Infrastructure & Public Works Blog

A Renaissance for Rail? President Obama Releases a New Plan for High-Speed Rail

mmead@hansonbridgett.com (Meghan Mead) — Thu, 21 May 2009 16:58:48 -0500

On April 16, 2009, President Obama unveiled his new High-Speed Rail Strategic Plan. Until this year, rail transportation has received less than three percent of all federal investment in intercity transportation infrastructure and the Northeast has the nation’s only high-speed rail corridor. In contrast, throughout the 20th century the United States has invested $1.8 trillion in our highway and aviation infrastructure. Now however, with oil prices climbing and mounting concern over climate change, investing in public infrastructure solely to support cars and planes in no longer sustainable. As President Obama’s Plan states, “a new approach is needed--one that responds to today’s economic, energy, and environmental challenges.” Railroads offer a solution as they can reduce pollution and congestion and efficiently transport people and goods between cities.

The chart below shows the relative advantages of air, rail, and highway transportation based on population density and distance between cities.

		Intercity Distance in Miles
		0-100	100-600	600-3000
Population Density	Light	1) Auto	1) Auto 2) Conventional Rail	1) Auto 2) Air
	Moderate	1) Auto 2) Commuter Rail	1) High-speed Rail 2) Auto	1) Auto 2) Air
	High	1) Commuter Rail 2) Auto	1) High-speed Rail 2) Air	1) Air

The Strategic Plan identifies ten potential high-speed rail corridors.

California (Bay Area, Sacramento, Los Angeles, San Diego)
Pacific Northwest (Eugene, Portland, Seattle, Vancouver, Tacoma)
South Central Corridor (Tulsa, Oklahoma City, Dallas/Fort Worth, San Antonio, Austin, Little Rock)
Gulf Coast Corridor (Houston, New Orleans, Mobile, Birmingham, Atlanta)
Chicago Hub Corridor (Chicago, Milwaukee, Cleveland, Toledo, Twin Cities, Kansas City, Detroit, St. Louis, Colombus, Louisville, Indianapolis, Cincinnati)
Florida Corridor (Orlando, Tampa, Miami)
Keystone Corridor (Philadelphia, Harrisburg, Pittsburg)
Southeast Corridor (Washington, Richmond, Raleigh, Charlotte, Atlanta, Macon, Savannah, Columbia, Jacksonville)
Empire Corridor (New York City, Albany, Buffalo)
Northern New England Corridor (Boston, Montreal, Portland, Springfield, New Haven, Albany)

The American Recovery and Reinvestment Act of 2009 (ARRA) appropriates $8 billion in funding for passenger railroads. Additionally, President Obama has promised a $5 billion commitment to high-speed rail over the next five years.

The Department of Transportation (DOT) has established three tracks for projects to receive ARRA funds. The first is for projects that are “shovel ready”, primarily intercity passenger rail projects and congestion reduction projects. The second track is for corridor development programs, a preliminary step for high-speed rail and intercity passenger rail projects. The third track is for planning activities, including the development of corridor plans. The DOT will issue guidance on the application process on June 17, 2009 and expects to begin awarding its first grants at the end of the summer.

Are public works bidding requirements in California really that restrictive?

dgehrig@hansonbridgett.com (David Gehrig) — Tue, 14 Apr 2009 14:10:37 -0500

In a word, yes. Most public agencies are required to award their public works construction projects to the lowest responsive, responsible bidder. Failure to comply with public bidding requirements can result in a legal ruling which can void the contract. However, there are also a variety of alternative project delivery methods (design-build, construction manager at-risk, job order contracting, public-private partnerships, lease lease-back etc.) that are available for select public agencies to use for qualifying projects. The difficulty is that the statutes which authorize these alternative project delivery methods are not organized in any logical fashion. I recently prepared a paper summarizing the main alternative project delivery methods available to public agencies in California, with a chart at the end that provides statutory references. The paper was included with the materials at the Integrated Project Delivery Seminar Series. In addition, the paper was included with the materials at the Lean in Public Sector Construction Projects Workshop and served as the basis for a presentation I gave on the topic. You can view a copy of the paper by clicking here.

DIR opinion solidifies "de minimis" exception to prevailing wages for private developers

dgehrig@hansonbridgett.com (David Gehrig) — Wed, 08 Apr 2009 09:55:50 -0500

The California Department of Industrial Relations recently published an opinion which solidifies the “de minimis” exception to prevailing wage laws for private developers which receive small amounts of public financial support for their projects. In Public Works Case No. 2008-37, the DIR responded to a request for a prevailing wage coverage determination initiated by the developer of a senior care facility in Elk Grove. As an incentive to build the facility, the city offered financial incentives in the form of reduced sewer impact fees (sewer credits) which totaled over $200,000. The DIR concluded that pursuant to Labor Code section 1720(c)(3), this amount was “de minimis” in relation to the overall project cost.

Ordinarily, construction projects in California which are paid for "in whole or in part out of public funds" are subject to prevailing wages. (See Labor Code section 1720(a)(1).) However, Labor Code section 1720(c)(3) creates an exception for “de minimis” public contributions as follows:

If the state or a political subdivision reimburses a private developer for costs that would normally be borne by the public, or provides directly or indirectly a public subsidy to a private development project that is de minimis in the context of the project, an otherwise private development project shall not thereby become subject to the requirements of this chapter.

