Construction Contract Law Issues for Major Water Infrastructure Projects

Transcription

1 Construction Contract Law Issues for Major Water Infrastructure Projects Presented by Antony L. Sanacory to: 2013 Duane Morris LLP. All Rights Reserved. Duane Morris is a registered service mark of Duane Morris LLP. Duane Morris Firm and Affiliate Offices New York London Singapore Los Angeles Chicago Houston Hanoi Philadelphia San Diego San Francisco Baltimore Boston Washington, D.C. Las Vegas Atlanta Miami Pittsburgh Newark Boca Raton Wilmington Cherry Hill Lake Tahoe Ho Chi Minh City Duane Morris LLP A Delaware limited liability partnership

2 EPA Estimates Regarding Water Infrastructure Needs 1

3 EPA Estimates Regarding Water Infrastructure Needs 2

4 EPA Estimates Regarding Water Infrastructure Needs 3

5 EPA Estimates Regarding Water Infrastructure Needs 4

6 What could possibly go wrong ? $700 Billion in work is needed near-term; At a time when money is tighter than it's been in a long time; Projects generally will... Be logistically complex; Involve a high number of stakeholders, with highly politicized decision-making processes; Be for a demanding and unforgiving public that will judge you mercilessly with hindsight; and Be bid by hungry contractors with beat up balance sheets and diminished ability to finance their work. 5

7 A Successful Project Is One That... A. Can be changed or modified if necessary; B. Is completed on-time and on-budget; C. Does not implicate financial defaults; D. Performs as expected; E. Is free of major accidents or casualties; F. Has been thought through so that there are no surprises ; G. Does not end in litigation; H. Others? 6

8 Planning Quote #1 Begin with the end in mind. - Taken from 7 Habits of Highly Effective People 7

9 All of these should align with the successful end... Item Properly Aligned With Successful End? Organization s Present and Future Needs The Project Never lose sight of your organization s missions and obligations to the public. Are you building what you need? Do you have flexibility to make adjustments? Financing Project Delivery Method Protecting the Bidding Process Protecting the Bid Selection Contract Terms Conformed to Project Construction Activities What strings are attached, and is there flexibility to deal with the unexpected? Do you have the right parties with the everyone s interests properly aligned? Will you be able to select the right bidder (not just the lowest price)? Have you honored the selection criteria and selected the option most consistent with the desired outcome? Are they practical? Do they properly allocate risks? Is there flexibility to deal with the unexpected? Which parties are responsible for which construction activities and who is responsible to complete construction within project schedule and budget? 8

10 The Concept of Risk Allocation in Construction Contracts 9

11 Question to the Audience: How is Risk Typically Allocated Amongst the Parties to a Major Construction Project? A. To the party in the best position to control or avoid it. B. To the party in the best position to absorb the cost of it. C. To the party that did not carefully read the contract. D. All of the above. 10

12 Common Stakeholders in a Large Construction Project...

13 Design v. Construction Design services can be phased and often include conceptual, schematic or technical design, preparing construction documents and bid documentation, and representing owner during construction. Construction typically includes procurement and installation of equipment and materials, site work, control of the site, demolition or building of structures. Competitive bidding requirements of Georgia Local Government Public Works Construction Law (O.C.G.A et seq.) apply to public works construction contracts not professional services. Engineering and architectural services can be bid, but not always required (though local ordinances may require bidding). Design-Build (Engineering, Procurement and Construction) and Public Private Partnership contracts do include construction. 12

14 Example Common Causes of Disputes on Construction Projects Dealt With in Contract Provisions 13

15 Question for the Panel: Based on past experiences, what are examples of issues that gave you considerable concern or worry when planning a large infrastructure project? 14

