Curriculum Vitae
Charles R. McBride, C.P.A. License # 86128
5000 Nighthawk Way, Ocean Hills, CA 92056
Cell (805)402-1472
Fax (760)630-4849
Charles@McBride-CPA.com
Upon graduation from Southern Methodist University (summa cum laude) with an accounting degree in 1979, Mr. McBride joined the audit department of the international accounting firm Ernst & Ernst (now Ernst & Young). He later served as the Chief Financial Officer for three large general contracting companies before entering the consulting and litigation support field. He has 24 years of experience as a Big-four CPA, corporate financial executive, and consultant specializing in forensic accounting, litigation support services, and construction contract claims. He has broad experience in the construction, real estate, aviation, and manufacturing industries and his audit experience includes serving companies in many other industries.
In the construction industry, he has worked extensively in all facets of contractor operations and in litigation with both public works and private contracting issues. He has been responsible for the accounting on more than five hundred construction projects totalling over one billion dollars. He is experienced in understanding cost accounting systems and management reports that contractor executives use to run their businesses and in asking for pertinent documents that will lead to a determination of the facts in a given situation. As Chief Financial Officer, he had responsibility for financial reporting and preparing, analyzing, and evaluating estimates of cost to complete on construction contracts. In this capacity it was necessary to evaluate change orders and associated costs for impacts on contract profitability. Areas of expertise include:
· Managing corporate financial functions and cost systems
· Merger and acquisition due diligence
· Forensic accounting and investigations
· Preparing and evaluating estimates of cost to complete on contracts
· Managing corporate insurance programs, bonds and mechanic’s liens
· Fact finding and data gathering to prepare and evaluate construction claims
· Pricing change orders and claims in accordance with contract documents
· Equipment management and internal rate calculations for company owned fleet
· Treasury and cash management
· Computer system software selection for construction companies
· Real estate development project budgeting, financing, and cost management
· Preparing budgets and financial models
· Designing job cost systems to recognize change order work and improve the accuracy of cost data
· Designing internal controls and procedures to streamline operations
· Problem solving and negotiating
Litigation Support & Construction Claims Consulting Highlights
Examples of consulting assignments performed:
Worked with counsel in consulting capacity subject to attorney-client priveledge work product doctrine in evaluating certain issues after law enforcement officials confiscated records. Assisted counsel in a review of procedures and practices relating to bid preparation, post-bid budgeting and accounting issues, and a review of financial records and project costs. Performed random tests of change-order estimating and pricing procedures and summarized test records.
Worked with counsel for a large computer manufacturer involved in a qui tam lawsuit. Evaluated and investigated invoicing and contract compliance issues on several government hardware and software contracts covering a five year period.
Worked with counsel in marital dissolutions to value businesses and real estate assets using multiple valuations methods. Normalized earnings of properties and used capitalization rate assumptions to value apartment complexes.
Worked with a terminated partner involved in several different homebuilding and real estate partnership entities to review the books and records of each entity and determine what his payout should have been versus what he had actually received from the partnerships. Scheduled out property sales, financing costs, intercompany transactions, and project costs to arrive at proposed adjustments to the books for each entity.
Consulted with a public agency in evaluating prime and subcontractor’s claims on six different projects exceeding $50 million each. The claims ranged in value from $4 million to $26 million per project. Each of the six prime contracts involved several subcontractors. Each of the contractors claimed that the agency had failed to properly administer the work and pay for changed work due to design changes, delays and disruption costs. Conducted fact finding and reviews of the contractor’s bids, job cost and overhead records in addition to detailed analysis in order to quantify cost overruns and to calculate daily rates for site overhead and various other claimed items. After financial review was completed, worked as a member of claim settlement team.
Worked on behalf of a major international airport on a claim of approximately $10 Million. The contractor claimed defective design and differing site conditions had caused increased costs. Conducted financial fact finding after a non-binding arbitration that included an analysis of change orders previously paid and a detailed review of the contractor’s bid and cost records to confirm information to the agency before a settlement was paid. Prepared a detailed report and an alternative claim pricing method based on the analysis that was later used to negotiate a final settlement with the contractor.
Consulted with counsel on behalf of a public agency in a construction contract lawsuit exceeding $20 Million. The prime contractor and several subcontractors claimed that the design of the wastewater treatment facility project was incomplete and defective and that the agency had also delayed and disrupted the work through contract maladministration, which caused the prime and subcontractors to incur increased costs. The consulting work consisted of analyzing the contractor’s bids, reconciling the bids to the contractor’s original job cost budgets, time-phasing job costs and comparing actual costs incurred to job cost budgets at the detailed activity level. The analysis resulted in determining the areas of the project with the major areas of cost growth and then causation could be established by a claim analysis team which included engineering and scheduling experts. Evaluated contractor bid methods and cost control systems in addition to the agency’s handling of change order requests to determine where problems were caused by each party. Calculated site overhead rates for time-related costs to use in delay damage analysis.
Assisted a large east coast based general contractor in starting an operation in the western states. Responsibilities included installing and implementing accounting software, establishing accounting procedures, setting up job cost budgets, monitoring job costs and estimates of cost to complete, assisting with bids and setting up joint ventures.