In this opinion, the DIR concluded that the “total project costs” came to $18,207,335, meaning that the sewer credits represented only 1.1% of this total. Consistent with three prior opinions, the DIR concluded that a contribution of public funds in the amount of 1.1% fell within the de minimis exception. In fact, an earlier opinion concluded that the exception applied where the public contribution was 1.64% of the total project cost.

This opinion is welcome news for developers which might receive financial incentives from a public agency for a construction project. While public contributions of 1.64% or less are small in terms of the total project cost, they are nonetheless useful, particularly in this economic climate.

Federal Stimulus Bill Means Increased Infrastructure Spending Coming to the Bay Area

mmead@hansonbridgett.com (Meghan Mead) — Fri, 03 Apr 2009 11:30:24 -0500

While the recession has led to a drastic slowdown in the construction industry, the horizon looks brighter as the Bay Area preps for a welcome infusion of cash from the federal government. The money comes from the federal stimulus bill, the American Recovery and Reinvestment Act of 2009. During his campaign President Obama emphasized the need for increased infrastructure spending as a means to end the recession, increase public transportation, and improve America’s aging infrastructure. The stimulus bill makes good on his campaign promises, with approximately $50 billion dedicated to core infrastructure spending on bridges, roads, rail, and other transportation projects.

The Bay Area could receive up to $1.5 billion in funding from the federal stimulus bill. Major projects that could receive federal funds include the reconstruction of Doyle Drive, costing an estimated $1 billion, and the construction of the subterranean train station at San Francisco’s Transbay Terminal, with a price tag of about $490 million. The Bay Area Council Economic Institute is leading the effort in drafting a plan to maximize the federal money flowing to the Bay Area and ensure funding is allocated to high priority projects. For now, the federal money has or will come from three different sources:

The Metropolitan Transportation Commission (MTC) has already received and distributed $495 million from the federal stimulus package. MTC is the agency responsible for allocating funding to the numerous transportation agencies and authorities in the Bay Area, as well as lobbying the federal government on behalf of Bay Area transportation agencies. The money will be used for projects such as rehabilitating roads and rails and procuring new equipment for transportation agencies.

The Bay Area is likely to receive an additional $462 million from the State for projects that were originally supposed to be funded through a bond sale. However, the credit crisis, California’s reduced bond rating ( the lowest among all fifty states), and the massive budget deficit have all conspired to reduce the likelihood of receiving funding from the state for infrastructure projects. Currently, the state is looking at an $8 billion budget shortfall although some think that number could increase if the recession continues.

The Bay Area may also receive up to $450 million in discretionary funds from the California Department of Transportation (“DOT”) for Doyle Drive, San Francisco’s Transbay Terminal and/or other projects. The DOT has yet to issue the guidelines to receive discretionary funding; those are expected on May 18, 2009.

In a separate lobbying effort, California’s High Speed Rail Authority, whose high speed train will link San Diego, Los Angeles, Sacramento, and San Francisco, is optimistic that it will also receive some federal funding. California is the only state with a high speed rail that has been voter approved.

It is an exciting time for infrastructure development in the Bay Area. We will continue posting information on new developments, including DOT’s guidelines for its discretionary spending.

President Obama Signs Executive Order Authorizing Use of Project Labor Agreements for Some Federal Construction Contracts

jsherman@hansonbridgett.com (Julie Sherman) — Mon, 16 Mar 2009 19:00:25 -0500

On February 6, 2009, President Obama signed an Executive Order authorizing federal executive agencies to use project labor agreements on federal construction contracts with a total cost of $25 million or more. The Order is effective immediately, and the Federal Acquisition Regulatory Council has been instructed to take “whatever action is required” to implement the Order within 120 days of its issuance. The Order also repeals Executive Order 13202 issued by former President Bush in 2001, which forbade federal agencies and other recipients of federal funding to require contractors to sign union-only project labor agreements as a condition of performing work on federal projects.

The Order states that federal executive agencies, in awarding a contract in connection with a construction project costing $25 million or more, or obliging funds pursuant to such a contract, may, on a project-by-project basis:

[R]equire the use of a project labor agreement by a contractor where use of such agreement will (i) advance the Federal Government’s interest in achieving economy and efficiency in Federal procurement, producing labor-management stability, and ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters, and (ii) be consistent with law.

“Project labor agreement" is defined as a "pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project.” If a federal agency determines the use of a project labor agreement would satisfy these criteria, the agency may require that every contractor or subcontractor on the project agree to negotiate or become a party to a project labor agreement with one or more appropriate labor organizations.

The stated policy behind the Order is to "promote economy and efficiency in Federal procurement." If a project labor agreement is used, the agreement must:

(a) bind all contractors and subcontractors on the construction project through the inclusion of appropriate specifications in all relevant solicitation provisions and contract documents; (b) allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements; (c) contain guarantees against strikes, lockouts, and similar job disruptions; (d) set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the project labor agreement; (e) provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and (f) fully conform to all statutes, regulations, and Executive Orders.

