Category Archives: General

P3 Is Riding the Wave in the Aloha State — Hawaii is Calling

P3 Options for Honolulu Rail Transit Project/HRTP

By: Doreen M. Zankowski, Esq.

The Aloha state will soon be calling for qualified P3 firms.  The $8.26 billion Honolulu Rapid Transit Project (HRTP) is moving again — no pun intended!   The HRTP, when finished, will be an automated, 20-mile elevated transit line, capable of moving 100,000 daily riders between Kapolei on the western side of O’ahu via the Honolulu International Airport and Pearl Harbor.  It will continue through downtown Honolulu and Ala Moana to Waikiki Beach and the University of Hawaii at Manoa.

On behalf of Honolulu Rail Transit, JLL conducted an assessment of potential alternative finance and delivery structures for the remaining elements of the HRTPJLL’s study concludes that public funding is necessary to bridge the $2 billion capital funding gap.  After analyzing many delivery options, including design-build-finance (DBF), design-build-finance-maintain (DBFM), design-bid-build, and design-build-finance-operate-maintain (DBFOM), and a P3 approach, the conclusion is that a design-build-finance-P3 is the way to go.  JLL has cautioned the public authority that the P3 approach will not, however, result in any project development investment, but it will cover the gap portion.  The private partner will provide gap financing during construction, and will be paid back after the rail system is operating and generating revenue.  The gap financing will give Honolulu Rail Transit greater cost and schedule certainty. Once the system is generating revenue, the private partner can be paid back with the appropriate interest costs.

The HRTP has been underway for some time — construction began in 2012.  The study by JLL was to identify the most efficient way to complete the project.  Namely, the $132 billion Section 4 “City Center Guideway and Stations” (4.2 miles across 8 stations from Kalihi to Ala Moana Center Station), the $315 million Pearl Highlands Transit Center, as well as fund and maintain a system-wide O&M program.

To date, construction of stations were bid by sections (there are 4 sections), using design-bid-build and design-build contracts.  The guideways were bid out by section using design-build contracts.  To date, sections 1-3 are under contract.   And, Ansaldo holds a 5-year Core Systems O&M contract.

According to JLL, capital costs currently are estimated at $8.2 billion — which includes a 65% increase since 2012.  The full rail line is scheduled to be opened in late 2025 — a greater than 7 year delay).

The Ohana (family) in the Aloha state recognize the limited P3 experience in the state, so putting together the best team is key.  Hats off to a great start with team members JLL, EY and HDR.

Is Your Business Prepared for New Tariffs on Aluminum and Steel Effective March 23?

On March 15, 2018, Presidential Proclamations 9704 (aluminum) and 9705 (steel) were published in the Federal Register Vol. 83. No. 51, at pages 11,619, etc., and pages 11,625, etc., respectively. As many are aware from continued coverage in the press, these proclamations are predicated upon national security concerns of the United States and the reports by the secretary of commerce under section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862). Mexico and Canada are excluded from the assessments for now in consideration of ongoing negotiations relating to the North American Free Trade Agreement (NAFTA).

A 10 percent ad valorem duty has been set for aluminum articles as defined in the proclamation relating to that category of product and a 25 percent ad valorem duty has been set for steel articles as defined in the second of these proclamations.

The effective date for the application of these duty rates is midnight Eastern time on March 23, 2018, with respect to goods entered into or withdrawn from warehouses for consumption on or after that date and time. These rates are in addition to any other duties, fees, exactions and charges applicable to such imported products. Such additional charges may include items such as harbor maintenance fees, merchandise processing fees and taxes, as appropriate.

Read the rest of this Alert on the Duane Morris website.

2018 Infrastructure Update: Congress is Diligently Working on a New Water Resources Bill

By:  Doreen M. Zankowski, Esq.

2018 Water Resources Development Act (WRDA):

Washington, D.C. – Senate and House Committees are diligently working on a new water resources bill to be filed in 2018 that would authorize federal funds for new Army Corps of Engineers flood protection, harbor and coastal dredging, and seaport improvement programs.  The Water Resources Development Act (WRDA) over the past four years (2014 and 2016) has authorized $14.7 billion in spending for approximately 64 projects.  WRDA-2018 should have appropriations exceeding the 2016 authorization of $10.3 billion.  All of this falls in line with President Trump’s stated campaign promise to focus on infrastructure and rebuild America. If the Democrats and Republicans can work together on WRDA-2018, expect funding for at least six projects:  two in Texas, two in Florida, and one each in Hawaii and New York.  The most significant project of the six is a coastal storm protection and environmental restoration projects from Sabine Pass to Galveston Bay in Texas.  The project’s estimated cost is $3.3 billion. 