Assisted counsel for a public agency that had terminated a contractor for convenience on one portion of the work while another portion of the work was already completed. This required that the contract value and contractor’s costs be analyzed and split between the terminated and non-terminated portions of the work under the difficult circumstances of litigation discovery. The contractor had kept his costs for the job as one whole contract so splitting the costs into two different pools would have been difficult even under the best of circumstances. Reviewed the projected profit or loss on both the partially completed portion of the contract and the completed portion of the contract after splitting the costs and revenue. Calculated loss ratio on the project as a whole and applied that ratio to costs incurred on the terminated portion. This loss adjustment was then used at trial to determine the agency’s position of how much the contractor was owed on the terminated portion of the work.
Consulted with counsel on behalf of a hospital in a $ 7 million construction claim dispute. The prime contractor and a large subcontractor claimed that a defective design, incorrect plans and improper inspection procedures had caused significantly increased costs. Reviewed the prime contractor and subcontractor’s financial and job cost records to determine if they supported the claim pricing methodology. Determined that the prime contractor had mispriced and overstated the claim while the subcontractor’s claim was properly priced and that the subcontractor’s surety would need to be in agreement with any settlement that was reached. This information was valuable to counsel in negotiating toward a settlement. Counsel kept the subcontractor’s settlement separate from the prime and required the surety and prime to approve the settlement which possibly resulted in avoiding a costly lawsuit with the surety company.
C.F.O. for a Commercial Building General Contractor / Developer
Responsible for turning around an accounting department that was in disarray and several months behind in processing. Created a plan and laid out objectives to accomplish the turnaround. Revised the job descriptions of all accounting personnel in order to better organize the department. Designed and implemented new procedures and systems to accomplish the overall objective of improving the department. Directed and managed all financial functions for this privately‑owned $100 million general building contractor and real estate development company. Responsibilities included:
· Interfacing with development partners and lenders
· Financial accounting and reporting
· Job cost accounting
· Investment management
· Bonding and mechanic’s liens
· Preparing budgets
· Hiring and managing staff
· Corporate financing
· Banking
· Corporate insurance program and employee benefits
· External audits
· Management information systems
· Preparing percentage of completion contract schedules for work-in-process
· Evaluating estimates of cost to complete on contracts
· Designing internal controls
Accomplishments included:
Designed and implemented systems for preliminary notice and lien release tracking for subcontractors and their material suppliers. This reduced costs and minimized the exposure to liabilities and legal problems that the company had previously been experiencing.
Established procedure to perform detailed analysis of cost to complete on construction contracts in progress. This alerted management to potential problems.
Reduced overtime in the accounting department by over 85% from previous years by rewriting the organizational responsibilities for each staff member and establishing accountability for each work item. Improved the morale and productivity of the staff without increasing the staff size.
Eliminated the problem of late billing to customers and late posting of liabilities which improved cash flow and the accuracy of job cost and financial accounting reports. Interest income quadrupled over the previous year due to the changes.
Designed and implemented a system to improve the process of obtaining customer approval for change orders. This improved the timeliness of billing the change orders to the customer and making the related payments to the subcontractor that had performed the work. The improvement of cash flow reduced the number of mechanic liens filed by subcontractors and their material suppliers.
C.F.O. for a Heavy & Highway General Contractor / Homebuilder
Responsible for directing and managing all financial functions for this $200 million group which included nine entities and more than nine hundred employees. Entities specialized in Heavy & Highway Construction, Earth Moving, Homebuilding, Quarry Mining, and Asphalt Production. Responsibilities included:
· Financial accounting and reporting
· Monitoring job cost to insure tight management of projects
· Preparing percentage of completion contract schedules
· Evaluating estimates of cost to complete on contracts
· Preparing and evaluating claims
· Equipment fleet management and internal rate calculations for rental to projects
· Hiring and managing staff
· Preparing budgets
· Asset management
· Corporate financing
· Banking and surety relationships
· External CPA and government agency audits (including U.S. Dept. Of Defense, Caltrans & U.S. Army Corps of Engineers)
· Management information systems
· Internal controls
· Credit and collections
· Employee benefits
Accomplishments included:
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Assisted in the acquisition and integration into operations of four construction companies. These acquisitions strengthened the company's profits and strategic market position in the Northern California market.
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Assisted in preparing several successful change orders and claims for additional compensation on contracts due to differing site conditions, right of way delays, defective specifications and other owner caused problems.
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Performed analysis and evaluated cost to complete on construction contracts for acquisition targets.
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Negotiated $25 million hybrid credit facility with General Electric Capital Corp. with no fees and below market interest rate.
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Chaired committee that selected and installed new accounting and management software in order to establish a more accurate and timely budgeting and cost management system along with improving equipment costing capabilities.
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Led the team that performed the implementation of the new software for the various entities that included data conversions, user training and transition planning in each business unit.
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Effectively supported the growth of the business from $90 to $200 million with minimal increase in staffing.