The authority for project labor agreements may also expand further in the near term. resident Obama has instructed the Director of the Office of Management and Budget (in consultation with the Secretary of Labor and with other officials as appropriate) to provide recommendations within 180 days about whether broader use of project labor agreements, with respect to both construction projects undertaken under Federal contracts and construction projects receiving Federal financial assistance, would help to promote the economical, efficient, and timely completion of such projects.

The Executive Order does not require a federal executive agency to use a project labor agreement on any construction project. Nor does it preclude federal agency from using a project labor agreement in circumstances that are not covered by the Order, such as leasehold arrangements and projects receiving Federal financial assistance. The Order also does not require contractors and subcontractors to enter into a project labor agreement with any particular labor organization.

New guide for creating "grid neutral" schools in California

dgehrig@hansonbridgett.com (David Gehrig) — Wed, 31 Dec 2008 21:00:42 -0500

The California State & Consumer Services Agency recently released the first draft of a step-by-step guide to help California schools and community colleges cut energy costs through on-site electricity generation and become "grid neutral." The guide is entitled "Grid Neutral: Electrical Independence for California Schools and Community Colleges," and can be viewed here. In fact, the state's Department of General Services is seeking comments regarding the content of the guide, which can be emailed to this address: Theresa.Townsend@dgs.ca.gov.

The goal of creating grid neutral schools is to construct facilities that generate at least as much power as they consume. This requires a series of steps, including: 1) measuring existing electricity use and setting performance goals; 2) implementing energy efficiency and conservations measures to lower electricity use; 3) installing solar or wind systems to create electricity to meet remaining needs; and 4) monitoring electricity consumption and production. The solar or wind systems can be installed by private third parties pursuant to a power purchase agreement, which conveys tax benefits on the private party while providing the school with access to power at consistent rates which are potentially below market. For more information, see the State and Consumer Services Agency's press release and this excerpt from the guide.

California court upholds 50-year ground lease between public health care district and private health care provider, allowing construction of a new SF Bay Area hospital to proceed

soleary@hansonbridgett.com (Shawn O'Leary) — Mon, 22 Dec 2008 18:40:13 -0500

A recently published appellate case upholds a 50-year ground lease and related agreements between the Peninsula Health Care District (“District”) and the Mills-Peninsula Health Services (“MPHS”), which will allow the construction of a new hospital that complies with California’s stricter seismic standards. (See Peninsula Guardians, Inc. v. Peninsula Health Care District (2008) 168 Cal.App.4th 75.)

Plaintiff Peninsula Guardians, Inc. sued the District and MPHS alleging that a 50-year ground lease between the District and MPHS violated Health and Safety Code section 32126, and that the District had made illegal campaign expenditures in the course of obtaining voter approval of the arrangement. Health and Safety Code section 32126 limits the leasing authority of public health care districts, and states that “[n]o lease for the operation of an entire hospital shall run for a term in excess of 30 years.” Peninsula Guardians claimed that the 50-year ground lease violated that provision.

The trial court held that the District and MPHS did not violate the Health and Safety Code. “First, the express terms of the Ground Lease demonstrate that it is not a lease for the operation or maintenance of a hospital.” Instead, it is a ground lease that specifically excludes improvements, which improvements are owned by MPHS until the end of the ground lease term. “Second, the Definitive Agreements demonstrate that the Ground Lease does not involve a hospital ‘acquired or constructed’ by the District.” Peninsula Guardians had advanced an argument that the statutory lease restriction also applied to hospitals acquired or constructed by the District, but the appellate court noted that the agreements actually stated that “MPHS, not the District, ‘will design and build’ a new general acute care hospital on roughly 21 acres of land leased from the District.”

The appellate court affirmed the trial court’s ruling which dismissed the Health and Safety Code claims against the District and MPHS from the case. Other issues regarding campaign expenditures were remanded to the trial court for further consideration.

History of District’s Relationship with MPHS

In 1985, the District and MPHS each owned an acute care hospital serving residents of the San Francisco Bay Area Peninsula region. To improve service and efficiencies they agreed to merge the operation of the two hospitals, with the District leasing its existing hospital to MPHS from 1985 through 2015, at which time ownership would revert to the District.

Like most entities operating hospitals within the State of California, California’s adoption of stricter seismic standards for acute care hospitals required a re-evaluation of their arrangement. This was particularly the case when those parties determined that it made more sense to build a new hospital than retrofit the existing facility. The statutes addressing the stricter seismic standards can be found here.

A series of complex agreements were reached to allow MPHS to demolish the existing hospital and return the site to the District and to design, finance and build a new hospital, all at no cost to the District. The District would provide a 50-year ground lease of the District’s land to MPHS, that could be extended for an additional twenty-five year period. The District would receive rent of $1.5 million per year, adjusted every three years for inflation. The District imposed limitations on MPHS’ use of the property, although MPHS held ownership to the new hospital facility and associated improvements. Upon expiration of the ground lease the hospital automatically would become the property of the District, with certain compensation for “Post-Term Assets” specified in the ground lease.

The District sought approval of the voters in the Summer of 2006, and the voters accepted the proposed new agreement. Construction started soon thereafter, and is still ongoing. In fact, you can monitor the current state of construction of the new Mills-Peninsula Health Services Hospital by viewing the images posted here. If you would like to see a fast forward view of how this construction proceeded over time based on construction site photos apparently taken every day during construction, click on the “Time Lapse” button at the top center of the screen. It is worth a look!

