By a whopping 116-0 margin, the N.C. House of Representatives yesterday passed House Bill 1043 (“HB 1043”), aimed at bringing objectivity and uniformity to the prequalification of contractors on public construction projects in the Tar Heel State.
Don’t let yesterday’s vote tally deceive you, however; the legislation was not without its share of controversy.
Senator Neal Hunt, Chair, and Representative Dean Arp, House Co-Chair, helm the Purchase and Contract Study Committee, which is currently considering prequalification reform in North Carolina.
Statutes governing the procurement of public construction contracts are intended to promote honest and open bidding procedures, thereby placing interested contractors on an equal footing when competing for the work. A Pennsylvania court observed way back in 1908 that it is the duty of public awarding authorities “to see that the purposes aimed at by the laws shall be effected in good faith.”
Many contractors are skeptical that standard is being met in North Carolina.
As I’ve previously written, a number of prime contractors recently testified before the General Assembly’s Purchase and Contract Study Committee about how the statute permitting prequalification of bidders is often misused so that certain contractors are favored over others, particularly in the construction management at-risk context. The opportunity for misuse arises from the utter lack of any statutory direction for exercising the right to prequalify under existing law (click image below for larger version):
Thankfully, the Committee appears ready to recommend extensive and significant modifications to this bare-bones statute.
With last year’s passage of House Bill 857 in the North Carolina General Assembly, public contracting agencies in the Tar Heel State have no shortage of project delivery methods from which to choose. From design-bid-build to construction management at-risk, design-build, design-build bridging and P3s, our state statutes now authorize a veritable cornucopia of options for procuring public construction contracts.
But the following tweet from ENR’s Tom Sawyer earlier this week got me wondering: is the state overlooking another viable procurement option?
This past summer, the N.C. General Assembly passed and Governor McCrory signed into law groundbreaking legislation authorizing the use of design-build, design-build bridging and public-private partnerships in the delivery and financing of public construction projects in the state. The legislation is sure to alter North Carolina’s public procurement landscape drastically and influence the complexion of the state’s construction industry, particularly at the design and prime contractor levels.
Last Wednesday, October 23, I attended an excellent panel discussion covering key aspects of House Bill 857 (“HB 857”) sponsored by Carolinas AGC Foundation, AIA North Carolina (@AIA_NC), the Professional Engineers of NC (@ProfEngNC), United Minority Contractors of North Carolina and the American Council of Engineering Companies of North Carolina. Based on that discussion and my own review and analysis of the legislation, here are my top ten observations:
1. Now that North Carolina lawmakers have embraced public-private partnerships as a project delivery option for public works, what size projects might we see developed via P3? Well, if the $4.8 billion (yes, that’s billion, with a “b”) expansion of I-35E in Texas is any indication, the sky’s the limit. Here’s AGC SmartBrief editor Jennifer Hicks’ tweet about the big news from the Lone Star State:
Alright, faithful readers, it’s time to launch a new feature here at N.C. Construction Law, Policy & News, a little something I’m christening the “Construction Tweets of the Week.”
The construction industry at all levels — local, state and national — enjoys an increasingly vibrant presence on Twitter. I aim to showcase some of the voices that left an impression on me in the preceding week, as well as to facilitate ongoing discussion, whether in the Comments section of this blog and/or in the Twitterverse beyond.
You’ll note the tweets embedded here are fully interactive, with hotlinks to each Tweep’s profile, linked content and “Follow” button. The reply, retweet and “favorite” functions are also fully operational. Click early, click often, and become a part of the Construction Twitterati.
Without further ado, here are the Construction Tweets of the Week for the week ending Saturday, October 5, 2013:
1. Dave Simpson of CarolinasAGC blasted out this tweet about six not-to-be-missed, CAGC-sponsored seminars concerning the North Carolina Legislature’s recent adoption of the design-build and public-private partnership (“P3”) project delivery systems for public projects in North Carolina:
Filed under Mediation, Project Delivery Systems, Surety Law
Image by digitalart via FreeDigitalPhotos.net
I commend to your reading the current issue of NC Construction News, which includes this feature article on public-private partnerships (“PPPs” or “P3s”). As those who regularly follow this blog know, I’ve dedicated a fair amount of cyber-ink recently to the utilization of P3s in the construction of public facilities (particularly highways); after reading the linked article, my thinking on the subject has coalesced around this admittedly simplistic notion: P3s have enormous potential for good, for bad and for ugly, and it likely will be up to the General Assembly to determine which of those adjectives ultimately will apply to this unique project financing and delivery system.