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Directed efforts to plan and implement a new corporate budgeting process aimed at improving profitability.
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Directed efforts to plan and implement a new job cost accounting system and procedures designed to recognize changes and more tightly manage the projects.
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Improved the accuracy of financial statements and reduced audit adjustments by 90% in first year as C.FO.
C.F.O. for a Heavy & Highway Contractor
Responsible for directing and managing all financial functions of this privately‑owned $40 million general contractor specializing in bridges, power plants, dams, and other infrastructure projects. Responsibilities included:
· Financial accounting and reporting
· Preparing estimates of cost to complete on contracts
· Assisting in bidding process on contracts
· Preparing initial job cost budgets from successful bids
· Preparing and evaluating claims for submission to project owners
· Equipment fleet management and internal rate calculations for rental to projects
· Preparing corporate budgets
· Hiring and managing staff
· Investment management
· Corporate finance
· Banking and surety relationships
· Corporate insurance program and employee benefits
· Bonds and mechanic’s liens
· External CPA and government agency audits
· Management information systems
· Internal controls
· Credit and collections
Accomplishments included:
Led team that planned and implemented relocation of equipment maintenance and material storage facility from Illinois to Wisconsin. Relocation resulted in reducing labor costs by $700,000 per year.
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Assisted in preparing several successful change orders and claims for additional compensation on contracts using the measured mile and other appropriate methods. Claims involved equipment cost for both marine and standard construction equipment, differing site conditions, delays, disruptions, defective specifications and other owner caused problems.
Negotiated a customized General Liability & Umbrella insurance program which cut insurance premium costs by over $400,000 per year during a tight liability insurance market cycle.
Directed the selection and installation of new accounting and management software. Managed the conversion, user training and transition process to the new software.
Improved financial statement accuracy and reduced audit adjustments.
Negotiated favorable real estate leases and purchases on behalf of the company.
Audit & Tax Accountant for Big 4 CPA Firm
Performed audits and worked on tax returns for companies in manufacturing, construction, defense contracting, and the oil and gas industry. The engagements included companies that were subject to the Securities Exchange Commission requirements.
Cost Accountant for an Aircraft Manufacturer
- Worked in product pricing of parts and components for bill of material and inventory pricing.
- Performed special research projects for the Controller and Division Manager.
- Ferried new airplanes to aircraft dealers throughout the country on weekends.
Education :
B.B.A. Accounting and Finance, Summa Cum Laude, Southern Methodist University (SMU)
Dallas, TX - 1979
Certified Public Accountant, 1981 to present
Professional Pilot Qualifications :
Multi-Engine Commercial and Instrument Rated Aircraft Pilot ‑ 1920 flight hours logged
FAA Certified Flight Instructor / Flight Instructor Instrument / Multi-Engine Instructor
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Articles Written
Construction Company Acquisitions
By Charles R. McBride, CPA
An investment in a closely held construction company is an extremely risky undertaking and therefore the expected return should be high compared to other investment alternatives.
The major acquirable asset in a construction company is the organizational structure and management.
The selling price for a construction company is often close to book value after all of the analysis has been done. A typical P/E ratio for a closely held construction company is 5 to 7 times "stabilized" earnings after tax, or a 15 to 20% after tax return on investment.
An investigation must be done to determine the level of gross margins on projects and their stability over time. Measure the profitability attained versus the riskiness of the candidate firm's projects and operations. Remember that the only tangible evidence of future earning power is the past earnings history of the acquisition target.
Acquisition Criteria
Compatibility with buyer's strategic planning goals
Consistent past and present profitability of seller's projects and operations
Evaluate percent complete and profitability of current work in progress
Quality of seller's existing management team
Reputation of the seller with owners, subcontractors, and suppliers
Field productivity and uniqueness of production methods used by seller
Price paid allows for adequate rate of return on investment for buyer
Geographic desirability of seller's projects and operations
Positive labor relations history
Working capital requirements
Potential customer base
Property and equipment appraisal
Competitive bid environment of seller
Valuation Methodology
Use a number of different valuation methods and assign a subjective weight to each method based on perceived importance and arrive at a final valuation amount by calculating the weighted average of the results of the different methods.
Method # 1
Weighted average of past earnings (for five years if available) – a weighting factor of five is placed on the most recent year's earnings and the weighting factor is reduced by one each year looking backward. This method places more weight on the more recent past as opposed to the more distant past as an indicator of future performance. The weighted average earnings are multiplied by the representative price earnings ratio to calculate the valuation.
Method # 2
Average earnings over the past five years – the average earnings over the past five years are multiplied by the selected price earnings ratio to arrive at the valuation.
Method # 3
Earnings from the most recent year only - multiply by the selected price earnings ratio to arrive at the valuation.
Method # 4
Asset based approach – adjust all assets and liabilities to their market value to arrive at a valuation for the company. Evaluation of work in progress is a major factor in this analysis.
A valuation summary compiles all of the valuation amounts along with weighting factors for each valuation technique. All the weighting factors are subjective in nature. Weighted totals are calculated in order to arrive at a final valuation figure for the acquisition target.
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