Statutory Seismic Standards

As is discussed in various other publications, California’s new stricter seismic standards have forced parties involved in health care in California to take drastic measures. These measures often times require restructuring of existing arrangements that did not take these new standards into account. While complex, the ultimate arrangement that the District and MPHS were able to enter into ultimately passed judicial muster. Nonetheless, the statutory seismic standards create ongoing challenges for health care facilities in California, many of which continue to struggle with finding the best approach to compliance.

New design-build authority for cities, transit operators and Sonoma Valley Health Care District

dgehrig@hansonbridgett.com (David Gehrig) — Mon, 20 Oct 2008 19:30:34 -0500

Governor Schwarzenegger recently signed three bills which will expand the ability of cities, transit operators and the Sonoma Valley Health Care District to award projects on a design-build basis. Each of these agencies is generally constrained by public bidding requirements to award construction contracts separately from contracts for professional design services. These agencies will now have a greater ability to take advantage of a useful project delivery alternative for some projects. The three bills are summarized below:

AB 642, Cities: This bill will amend Public Contract Code section 20175.2 to expand the scope of existing design-build authority for cities in Solano and Yolo counties to all cities. As of January 1, 2009, all cities will be able to award construction contracts on a design-build basis for projects that are $1 million or less.

In addition, AB 642 also created a new Public Contract Code section 20193, which authorizes a pilot program for any “qualified entity” to award a project for a regional or local wastewater treatment facility, solid waste facility or water recycling facility on a design-build basis. The pilot program would only apply to 20 projects, each of which must exceed $2.5 million in value. Qualified entities include cities, counties, cities and counties and special districts.

AB 387, Transit Operators: This bill will amend Public Contract Code section 20209.7 to expand the scope of existing design-build authority for transit operators. Effective January 1, 2009, transit operators may now award contracts for the acquisition and installation of technology applications or surveillance equipment designed to enhance safety, disaster preparedness, and homeland security efforts on a design-build basis. Moreover, there is no cost threshold for these contracts, and transit operators may award them to the lowest responsible bidder or by using the best value method.

SB 1699, Sonoma County Health Care District: This bill will add a new section 32132.5 to the Health and Safety Code which authorizes the board of directors for the Sonoma County Health Care District to award contracts on a design-build basis. Section 32132.5 incorporates the existing design-build authority for counties set forth in Public Contract Code section 20133, which established a cost threshold of $2.5 million. Unfortunately, although efforts were made to have this legislation apply to all health care districts, the bill was ultimately truncated to apply only to Sonoma County Health Care District.

Although limited in their applicability, the adoption of these bills is certainly a welcome step toward allowing public agencies greater flexibility in awarding construction projects.

Court clarifies public works contract claims procedures in relation to government tort claim procedures

karnold@hansonbridgett.com (Karin Manwaring) — Sun, 21 Sep 2008 11:48:34 -0500

On August 25, 2008, a California appellate court held that compliance with the claims procedures set forth in a public works contract relieves a contractor from the requirement to file a government tort claim prior to filing a lawsuit, unless the contract expressly mandates that a government tort claim also be filed. (Arntz Builders v. City of Berkeley (2008) 166 Cal.App.4th 276.)

The case involved a construction contract between Arntz Builders (Arntz) and the City of Berkeley (City) for the renovation of the Berkeley Central Library. The contract set forth specific claim procedures to resolve disputes arising under the contract, as required by Public Contract Code sections 20104-20104.6. Disputes arose and Arntz filed a complaint against the City for breach of contract after satisfying all contractual claim procedures. The trial court ruled that the complaint was barred because Arntz failed to present a claim pursuant to Government Code section 910 in addition to complying with the claims procedures required by the contract.

On appeal, the appellate court held that the contractual claims procedures were the exclusive claim procedures which the contractor had to satisfy. Unless a public works contract expressly requires compliance with the government tort claim procedures under Government Code section 910, the contractor’s compliance with claims procedures set forth in the contract is sufficient to pursue a lawsuit against the public agency.

The Arntz case clarifies an issue which has been the subject of confusion for some time. Public Contract Code section 20104-20104.6 requires that public works contracts include claims procedures for all contracts under $375,000 in value. Similarly, the Tort Claims Act claim filing requirements under Government Code section 910 apply to claims for money or damages arising from contractual liabilities of public entities or public employees. However, the relationship between the two statutory provisions was not clear. In reviewing the history and language of the Tort Claims Act, the Arntz court concluded that the legislation was designed to authorize local agencies to develop their own claims procedures for contractual disputes as an alternative to the statutory claims procedure. Government Code section 930.2 specifically authorizes a public agency to enter into a written agreement establishing claim procedures that supersede statutory claims requirements. Section 930.4 provides that a claim procedure established by agreement made pursuant to section 930.2, “exclusively governs the claims to which it relates.” Together, the Arntz court held, these statutes authorize local agencies to include specific claims procedures in a contract that will exclusively govern claims arising under that contract.

