I am on the board of the Construction Leadership Council of the AGC of Middle Tennessee.  Earlier today, we presented a check to the Ronald McDonald House Charities to help support their great work for sick children and their families in and around Nashville, Tennessee. 

As I drove back to the office, I thought about the importance of helping others … and specifically the impact of giving to others.  I recently heard a Jewish reading about giving:

THERE ARE eight degrees in the giving of Tsedakah, each one higher than the next:

to give grudgingly, reluctantly, or with regret;

to give less than one should, but with grace;

to give what one should, but only after being asked;

to give before one is asked;

to give without knowing who will receive it, although the recipient
knows the identity of the giver;

to give without making known one’s identity;

to give so that neither giver nor receiver knows the identity of the other;

to help another to become self-supporting, by means of a gift, a loan,
or by finding employment for the one in need.
 

Contractors are giving at every level.  Last night, Hardaway Construction and LP Building Products won the AGC of Middle Tennessee’s Community Outreach award for their participation in the construction of Lighthouse Christian School featured on Extreme Home Makeover. In addition, AGC’s Operation Opening Doors is helping renovate a home for a Las Vegas family struggling with medical issues.  

So, at which level are you or your company giving? 

Last week, I spoke at the annual meeting of the Tennessee Road Builders Association.  Fellow speaker and lobbyist,  Dave Bauer of the American Road & Transportation Builders Association, gave a legislative update on the status of Federal transportation funding.  During his talk, Dave suggested that Public Private Partnerships (PPPs) can help, but are not a solution to the economic problems currently facing the industry. 

 

I previously wrote about whether PPPs could help revive highway and bridge construction.  Whether you are talking about PPPs or some other partnership arrangement between owner/developers and contractors, partnering can work.  But problems often arises in three areas: 

  • Partnering often works until there is a dispute about time or money.   While this may be no different than a traditional contracting approach, the partnering relationship becomes strained when project delays arise or cost overruns come into play.  The natural reaction is to start assessing blame.  Used effectively, however, the partnership should be able to find common sense solutions to time and money problems.
  • Partnering is often accepted by upper management, but not at the project level.  You can imagine the problems that may arise when there is a disconnect in the family where both the owner and contractor feel they are being taken advantage of.  This feeling can be exacerbated at the project level by those who are involved in the day-to-day construction.  You need to get all levels to "buy in" to the process.
  • Partnering often highlights an imbalanced decision-making process.  When disputes arise between partners, it is important that each have equal bargaining in the process.  For example, it can be difficult for the contractor’s project manager to be negotiating and attempting to resolve disputes with the owner’s representative, who may be at a higher level.

There are many other problems that can exist with partnering.  However, the goal is to avoid the frustration that is often felt by those who want the relationship to work.  The best way to avoid these problems is to: (1) have a balanced partnering agreement that properly allocates risk between and among the partners; (2) get all players together at the inception of the project, both within your own organization and with the other partner, to foster team-building in the relationship; and (3) incorporate an alternative dispute resolution process that allows for effective and efficient resolution of internal disputes.

Image: Metro Transportation Library and Archive

As reported in the Nashville Business Journal and News Channel 5 (video), a non-discrimination bill passed on a second reading at Metro Council last week.  The council voted 21 to 16 in favor of the bill that would add two new classes to the procurement code Metro contractors already follow. These companies would not be able to discriminate on the basis of gender identity and sexual orientation if it passes.  

A copy of the non-discrimination bill can be found here.  The bill must pass a third and final reading at the next council meeting set for March 15, 2011.  As reported, Mayor Karl Dean said that he would sign the bill into law.  According to The Tennessean, more than 181 other communities across the country have adopted similar policies.