It should be noted that Senate panel working on WRDA was told at a hearing on Capitol Hill that the Army Corps of Engineers construction backlog is an estimated $96 billion, which is only for current needs and does not include any future requirements.  What does all this mean?  It means that Federal spending should rise in 2018 and 2019 for much-needed infrastructure projects in the United States.  Continue reading 2018 Infrastructure Update: Congress is Diligently Working on a New Water Resources Bill

Pay to Play: America’s Infrastructure Program 2018 and Beyond

Ways to Pay for America’s Infrastructure Needs:  How will we pay for the future infrastructure bill that is heating up on Capitol Hill?  More importantly, bill or no bill, how will we pay for the infrastructure needs of the United States?  In its 2017 Report Card, the American Association of Civil Engineers (ASCE) estimated that the U.S. needed to invest $4.59 trillion in its infrastructure between right now and 2027.  ASCE estimated that Public Private Partnership (P3) programs will only fund 10-15% of America’s infrastructure needs.  This blogger believes that the 10-15% must and will be increased to 40-50% for using P3 delivery methods, otherwise our infrastructure will continue to crumble. 

Currently, the major funding sources on the table are: direct appropriation by the Federal Government; P3 programs; National Infrastructure Bank; Move America Bonds, Tax Credits; Tax Repatriation; Carbon Tax; and Sale of Government Loans.  On a more micro-level, there has been talk of a gas-tax hike, but will that generate enough revenue to fund the ever-growing need to build and replace America’s infrastructure needs.  I dare to say, the gas-tax won’t provide enough fire to fuel this engine.  Continue reading Pay to Play: America’s Infrastructure Program 2018 and Beyond

Careful: That Flow-Down Clause is Loaded (or, “How Incorporation by Reference” Can Leave Marks in Unintended Places)

We all do it. We all use multipart agreements, or structure transactions where multiple parties are agreeing to the same set of terms and conditions, or seek to bind remote parties to a unified set of obligations, because it makes sense to do that from any number of perspectives. In construction, the practice has existed beyond memory: use of “incorporation by reference” or “flow-down” clauses to impose consistent contractual obligations down the chain of privity is so common as to be remarkable only in its absence.  When done lazily, however, problems can result, particularly in the areas of dispute resolution, as illustrated by recent court decisions concerning arbitration clauses that were “incorporated by reference”.

Continue reading Careful: That Flow-Down Clause is Loaded (or, “How Incorporation by Reference” Can Leave Marks in Unintended Places)

Massachusetts Pay Equity Law: Don’t Ask, Don’t Ask… (or, This Is Not Your Father’s Job Interview)

On August 1, 2016, Massachusetts Governor Charlie Baker signed “An Act to Establish Pay Equity in the Commonwealth,” a bipartisan bill which outlaws gender-based wage discrimination. Beyond the obvious, this law (which takes effect July 1, 2018) has significant ramifications for employers in Massachusetts, including those in the construction industry.  Continue reading Massachusetts Pay Equity Law: Don’t Ask, Don’t Ask… (or, This Is Not Your Father’s Job Interview)

New York Governor Vetoes Public Contract Notice Bill Requiring Prejudice Before Forfeiture

One of our previous alerts provided notice of a bill passed by the New York State legislature requiring any contract awarded for public work include a provision that the contractor’s failure to give a notice within 180 days of the time prescribed in the contract would not invalidate any claim unless the public entity could demonstrate that it was materially prejudiced by the failure to provide notice. The new year, however, brought news from Albany when it was learned that the Governor, Andrew Cuomo, vetoed the bill with a message that included the following justification:

Appropriate notice provisions in public works contracts permit public owners to manage projects more efficiently. They also ensure that information is promptly provided to stakeholders if necessary to evaluate a change order or to resolve a problem on a project.

The Governor further commented that such a bill would fundamentally change well-established law and eliminate a public owner’s ability to mitigate project delays, adhere to plan work schedules and – quoting here – “would require public owners to accept and pay for work that was unnecessary and otherwise unauthorized.” Throwing more gas on the fire, the memo in support of the veto further stated that, “[m]oreover, litigating whether a public owner has been materially prejudiced will undoubtedly lead to increased claims and costs. For these reasons, I am therefore constrained to veto this bill.”
The Governor, evidently in an attempt to placate the trade groups and other organizations in support of the bill as well as the majority of the legislature, suggested that the Council of Contracting Agencies conduct a review of the notice and “forfeiture” – his words – provisions and to issue a report with their proposed recommendations in September of this year. The committee purpose apparently is an attempt to create uniform notice provisions throughout the state public contracts. However, it does not appear that uniformity in notice provisions was the prime driver of the proposed bill but, rather, their forfeiture aspects.