However, the Arntz case also left open the possibility that a public works contract may expressly require that a government tort claim also be filed after the contractual claims procedures are satisfied, as a prerequisite to a lawsuit. Requiring a claimant to present a government tort claim in addition to satisfying contract claim procedures could provide an additional affirmative defense for a public agency being sued, and also reduces the applicable statute of limitations from 4 years to 2 years. However, the public agency should consider the claim procedure it creates carefully as the additional requirement could also be procedurally burdensome and unnecessarily protract the claims process.

Court clarifies subcontractor substitution requirements

dgehrig@hansonbridgett.com (David Gehrig) — Sun, 14 Sep 2008 17:55:42 -0500

A California appellate court recently clarified the requirements for substitution of a subcontractor on a public works project under Public Contract Code sections 4100-4114. (Titan Electric Corp. v. Los Angeles Unified School District (2008), 160 Cal.App.4th 188.) Public Contract Code section 4107 prohibits a contractor on a public works project from substituting a subcontractor unless the public agency consents to the substitution, and one of nine specific statutory circumstances has occurred. Section 4107 also requires the public agency to provide notice to the subcontractor being removed and to conduct a hearing on the substitution if requested by that subcontractor. However, the Titan court upheld the substitution of an electrical subcontractor even though a hearing was not conducted until after a new subcontractor had already been hired and completed the remaining work, concluding that the parties had substantially complied with the statutory requirements.

In the Titan case, the Los Angeles Unified School District awarded two separate public works projects to Kemp Bros. Construction: the Huntington Park Elementary School and the Los Angeles Center for Enriched Studies. Titan Electric Corporation was the electrical subcontractor to Kemp for both of these projects. During the course of the work, Kemp petitioned the District to substitute Titan, alleging that Titan had failed or refused to perform its subcontracts and had substantially delayed or disrupted the progress of the work. Titan opposed the substitution requests and demanded an administrative hearing under Public Contract Code section 4107. The District granted Kemp’s request to substitute Titan. However, by the time the hearings were conducted, Kemp had already hired a new electrical subcontractor which had completed the remaining electrical work.

Titan sued the District seeking administrative mandamus to reverse the District’s approval of the substitution, arguing that the District had no authority to approve the substitution after another subcontractor had already completed the work. The trial court denied Titan’s petition, concluding that nothing in the statute or case law precludes a public agency from consenting to a substitution after a new subcontractor has already been hired. The appellate court came to the same conclusion, stating as follows: “Although section 4107 contemplates that the awarding authority’s consent to substitution and approval of a replacement subcontractor will occur before the replacement performs the subcontract, a deviation from this procedure is valid so long as the procedure used actually complies in substance with the reasonable objectives of the statute. Here, such substantial compliance occurred.”

The Titan case may be welcome news for public agencies and general contractors. It allows for the substitution of a subcontractor even where the hearing contesting that substitution occurs after a new subcontractor has been hired, provided there has been “substantial compliance” with the statutory requirements. Of course, the best practice is still to conduct the hearing prior to a new subcontractor being hired.

New bill would expand design-build authority for cities and specified projects

dgehrig@hansonbridgett.com (David Gehrig) — Wed, 20 Aug 2008 16:40:27 -0500

A new bill authored by Doris Wolk would expand the authority to award projects on a design-build basis to all cities, as well as to projects by any “qualified entity” for local or regional wastewater facilities, solid waste management facilities, or water recycling facilities. The bill, AB 642, has passed both the state assembly and state senate, but still awaits the signature of Governor Schwarzenegger. Assuming he signs the bill, the expanded design-build authority would go in to effect on January 1, 2009.

The bill would revise Public Contract Code section 20175.2 to provide design-build authority to all cities, instead of just cities in Solano and Yolo counties. A new dollar threshold would be created in the amount of $1 million. Cities would still be obligated to establish a labor compliance program and to pre-qualify bidders before utilizing the authority. In addition, cities would still have the choice of awarding a project to the lowest responsible bidder or on a “best value” basis. The expiration date of this statute would be extended from January 1, 2011 to January 1, 2016.

The bill would also create a new Public Contract Code section 20193, which would authorize a pilot program for any “qualified entity” to award a project for a regional or local wastewater treatment facility, solid waste facility or water recycling facility on a design-build basis. The pilot program would only apply to 20 projects, each of which must exceed $2.5 million in value. Qualified entities include cities, counties, cities and counties and special districts. As with the design-build authority for cities, the new statute would require a public entity to establish a labor compliance program and to pre-qualify bidders before utilizing the authority. In addition, public entities would have the choice of awarding projects to the lowest responsible bidder or on a “best value” basis. This statute would expire on January 1, 2020.

The Future of Green Building - Tools and Technologies for Designing High Performance Buildings

dgehrig@hansonbridgett.com (David Gehrig) — Thu, 06 Mar 2008 15:31:26 -0500

Hanson Bridgett will be hosting a sustainable business forum entitled "The Future of Green Building - Tools and Technologies for Designing High Performance Buildings" on Wednesday, March 19, 2008 at our offices in San Francisco. Speakers will include Jon Pittman, Vice President of Market Development at Autodesk; Christopher (Kit) P. Ratcliff, AIA, LEED AP, Principal and Director of the Civic Practice Area at Ratcliff Architecture; and Howard W. Ashcraft, Jr., Partner in the Construction Practice Group at Hanson Bridgett. Click here for more details or to register to attend the forum.