16 The Concept of Project Delivery Methods 15

17 Project Selection and Delivery Method Design Bid Build 16

18 Project Selection and Delivery Method Design Build 17

19 Project Selection and Delivery Method Construction Manager at Risk 18

20 Project Selection and Delivery Method Public Private Partnership 19

21 Project Selection and Delivery Method Interesting Comments on Public Private Partnerships Governor Deal on May 2, 2011 in discussing his signing of Georgia SB 122 (authorizing public-private partnerships on Georgia water reservoirs, facilities and systems): This stretches public dollars by attracting partners to move forward with public works projects that will benefit the citizens of the state for generations. The lack of funding has hampered progress, even with a punishing drought in recent memory. This legislation will help us get projects moving before the next drought. President Obama during the 2013 State of the Union Address: And to make sure taxpayers don t shoulder the whole burden, I m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children. Let s prove that there is no better place to do business than the United States of America. And let s start right away. 20

22 Question for the Panel: Share with the audience any experiences you have had deciding between differing methodologies and any particular project characteristics that helped inform your decision. 21

23 Aligning the Bidding Process With A Successful End 22

24 Georgia Law on Competitive Bids 23

25 Project Delivery Methods And Georgia s Bidding Procedures - Taken from Project Delivery Options Volume 1 of 2, Georgia State Financing and Investment Commission 24

26 Project Delivery Methods And Georgia s Bidding Procedures - Taken from Project Delivery Options Volume 2 of 2, by Georgia State Financing and Investment Commission 25

27 Common Project Delivery Methods... - Taken from Owner s Guide to Project Delivery Options, Construction Management Association of America 26

28 Is Lowest Bid the Best? Little to no discretion to select second-lowest bid in sealed bid process: Approval of a process which favors the acceptance of the lowest bid is a constant theme expressed in cases decided by this Court. R.D. Brown Contractors, Inc. v. Columbia County B.O.E. However, local governments have meaningful discretion to instructions and conformity with bid instructions (i.e., whether a bid is responsive ) and to waive minor technical deficiencies in a bid. Id. So what is the lesson here? Bid instructions should be rigorous, comprehensive and require bidders to clearly articulate path to successful completion of project (including detailed work and payment schedules). 27

29 Georgia Law on Public Private Partnerships Bidding and Contracting Georgia SB 122 signed into law on May 2, 2011: - Amends O.C.G.A et seq. (government public works bidding) and O.C.G.A et seq. (environmental finance authority); - Allows public private partnerships for planning, financing, constructing, acquiring, operating, or maintaining certain water reservoirs, facilities, and systems; - Process includes multiple opportunities for public comment; - Bidders respond to written request for proposals; - Authority(ies) engages in discussions with respondents and narrows field; - Announcement of most meritorious proposals followed by period or competitive negotiations and award based on value and ability of final project s characteristics to meet goals consistent with state, regional and local comprehensive plans. 28

30 Planning Quote #2 Plans are nothing; planning is everything. - Dwight D. Eisenhower 29

31 Your Project Timeline Should Take Into Account the Necessary Planning... 30

32 Question for the Panel: Based on your past experiences, what is one aspect of project planning that you either underestimated on the front end, or wish you had understood better on the front end? 31

33 Planning Quote #3 "Everybody has a plan until they get punched in the face. - Mike Tyson 32

34 Helpful Resources: - Project Delivery Options Volumes 1 and 2, Georgia State Financing and Investment Commission - A Guidebook to Local Government Construction Projects, Association of County Commissioners of Georgia (3 rd Edition 2011) - Demystifying Construction Contracts, Building Profits, Construction Financial Management Association - Owner s Guide to Project Delivery Options, Construction Management Association of America 33

35 Questions? 2013 Duane Morris LLP. All Rights Reserved. Duane Morris is a registered service mark of Duane Morris LLP. Duane Morris Firm and Affiliate Offices New York London Singapore Los Angeles Chicago Houston Hanoi Philadelphia San Diego San Francisco Baltimore Boston Washington, D.C. Las Vegas Atlanta Miami Pittsburgh Newark Boca Raton Wilmington Cherry Hill Lake Tahoe Ho Chi Minh City Duane Morris LLP A Delaware limited liability partnership