What does the proposal mean to contractors?  If the legislation is passed on the final reading, contractors and suppliers who work with Nashville would have to offer workplace protections for homosexuals and transgender individuals.  In its simplest terms, contractors who do business with Metro would be required to add gender identity and sexual orientation to their non-discrimination policies.  In addition, the parties’ contract must include an affidavit of compliance, which should be part of the bid documents.  The law reads:

The purchasing agent of the metropolitan government shall include in all bid specifications or invitations to bid a provision to the effect that no contract shall be entered into for building and construction projects or supplies or services unless the successful bidder submits an affidavit to the metropolitan government stating that by his employment policy, standards and practices he does not subscribe to any personnel policy which permits or allows for the promotion, demotion, employment, dismissal or laying off of any individual due to this race, creed, color, national origin, age, sex, gender identity, or sexual orientation, and that he is not in violation of and will not violate any applicable laws concerning the employment of individuals with disabilities.

As amended, the law excludes businesses with less than 15 employees and it does not not apply to religious institutions.

My friend Kent Starwalt of the Tennessee Road Builder’s Association sent out a legislative update this morning about the tension between Obama Administration and the Republican controlled Congress on infrastructure investment.  

 

According to the Stateline article, the divisions over transportation investment include high-speed rail, roads, bridges and access to high-speed internet:

The president is trying to make the case that improving the country’s entire physical infrastructure—including roads and railways but also high-speed Internet connections—will make America more competitive and generate jobs in the short term. But GOP lawmakers, whose numbers surged following the November elections, want to scale back federal spending across the board, and they are especially suspicious of Obama’s emphasis on rail and transit.

A blog post by another friend, Evan Caplicki, earlier today may provide a feasible alternative to the debate above.  In his post on Public-Private Partnerships (PPPs) for Transportation, Evan discusses a Toolkit for Legislators released by the National Conference of State Legislatures.

It is no secret that states are struggling to meet their growing infrastructure needs with limited funds. Some states like Tennessee have a "pay as you go" program and will not borrow funds for roads and bridges projects.  But the Toolkit for Legislators suggests leveraging existing resources through the use of PPPs.  In its simplest form, PPPs agreements allow private companies to take on traditionally public roles in infrastructure projects, while keeping the public sector ultimately accountable for a project and the overall service to the public.  According to the NCSL report, 29 states and Puerto Rico have legislation addressing transportation PPPs and more than $46 billion has been invested in these projects over the last 20 years.

Can PPPs and other alternative financing programs revive highway and bridge construction?  As always … it depends.  Here are my thoughts:

  • PPPs can reduce the initial public investment through accelerated or more efficient delivery.
  • PPPs don’t create new money, but instead rely on the private sector and other resources to help develop the infrastructure.  However, public funds will eventually be a part of the equation to pay back the private investment.
  • PPPs can provide a feasible alternative to states contemplating investment in infrastructure, provided all the right pieces are in place (i.e., financing package, design and construction teams, legislative authority).

Thus, if the legislative framework is in place to support a PPP for transportation investment, then there will be opportunities for new highway and bridge projects to go forward.  Indeed, contractors with PPP experience are situated in the perfect spot as the debate of infrastructure investment continues on Capitol Hill.

 Image: Elliott P.

If you are near a computer today around lunchtime (12:00pm EST), you need to head over to the Capital Thinking radio show hosted by Kevin O’Neill.

Capital Thinking is a weekly glimpse of the intersection between politics, policy, the law, and the world of business. Capital Thinking goes beyond the typical talking head babble of traditional media to give a better understanding of what’s going on in Washington and what it means for businesses and families. Each week, the show features a mix of influential guests … policymakers, lawyers and business leaders … who will give you an in-depth and balanced look at issues of interest in Washington, the legal arena and the business world. This is a high-energy hour of radio that will give you actionable intelligence for use as a business leader and citizen. Capital Thinking is broadcast live every Thursday at 9 AM Pacific Time on the VoiceAmerica Business Network.

During the second half of the show today, I will be talking with Kevin about the next steps in social media.  We will talk about business development uses, as well as the legal risks and pitfalls for employers.  We will also talk about the difference between social media and social networking.

If you miss the show, you can download the podcast afterward.  Also, you can send me a question via Twitter at @matthewdevries during the show and I will try to answer it for you.