Governor Schwarzenegger Announces Ambitious Plan to Foster Public-Private Partnerships

jsherman@hansonbridgett.com (Julie Sherman) — Wed, 12 Dec 2007 19:34:12 -0500

Governor Schwarzenegger recently announced a plan to promote public-private partnerships in order to meet California’s long-term infrastructure needs. (See Los Angeles Times article.) Public-private partnerships are contractual agreements which are formed between public agencies and one or more private companies whereby the private company finances, builds and manages public facilities for a specified period of time.

Public facilities which could benefit from such public-private partnerships include schools, roads, ports, treatment plants and hospitals. Under the terms of the agreement, the private company either rents the newly constructed facility back to the government or collects fees from users of the facility in order to recoup its costs. Ultimately, ownership and operation of the facility could revert to the public agency after the term of the agreement expires.

Currently, state law authorizes public-private partnerships in only limited ways. (See the Infrastructure Financing Act.) However, part of Schwarzenegger’s proposal includes seeking additional legislative approval for such agreements. Allowing California to enter into such agreements will benefit the state because, according to Schwarzenegger, “state agencies estimate that California needs $500 billion in infrastructure over the next 20 years. We will need that infrastructure delivered, operated and maintained on-time, on-budget and at the lowest risk and cost to taxpayers.”

While the plan appears to have gained support from the federal government, state critics argue that public-private partnerships could ultimately cost the public more money due to lack of government oversight. Schwarzenegger’s proposal, however, would include the creation of a state agency staffed by finance experts to negotiate public-private agreements so as to protect the taxpayers' interests by providing sufficient government oversight and holding private companies accountable.

The public-private partnership model is just in its infancy in California, but is currently utilized effectively in Canada, Europe and Australia. This proposal could be a promising development given the magnitude of California’s infrastructure needs. Look for more details about Schwarzenegger’s proposal in the State of the State Address in January.

New comprehensive guide for Integrated Project Delivery published

dgehrig@hansonbridgett.com (David Gehrig) — Thu, 15 Nov 2007 16:52:56 -0500

Earlier this month, the American Institute of Architects California Council ("AIACC") and the American Institute of Architects ("AIA") jointly published a comprehensive new guide to Integrated Project Delivery methods. The document is entitled "Integrated Project Delivery: A Guide," and can be downloaded here. The Guide marks an exciting step forward in the development of Integrated Project Delivery concepts and making IPD a viable alternative for the construction industry.

The Guide is approximately 57 pages long and is divided into seven chapters. It begins with an updated definition:

Integrated Project Delivery (IPD) is a project delivery approach that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to optimize project results, increase value to the owner, reduce waste, and maximize efficiency through all phases of design, fabrication, and construction.

IPD principles can be applied to a variety of contractual arrangements and IPD teams can include members well beyond the basic triad of owner, architect, and contractor. In all cases, integrated projects are uniquely distinguished by highly effective collaboration among the owner, the prime designer, and the prime constructor, commencing at early design and continuing through to project handover.

The foreword includes this inspirational language: the Guide "may set all who believe there is a better way to deliver projects on a path to transform the status quo of fragmented processes yielding outcomes below expectations to a collaborative, value-based process delivering high-outcome results to the entire building team."

Restrictions on State of California's ability to contract with private engineering firms struck down by California Supreme Court

gkorbel@hansonbridgett.com (Greg Korbel) — Sun, 11 Nov 2007 11:06:16 -0500

On November 5, 2007, the California Supreme Court held that the State of California could not enter into a memorandum of understanding with an engineering union which restricted the State from hiring and retaining private engineering firms where such restrictions were barred by a recent amendment to the state constitution. (See Consulting Engineers and Land Surveyors of California, Inc. v. Professional Engineers in California Government, 2007 Cal. LEXIS 12680.)
In November 2000, California’s voters approved Proposition 35, adding art. XXII to the state constitution. Art. XXII allowed the state to contract with private entities to obtain architectural and engineering services for public works of improvement. Proposition 35 specified that art. VII, which the courts had usually interpreted as barring such contracts, would not be construed to limit the state from contracting with private companies for such services.

After Prop. 35 was passed, the state and Professional Engineers in California Government (PECG), a union representing engineers employed by the state, entered into a collective bargaining agreement, known as a memorandum of understanding (MOU). Article 24 of the MOU provided that, except in extremely unusual or urgent circumstances, the state must make every effort to use state employees to perform architectural and engineering services for public works projects, before resorting to contracts with private companies.

Art. 24 of the MOU mandated the preferential use of civil service engineers over outside engineers, except under specified circumstances. It also permitted termination of existing outside engineering contracts and transfer of the work to civil service engineers after the contracts are reviewed by a committee dominated by PECG members. Finally, it required that steps be taken, such as termination of outside contracts were possible, to minimize the displacement of state engineers resulting from contracting out engineering services. Although cost savings appeared to be a consideration with respect to the termination of existing engineering contracts, the court noted there was no requirement that the preference given to civil service engineers for new projects must be based on cost effectiveness.

Consulting Engineers and Land Surveyors of California, Inc. filed a petition for a writ of mandate, seeking to enjoin the implementation of Art. 24 of the MOU.