Filed under Project Delivery Systems, State law, policy & news
A couple of my blog posts have mentioned the use of public-private partnerships (“PPPs”) as an alternative source of highway construction financing, including my February 6, 2012 story about NCDOT’s plans to widen I-95 (by the way, last Friday, the Federal Highway Administration gave tentative approval to tolling on I-95).
It remains unclear whether any private money might be utilized to finance the I-95 widening project. What is clear is that PPPs present a host of legal issues that all project participants (and their attorneys) would need to wrestle with should the NCDOT seek private money for I-95, or any other state highway project.
The purpose of this blawg post is to supply three resources for enhancing our collective understanding of the practical implications of PPP financing. A good place to start is this blog post from the blawg “Best Practices Construction Law,” authored by attorney Matthew J. DeVries, who practices in Virginia and Tennessee. Mr. DeVries links to the second resource you should consider, and that’s the AGC’s White Paper on Public-Private Partnerships. Contractors may want to jump to page 13 of the White Paper, which includes a chart summarizing how a PPP could shift typical risk allocations:
For additional depth, consult the National Cooperative Highway Research Program’s Major Legal Issues for Highway Public-Private Partnerships. It presents several representative case studies and concludes that several successful projects have given PPP participants the flexibility to select the optimal project delivery system for their particular project. Such flexibility, of course, could mean procurement outside the sealed bid process.
I’ll be keeping an eye on subsequent I-95 developments. Should the NCDOT begin exploring PPPs, it is hoped that these three resources will provide the contracting community with a foundation for understanding the legal ramifications of this alternative highway financing framework.
Construction attorneys learn early on that there are two forms of “construction management” – “pure” construction management, where the construction manager is an agent of the owner (“CM-Agency”); and construction management “at-risk,” where the construction manager is legally responsible for delivering the project on-time and on-budget (“CM At-Risk”). A CM-Agent helps the owner manage/make critical decisions about a project, but does not actually commit to delivering the project on-time or on-budget, and does not enter into subcontracts with trade contractors. Compare the CM At-Risk, who is “at risk” to the owner for the project schedule and cost and also “at risk” to the subcontractors for timely payments down the chain.
Seems simple enough. But what does this distinction actually mean in the real world? I recently stumbled upon this concise, helpful article from a representative of Holder Construction in Atlanta clarifying the practical differences between CM-Agency and CM At-Risk. The article emphasizes that CM-Agency is a method for managing a construction project, while CM At-Risk is a project delivery system (competing with other methods such as single prime, multi-prime, design-build, etc.). That distinction is critical, and demonstrates that comparing CM-Agency and CM At-Risk is a lot like comparing apples and oranges.
Assume you’re an owner in the early stages of planning a new project and assembling the project team. Maybe you don’t have in-house staff with construction management experience, or maybe (if you’re REALLY fortunate in these difficult times) you have multiple projects to manage but insufficient staff to handle all the decision-making and day-to-day responsibilities those projects entail. You might be in the market for a “pure” construction manager, someone who is in your corner and serving your interests exclusively throughout the project, including hiring the design team, evaluating what industry form contracts to utilize and managing day-to-day construction operations once the shovels hit the dirt.
The CM-Agent can also help you decide early on what project delivery method to utilize. And if the project is on a fast track schedule, requiring timely budgetary input from the builder during the design phase, the CM At-Risk project delivery system might be the CM-Agent’s recommendation. Unlike the CM-Agent, the CM At-Risk is not, from a project relationship perspective, entirely in the owner’s corner. Because it serves as the guarantor of the project’s schedule and budget, the relationship between the owner and the CM At-Risk, no matter how strong the team approach to the project may be, is inherently adversarial.
Viewed in light of this hypothetical, then, CM-Agency and CM At-Risk are not opposites. “CM-Agency v. CM At-Risk” is not an either-or proposition. Project owners should not think in terms of choosing between CM-Agency and CM At-Risk. Instead, and under the right set of circumstances, they can be complimentary project management and delivery tools, utilized together to ensure a successful project.
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Construction Law 2013, 2015-2019
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N.C. Construction Law, Policy & News 