Updated: Here is the podcast link, which will be available later this evening.

Initially filed as a class action suit in October 2010 against the USGBC, Henry Gifford’s lawsuit took a turn this week when he filed an amended complaint.  The original lawsuit alleged violations of the Sherman and Lanham Acts for “deceiving users” of the LEED rating system.  The lawsuit questioned whether "LEED buildings use less energy than conventionally-built buildings.”

Gifford’s amended complaint ([pdf) focuses on claims of false advertising under the Lanham Act and state law, as well as a claim for deceptive trade practices under state law.  Again, it is no longer a class action, but instead alleges certain damage to Gifford and a few others as professionals in the industry.  The amended complaint states:

USGBC’s false advertisements divert customers from Plaintiffs to professionals accredited by USGBC and/or its affiliates who provide advice about how to obtain LEED certification. Plaintiffs are losing customers because USGBC’s false advertisements mislead the consumer into believing that obtaining LEED certification incorporates construction techniques that achieve energy-efficiency.

Should Owners and Contractors Worry about Gifford’s Suit Against USGBC? At this point, the answer is a simple …  No …  While it is interesting to follow the legal commentary about the lawsuit, the claims are in their infancy stage.  The USGBC will be afforded an opportunity to challenge Gifford and his co-plaintiffs’ standing to bring the law suit.  "Standing" is one of those Law School 101 principles that says a party must demonstrate to the court sufficient connection to and harm from the action challenged.  In other words, they must have a dog in the fight.

Whether you are an owner-developer or contractor working with a green project, the real lesson from the Gifford show is to address LEED certification and energy performance in your contracts.  As an owner, you may want the LEED certification from the USGBC and you may want your building to achieve a certain energy performance.  As a contractor, you cannot guarantee certification, but you may be obligated to construct the building with certain performance guarantees. 

This must be the week for transportation.  Yesterday, I received an update from the Tennessee Road Builder’s Association about the acquisition of right of ways on Federal funded projects.  According to a memo from TDOT’s Chief Engineer Paul Degges, the Federal Highway Administration (FHWA) will be enforcing its policy that all property must be acquired under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (Uniform Act). 

 

What is the Uniform Act? Passed by Congress in 1970, the Uniform Act is a federal law that establishes minimum standards for federally funded programs and projects that require the acquisition of real property (real estate) or displace persons from their homes, businesses, or farms. The Uniform Act’s protections and assistance apply to the acquisition, rehabilitation, or demolition of real property for federal or federally funded projects.

What is the FHWA policy? According to the TDOT memo, FHWA has advised that the roadway contractor cannot acquire the land that is to be incorporated into the right of way during the construction phase.  The contractor is required to strictly adhere to the Uniform Act’s requirements.  Any variance from the policy could jeopardize the Federal funding on the project.  If you need to find the correct contact information for your state, check out the FWHA’s Right of Way Office Roster.  You can also check out the FHWA’s page on Frequently Asked Questions. 

What should contractors learn?  The events leading to the TDOT memo suggest that a roadway contractor acquired some land during the construction phase of a project that was to be incorporated into the right of way.  The FHWA confirmed that the Right of Way Division should be responsible for "the acquisition of any additional property when this type of situation occurs…"  Thus, if additional right of way is needed because plans are incorrect or a value engineering change proposal recommends it, a plans revision should be issued and the Right of Way Division needs to acquire the property … not the contractor.  According to TRBA, this will not affect waste and borrow areas that the contractor is responsible for acquiring.

Image:gwarcita

As I drove into work this morning, Nashville Public Radio had a piece this morning about TDOT’s resistance to borrow for bridge construction.  In case you did not know, TDOT employs a pay-as-you go method, which means the state will not borrow for new projects even when it has the opportunity.

Last year, the Legislature granted TDOT the authority to borrow money through bonding for the more than 200 bridges that needed repair in the state.  In a recent hearing, new TDOT Commissioner John Schroer confirmed TDOT’s payment plan: "All the money that we’ve done for bridges has come out of cash from state funds and federal funds, and we don’t expect to actually bond any of those bridge jobs." 