The Court found that the effect of all of these requirements was to restrict the ability of state authorities to freely contract out engineering services. The mandatory preference for civil service engineers, without a concomitant requirement of costs savings, did not ensure the best value for California taxpayers, and it undermined the goal of promoting fair competition. Moreover, the court observed, common sense dictated that review and termination of existing contracts would not be conducive to speeding the completion of backlogged projects. Art. 24 thus contravened the goals of Prop. 35 and thwarted the intent of the electorate.

The court found further that substantial evidence supported the trial court’s finding that the implementation of art. 24 of the MOU would (1) disrupt ongoing public works projects and waste public funds by terminating existing contracts, (2) produce great and irreparable injury to the public and to the parties to existing architectural and engineering services contracts, and (3) result in the loss of benefits that would flow to the public from such future contracts.

The California Supreme Court affirmed, holding that art. 24 of the MOU fatally conflicted with Prop. 35.

One Step Closer to the "Grand Central Station of the West"

gkorbel@hansonbridgett.com (Greg Korbel) — Wed, 17 Oct 2007 14:01:53 -0500

On September 20, 2007, the Transbay Joint Powers Authority (“TJPA”) selected Pelli Clark Pelli Architects and the Hines development firm to design and develop the new Transbay Transit Center and Transit Tower.

The new Transbay Transit Center at First and Mission Streets in San Francisco is part of a $983 million project that will centralize the region’s transportation network by accommodating nine transportation systems under one roof, including AC Transit, Caltrain, Muni, Golden Gate Transit, SamTrans, Greyhound, BART, WestCAT, and future California High-Speed Rail. The project also includes demolition of the current terminal and running a temporary terminal. TJPA officials hope to open the new terminal by 2014.

The Pelli/Hines proposal calls for a new terminal, a futuristic quarter-mile-long structure that would extend above First and Fremont streets and would be topped by a 5.4-acre park, and an open-air plaza topped by a glass canopy that billows up to the terminal's rooftop park. The team also seeks to build a 1,200-foot office tower at First and Mission streets and has offered $350 million for the site - money that would help pay for a new Transbay Terminal next door.

TJPA officials hope to work out a financial deal with Hines within six months. In the same period, Macris said, the Planning Department aims to release an initial recommendation as to what heights should be allowed on the Transbay site and nearby blocks. If approved, zoning would be in place by early 2009 - in time for the Hines-Pelli team to take a revised version of its proposal to the city's Planning Commission. If this occurs, construction could begin within months and a tower could open by 2013.

Click here for more information about the Transbay Terminal Project:
www.transbaycenter.org/transbay/

Click here to seek the Pelli/Hines Presentation Boards:
www.transbaycenter.org/TransBay/uploadedFiles/Project/PelliBoards-All.pdf

Court denies contractor relief for claims against County of Sacramento where claim filing requirements were not followed

llouridas@hansonbridgett.com (Laila Louridas) — Tue, 24 Jul 2007 19:33:52 -0500

The California Court of Appeal recently entered a decision reinforcing the importance of a contractor's compliance with the applicable code provisions when filing claims and bringing causes of action against public entities in public works projects.

In Westcon Construction Corporation v. County of Sacramento, (2007) 152 Cal. App. 4th 183, the County of Sacramento awarded Westcon a contract to construct a security fence in August of 2000. During construction, the parties encountered problems and Westcon requested extensions on the completion date and additional compensation. A notice of completion was recorded in September 2001 and the parties later met to discuss Westcon's claim that it had performed over $300,000 in extra work. A month after receiving final payment for the project in March 2002, Westcon sent a packet of information supporting its claim for additional compensation to the County's engineer in charge of the project. The County issued a final acceptance of the project in July of 2003, and did not acknowledge that it received the materials sent to the engineer. Westcon resubmitted the claim over a year later in June of 2003. The County rejected the claim as untimely. After subsequently submitting a Government Claims Act claim, which was also ultimately rejected by the County, Westcon filed suit in March 2004. At trial, the court granted the County's motion for summary judgment, finding that the Government Claims Act claim was untimely. It rejected Westcon's arguments that 1) the period for filing a claim had been tolled during negotiations to resolve its claim under the Public Contract Code, and 2) that the claim submitted in June 2003 was timely and substantially complied with the Government Claims Act. Westcon appealed.

On appeal, the court affirmed. It held that Westcon's tolling argument under the Public Contract Code was not valid because the County's final payment on the project in March of 2002 operated as a denial of all outstanding claims, including Westcon's Public Contract Code claim, under the terms of the construction contract. Westcon's argument that the County waived the untimeliness of its Government Claims Act claim by failing to give notice of rejection of the claim in the proper form were also rejected. Finally, the court found that Westcon did not substantially comply with the Government Claims Act claim-filing requirement. Sending the claim documents to the County's engineer in charge of the project did not constitute substantial compliance, as the engineer was not an officer that was authorized to receive claims, and Westcon was not able to show that the County otherwise had actual notice. Thus, the claim was deficient because it was not sent to the proper authority. In response to Westcon's claim that it was not fair that they were "trapped" by the deadlines imposed by the Government Claims Act, the Court of Appeal replied that "those who do business with public entities must know the ground rules and are charged with the knowledge of the provisions of their own contract." (Id. at p. 203.)

