Heard Gardens earlier this year.

Another landscape company who is reaping the benefits of Iowa’s growing green industry is Des Moines’ Perficut Lawn & Landscape. The company, which earned $3 million in 2002, is expecting $11 million this year, according to President Kory Ballard. Since that time, the company also has gone from 24 full-time and 45 seasonal employees to 40 full-time and 125 seasonal employees, as well as doubling its vehicles from approximately 34 in 2002 to 70 of its signature blue trucks today.

Though Perficut has enjoyed strong growth, it has felt some of the negative effects of rising business costs, including soaring gas prices – mainly, some unpaid bills for work performed, resulting in cash flow restrictions. Also, Ballard has seen some large developers make cutbacks or close their doors since 2007 and, on the residential side, he has seen some customers spend less and be more selective in the services they choose to purchase. On the commercial maintenance side, the excessive snow this winter resulted in property owners spending more than they budgeted, so they are making service cutbacks on their lawn care as a way to recoup costs, Ballard shares.

In fact, due to the residential construction slowdown, many Iowa landscape professionals have not raised prices “because they are scared of losing work,” Ballard says. “We are paying more for all of the products we use and have been unable to adjust the prices accordingly.”

Despite these challenges, Ballard says the company will still continue growth in the next few years “but at a much slower rate than in the past,” citing growth plans in the 5- to 10-percent range.

Though most Iowa landscape contractors see a reduction in new residential home building, they are seeing customers invest money in their existing residences instead, McGinness says. Both Perficut and Wright Outdoor Services report the phone is still ringing with clients requesting quotes. Even with Perficut’s initial $50 consulting fee to meet with design/build customers, only four potential clients declined because they didn’t want to pay the fee so far this year.

McGinness and Ballard plan to see the most growth come from their tree service divisions. In addition to that sector, McGinness says his enhancement profit center is enjoying strong growth, and Ballard plans to see a boost in recurring revenue from obtaining new maintenance clients after completing their installations.

Iowa’s green industry provides more than 11,000 jobs. Haynes and her colleagues plan to use this preliminary research to create further educational programming and professional development opportunities to address industry needs. Building the skills of the workforce will help position Iowa’s green industry for further expansion, she says.

Moreover, when it came to identifying factors that could limit business success, survey respondents pointed only to the availability of skilled labor and capital, which are also limitations in states with larger green industries than Iowa, Haynes points out. –Nicole Wisniewski

ValleyCrest Acquires $15 Million D.C. Firm

In June, ValleyCrest Cos. acquired Pine Ridge Landscaping, a $15.1 million full-service landscape firm based in Chantilly, Va. Terms of the transaction were not disclosed.

The deal was a good fit for a few reasons, says Roger Zino, pance. These include the firm’s leadership, commercial maintenance base, consistent growth and good operations. “They really run a tight ship,” Zino says. Pine Ridge former owners William Cumberland and Wayne Shiveley join ValleyCrest as regional vice presidents. The acquisition is the third this year for ValleyCrest, which ranks No. 2 on Lawn & Landscape’s Top 100 list with 2007 revenue of $935 million.

Zino says acquisition inquiries have picked up over the last two years. “The more acquisitions we do and as the leadership teams continue to work with ValleyCrest and enjoy the experience, the more the word gets out,” he says. Zino adds that economic uncertainty may increase sellers’ interest.

Though Zino declines to say how many more acquisitions are on the horizon for ValleyCrest, he says the company is always looking to partner with firms that have great leadership teams and share ValleyCrest’s values. Firms’ size, location and service mix are secondary factors, he says.

“It’s hard to predict in any given year how many of those come to bear,” Zino says. “We look at the opportunities as they become available and we welcome the exploratory discussions to find out if there is a good match. We don’t really have a target number.” –Marisa Palmieri

Six Causes of Pain at the Pump

The cost of filling up a truck, mower or other piece of equipment is enough to send chills down the spine of the average lawn care operator trying to stay in the black. The price of fuel seems to increase faster than lawns grow after a good spring rain. To the casual consumer or fleet operator, the price jumps seem to have no rhyme or reason. Yet behind the scenes, several factors are at play causing green industry professionals to consider adding or increasing fuel surcharges.

Here’s a look at six main reasons gas prices are climbing:

CRUDE OIL. The price change in a barrel of crude oil is constantly in the news because it is important for gas prices. For the most part, when the price of crude oil goes up, you can expect the price at the pump to increase as well, according to the U.S. Government Accountability Office (GAO). The U.S. buys crude oil in the world market, and the high world demand mixed with the shrinking total U.S. share of the market causes the price to skyrocket.

SUPPLY AND DEMAND. Not unlike the price of crude oil, the price of gasoline is partly determined by what’s needed and what’s available, the GAO says. Some regions’ prices are always higher than others because of their distance from the supply, according to the Energy Information Administration (EIA). It costs more to get the gasoline there from the ports, refineries and pipelines.

REGULATIONS. Federal and state requirements for gasoline have an impact on the cost of filling up a fleet. Rules are in place in some parts of the country that require gasoline to have additives designed to reduce carbon monoxide and smog when the fuel is burned. The extra step adds to the cost of producing the fuel. About a third of the U.S. gasoline supply is reformulated to meet regulations, the EIA says.

SEASONAL FACTORS. Events that occur at certain times of year, such as hurricanes, can stop production at refineries for a short time, temporarily decreasing the supply, the EIA says. This is why most regions of the country saw a jump in prices after Hurricane Katrina. Other seasonal events, such as summer vacations, up the demand for the fuel, causing higher prices.

TAXES. Federal, state and local government taxes accounted for 15 percent of the retail price of gas last year, the EIA says. There are 11 states that added their own tax on top of the federal one. But taxes have remained fairly steady in recent years, so they haven’t been a cause of the volatility, according to the GAO.

INDUSTRY CHANGES. More than 2,600 mergers occurred in the petroleum industry in the 1990s, the GAO reports. Mergers sometimes involve companies that compete with each other, leaving less competition in the end. This enables gas retail companies to charge more at the pump. – Heather Wood

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