New York Governor Issues Executive Order to Close Wage Gap In State Contracts

On January 9, 2017, New York Governor Andrew Cuomo signed Executive Order 162 requiring state agencies and authorities to include a provision in state contracts “requiring contractors to agree to include detailed workforce utilization reports, in addition to the equal employment opportunity information” that is currently required to be included in such reports. The new reports must contain the job title, salary and other data, including the gender, race, and ethnicity of each employee working on the state contract. If the contractor cannot identify the particular workers on the state contract, the report must then contain the job titles and salary data “of each employee in the contractor’s entire workforce.”

Executive Order 162 applies to “all State contracts, agreements, and procurements issued and executed on or after June 1, 2017.” The new reporting requirement applies to both contractors and subcontractors. Contractors and subcontractors will be required to report the information on a quarterly basis for all prime contracts with a value in excess of $25,000. Contractors with contracts of more than $100,000 must report monthly.

The New York State Department of Economic Development will set forth procedure in which the information will be reported. The New York State Department of Labor will analyze the data and make recommendations to eliminate any detected wage disparity.

Upon signing the Order Governor Cuomo stated: “At these stormy times of instability and confusion, New York must serve as a safe harbor for the progressive principles and social justice that made America.”

Executive Order 162 can be found here.

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and of the Duane Morris Cuba Business Group. Mr. Aquino focuses his practice on commercial litigation with a concentration in construction law, mechanics’ lien law and government procurement law. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

New York Construction Industry Welcomes New Agreement On Extension Of 421-A Tax Abatement Program

Almost a year after it expired, the Building and Construction Trades Council and the Real Estate Board of New York (REBNY) reached an agreement to restore the 421-a tax exemption program. The New York State legislature still has to approve the agreement.

The new agreement will require developers to pay construction workers an average hourly wage of $60 (including wages and benefits) for projects in Manhattan with over 300 units south of 96th Street. In Brooklyn and Queens, the average hourly rate for workers, including wages and benefits, will be $45, and the wage and benefit obligations will apply to buildings located in Community Boards 1 and 2 within one mile of the nearest waterfront bulkhead. Projects with 50 percent or more affordable apartments are excluded from the wage and benefits requirement.

The agreement will also extend the maximum time developers will pay zero in property tax with the 421-a program from 21 years to 35 years. In exchange, affordable apartments with rent limitations must remain that way an additional 5 years to 40 years.

To assure compliance with the wage and benefits obligation of the program, developers will have to hire independent monitors to audit certified payrolls. The independent monitors will certify to the New York City Department of Housing Preservation and Development within 120 days of the receipt of the final Certificate of Occupancy that the compulsory wages and benefits have been paid.

Under the new agreement, developers may opt out of the 421-a wage and benefits requirement by entering into a Project Labor Agreement (PLA). If a developer chooses to enter into a PLA, the developer can still take advantage of all other elements of the 421-a program.

“The deal reached today between these parties provides more affordability for tenants and fairer wages for workers than under the original proposal. While I would prefer even more affordability in the 421-a program, this agreement marks a major step forward for New Yorkers,” Governor Andrew Cuomo said in a statement.

Rob Speyer, chair of REBNY, said: “We are pleased to have reached an agreement that will permit the production of new rental housing in New York City, including a substantial share of affordable units, while also ensuring good wages for construction workers.”

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and of the Duane Morris Cuba Business Group. Mr. Aquino focuses his practice on commercial litigation with a concentration in construction law, mechanics’ lien law and government procurement law. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

 

Duane Morris’ Charles Fastenberg to Present Lorman Educational Services Webinar on “Understanding New York Public Contracts and Procurement Regulations”

Duane Morris special counsel Charles Fastenberg of the firm’s New York office will present the Lorman Educational Services webinar, “Understanding New York Public Contracts and Procurement Regulations,” on Thursday, October 6, 2016, from 1:00 p.m. to 2:30 p.m. (Eastern time). This webinar will provide insights for contractors and vendors so they are aware of unanticipated issues they may face when submitting bids for contracts.

For more information, please see the event posting on the Duane Morris website.