AIA California Council issues a working definition of "Integrated Project Delivery"

dgehrig@hansonbridgett.com (David Gehrig) — Tue, 29 May 2007 20:50:02 -0500

At the AIA National Convention in San Antonio on May 2, the AIA California Council issued an intriguing working definition of "Integrated Project Delivery." The goal of Integrated Project Delivery is to approach construction projects in a more collaborative way, taking advantage of technological tools such as Building Information Modeling. Click here to view the document published by the AIACC.

Integrated Project Delivery calls for earlier and on-going cooperation among all stakeholders on a construction project, including the owner, architect, contractor, subcontractors, suppliers, equipment manufacturers, system integrators and lenders. One key of the Integrated Project Delivery is creating compensation structures that rewards "best for project" behavior. Here is the working definition of "Integrated Project Delivery," which will be elaborated on in later phases of the document:

Integrated Project Delivery ("IPD") is a project delivery approach that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to reduce waste and optimize efficiency through all phases of design, fabrication and construction.

IPD principles can be applied to a variety of contractual arrangements and IPD teams will usually include members well beyond the basic triad of owner, architect and contractor. At a minimum though, an Integrated Project includes tight collaboration between the owner, the architect, and the general contractor ultimately responsible for the construction of the project, from early design through project handover.

The collaborative approach of IPD is both groundbreaking and laudable. It will be interesting to see how soon this approach might be utilitized.

Draft Building Information Modeling Standard issued

dgehrig@hansonbridgett.com (David Gehrig) — Thu, 29 Mar 2007 14:11:30 -0500

The National Institute of Building Sciences (NIBS) recently issued the version 1.0 draft of the National Building Information Modeling Standard (National BIM Standard). The National BIM Standard has been in the works for over four years, and is a collaboration between over 30 subject matter experts throughout the capital facilities industry. An industry review and comment period is now in effect until May 21, 2007.

The National BIM Standard provides the first comprehensive look at the recommended procedures for the Building Information Modeling process. In short, Building Information Modeling aspires to change the culture and approach to the construction of capital facilities to a more cooperative model which utilitizes technology to model buildings before they are built. The National BIM Standard was developed from the following 4 tenets:

to build a facility virtually prior to building it physically so that detailed analysis can occur early in the process, allowing for problems to be resolved electronically first;
to collect data at its point of creation and sharing it throughout the lifecycle of a facility;
to make data entry and data maintenance part of the business process and not a separate step, which would only add work to a project; and
to recognize the importance of the collection of detailed information regarding a facility since detailed information can always be summarized, but summary information cannot be broken down into detailed information.

The National BIM Standard is approximately 162 pages long, and a link to it can be found here. NIBS is a non-profit organization formed by an act of Congress to be a liaison between public and private design and construction organizations.

Public Agencies Face New Restrictions in Contracting with Design Professionals

mconneran@hansonbridgett.com (Michael Conneran & Patrick Miyaki) — Wed, 21 Mar 2007 16:28:32 -0500

With the enactment of AB 573 (Wolk), many California public agencies face new restrictions on the indemnity protections they can require when engaging design professionals.

The new law applies to contracts (or amendments to existing contracts) entered into after January 1, 2007 with (1) licensed architects; (2) licensed landscape architects; (3) registered professional engineers; and (4) licensed professional land surveyors.

The new law, which adds Section 2782.8 to the California Civil Code, provides that agreements between most public agencies and the listed types of design professionals may only require the design professionals to indemnify and defend the public agency for liability arising out of the negligence, recklessness, or willful misconduct of the design professional. A broader indemnity provision is unenforceable, and the parties may not, by contract, waive this statutory limitation. Interestingly, the new law does not apply to the State of California, but does include cities, counties, special districts and joint powers authorities.

What indemnity language is now acceptable?

An example of an indemnity provision that complies with AB 573 would be the following:

" … Design Professional shall indemnify, keep and save harmless the Public Agency… against any and all suits, claims, actions, damages, liabilities, costs and expenses [etc.] … that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the Design Professional, its employees, subcontractors, or agents in the performance (or non-performance) of services under this Agreement."

A provision that would not comply:

"… Design Professional shall indemnify, keep and save harmless the Public Agency… against any and all suits, claims, actions, damages, liabilities, costs and expenses [etc.] … that arise out of, pertain to, or relate to the services of the Design Professional, its employees, subcontractors, or agents in the performance (or non-performance) of services under this Agreement."

The key issue is that the indemnity must relate to the negligence, recklessness or intentional misconduct of the professional. It cannot cover causes that are not related to the fault of the design professional.

How else can an agency manage its risk?

Indemnity provisions are methods by which agencies attempt to limit their exposure to risks that can occur during projects. Other methods of protection include insurance coverage, although insurance coverage for professional liability normally is similarly limited to damages arising due to the negligence or misconduct of the covered professional. AB 573, like a provision in Civil Code 2872(b) giving contractors similar protections, narrows the number of parties that may bear responsibility when something goes wrong with a public project that is either no one’s fault or the fault of someone not subject to a contractual indemnity by excluding certain design professionals.

The lawyers in Hanson Bridgett’s Public Agency section are well versed in legal issues related to AB 573 and contracting with design professionals in general. If you have any questions regarding compliance with AB 573 or other contracting issues, please contact Michael Conneran or Patrick Miyaki.