When talking about project financing, one tends to wonder: Where’s all that money coming from?  Here are few major sources: 

  • Highway use taxes and gasoline taxes, which help fund highway projects at the federal level and other transportation projects at the state level;
  • State taxes and fees, such as motor vehicle sales tax and registration fees; and
  • Federal aid programs, which are generally federal assisted, state administered programs that are tied to specific projects.

If a state chooses not to borrow funds for road and bridge construction, then what other options remain?  Again, without cash or debt, it is about raising sources of revenue for investment in these projects.  Options can include:

  1. Raise fuel and vehicle taxes
  2. Increase transit fees or consider new mileage-based or vehicle-mile user fees,
  3. Add sales taxes or increase property taxes
  4. Re-apportion general revenues for transportation investment
  5. Consider tolls and highway use programs
  6. Evaluate public-private partnerships

Question: What other options exists for the states?

Image: thomas23

The Transportation Investment Generating Economic Recovery (TIGER) grant program was created under the American Recovery & Reinvestment Act (ARRA) with a $1.5 billion dollar multi-modal discretionary grant program.  It was designed to provide support for innovative transportation projects of national, regional, and local significance.  The TIGER program included projects that were often difficult to fund under the traditional transportation programs.  In 2010, the program received over 1400 applications, totaling almost $60 billion and awarded 51 projects.

When I first heard about the TIGER program, I could not get the words, "They’re great!" out of my mind.  As if Tony the Tiger had anything to do with either transportation or construction projects.  But an article in ENR last week confirmed some promising news for the transportation industry. 

According to the ENR report, the DOT program has not sought proposals for 2011 TIGER grants. However, some 2010 TIGER projects are moving toward construction, including a $105 million intermodal facility in Tennessee and a $97.5 million complex in Alabama.  The projects, both owned by Norfolk Southern Corp, are supposed to get more than $50 million each from the TIGER grant program.  The best news: Norfolk Southern "is likely to seek bids for the Tennessee project by the end of February."

If DOT does seek proposals for 2011, the best starting place to learn about grant opportunities and the application process is the Department of Transportation ARRA homepage, where you can review the list of last year’s applicants, a written summary of the selection process, and the Secretary’s decision memorandum that describes which applications were chosen and why.
 

Image: Mark Strozier

Earlier today, I attended a special sold-out event on Wall Street’s View on Prospects for the Health Care Industry sponsored by the Nashville Health Care Council. 

Moderated by Wayne Smith of Community Health Systems, the panel included the following Wall Street analysts: Chris Colley, Managing Director of medical Devices for Stephens, Inc.; Kemp Dolliver, Managing Director of Avondale Partners; Frank Morgan of RBC Capital Markets; and Adam Feinstein of Barclays Capital. 

The health care sector represents one of the few primary arenas for growth in the construction industry.  Naturally, I was anxious to hear what these financial giants had to say about the health care market in 2011.

  1. Growth, steady, decline.  You can expect to see growth in renal dialysis facilities, nursing home facilities and rehabilitation hospitals.  Long-term acute care hospitals, hospice facilities and senior care facilities will remain steady or "neutral".  Home health care should see a decline.
  2. Cost-savers.  The segments in the health care industry that will remain strong in 2011 are those that involve cost-saving solutions and technologies.
  3. Uncertainty.  When speaking about economic trends in the health care industry, the real uncertainty is health care reform.  As the Federal government continues to debate the right balance of cost and benefits, whatever policy remains in the end will affect Wall Street’s view of the health care industry (and consequently the construction sector of the industry).

Remember, these are financial analysts talking about financial trends in the health care industry.  If you were to read between the lines, you can verify what many in the construction industry have predicted . . . there many opportunities for growth in new construction and renovations of existing facilities.   As cost-savings becomes an increasing factor in the analysis, I think you are going see an increase in the greening of health care buildings.

Image: Matthew Knott