IOil and gas industry - refinery, factory, petrochemical plantt’s not every day that a decision by the United States Supreme Court has the potential to impact the construction industry. But the Court handed down a decision last month that could hinder the pace of power plant construction around the country. In Hughes v. Talen Energy Marketing, LLC, the Court unanimously struck down a Maryland regulatory program that provided subsidies to incentivize new power plant construction in the state. According to the Court, the program intruded on the federal government’s authority to regulate the interstate wholesale market for electricity. Because several other states have similar programs, more cases challenging state power plant construction incentives could be on the horizon.

Continue Reading Lights Out for Maryland’s Power Plant Construction Subsidy Program

Rails to TrailsThe Maryland Department of Transportation/Maryland Transit Administration (MDOT/MTA) recently announced its selection of Purple Line Transit Partners as the concessionaire for the new 16.2 mile, 21-station, light rail Purple Line that will run through Montgomery and Prince George’s counties. On April 6, 2016, the Maryland Board of Public Works, comprised of Governor Larry Hogan, Treasurer Nancy Kopp, and Comptroller Peter Franchot, unanimously approved the public private partnership agreement with Purple Line Transit Partners.

We have been following the development of this project for several years. In 2013, Maryland identified it as the first P3 project under new legislation that updated its Public Private Partnership law to facilitate the use of P3s.

There were questions about the viability of the project in 2014 during the gubernatorial election cycle. But after taking office in January 2015, Governor Larry Hogan gave conditional approval to a reduced-cost version of the Purple Line project and outlined three criteria for approval of the project: (1) additional financial support from Montgomery and Prince George’s counties; (2) reserved federal funding; and (3) aggressive pricing from the successful team. Montgomery and Prince George’s counties pledged $330 million in cash and non-cash contributions to the project. The federal government reserved approximately $900 million for the project, with $125 million recommended for FY 2017. Finally, the initial state expenditure for construction cost was reduced by $8 million to $159.8 million, and the amount of the average annual availability payments was reduced by $18 million to $149 million per year over thirty (30) years. As a result, the project is reportedly coming in $550 million below prior estimates, and the Governor approved moving forward with the project.

Continue Reading Maryland Approves P3 Contract for Purple Line Light Rail Project

In some states, courts allow contractors to sue design professionals for negligence even in the absence of a contract. In others, like Maryland, courts apply a rule known as the Economic Loss Rule (ELR) to bar such claims. Courts apply the ELR when, without a contract in place, someone sues another for purely financial losses (i.e., not for personal injuries or property damage). The ELR is very important in the construction world because contractors who sustain losses that they attribute to substandard design documents often sue the design professional who prepared the plans and specifications, even though they rarely have a contract with the designer.

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In a recent case – Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP – the Maryland Court of Special Appeals (“Court”) reaffirmed the ELR and rejected various claims brought by a contractor against a design professional. The Balfour Beatty Infrastructure case involved a public works project for the City of Baltimore (“City”). The City entered into contracts with the design and engineering firm Rummel Klepper & Kahl, LLP (“RK & K”) to upgrade a water treatment plant. The City also entered into a contract with Balfour Beatty Infrastructure, Inc. (“Balfour”) to build the upgrades. Balfour did not have a contract with RK & K. Due to a series of design errors, Balfour suffered delays during construction and performed additional work that it attributed to the design errors. Based on these facts, Balfour sued RK & K for professional negligence and negligent misrepresentation, alleging that RK & K supplied false information to prospective bidders and failed to establish a  reasonable contract duration.

Continue Reading Can a Contractor Sue a Design Professional Without a Contract? Not in Maryland

New Proposed Legislation Would Require Bond: If House Bill 1488 becomes law in Maryland, bid protesters of state contracts appealing a decision to the Maryland Board of Contract Appeals would be required to simultaneously submit a “protest appeal bond or other form of acceptable security” along with their bid protest appeal. For mid-sized and large businesses, the bond would be required to be in an amount equal to 5 percent of the estimated value of the contract being protested – including base term and options. For small businesses, the proposed legislation would require a protest appeal bond in an amount equal to 1 percent of the estimated value of the contract being protested (including base term and options).

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If You Lose, The State Keeps The Cash: HB 1488 provides that if the Appeals Board affirms the unit’s procurement decision (or if the appeal is dismissed) the appeal bond (or other form of acceptable security) “shall be deposited into the General Fund of the State.” In other words, if you lose, your bond is forfeit to the State. If the protest appeal is successful, the appeal bond or other form of acceptable security would be returned to the protestor.

Chilling Effect: If House Bill 1488 becomes law, it will likely have a dramatic effect on the number of appeals filed. Indeed, the number of legitimate protests filed would most assuredly decline.

House Bill 1488 was first introduced and read for the first time on February 24, 2014. Cohen Seglias will continue to monitor the status of House Bill 1488.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

The Maryland Department of Transportation/Maryland Transit Administration (MDOT/MTA) recently announced that four of the six teams that submitted qualification statements will be permitted to submit proposals to design, build, finance, operate, and maintain the Purple Line light rail public private partnership (P3) project that will run from Bethesda to New Carollton in Montgomery and Prince George’s counties. The short-listed teams are:

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Maryland Purple Line Partners, comprised of Vinci Concessions, S.A.S.; Walsh Investors, LLC; InfraRed Capital Partners, Limited; Alstom Transport SA; and Keolis SA;

Maryland Transit Connectors, comprised of John Laing Investments Limited; Kiewit Development Company; and Edgemoor Infrastructure & Real Estate LLC;

Purple Line Transit Partners, comprised of Meridiam Infrastructure Purple Line; Fluor Enterprises, Inc.; and Star America Fund GP LLC; and

Purple Plus Alliance, comprised of Macquarie Capital Group and Skanska Infrastructure Development, Inc.

Transportation Secretary James T. Smith, Jr. said, “These teams clearly demonstrated their qualifications to deliver this important project in their responses to our Request for Qualifications.” MTA Administrator Robert L. Smith said, “We were quite pleased with the overall response. The interest expressed by so many well-regarded companies is a testament to both the value of the Purple Line as a transportation asset and the power of public-private partnership to deliver value for citizens over a long period.” The other two teams were M-PG Connect, LLC, comprised of Plenary Group USA, Ltd. and Bechtel Development Company, Inc., and Purple Line Development Partners, comprised of CSCEC and United Labor Life Insurance Company, Inc.

Many of the shortlisted teams have prior experience with P3 transit projects. Members of the Purple Line Transit Partners and Purple Plus Alliance teams – Fluor and Macquarie – were part of the successful team on Denver’s Eagle P3 light rail project, which is the first design, build, finance, operate, and maintain (DBFOM) transit concession that successfully closed in the United States (it is currently about mid-way through construction and scheduled to complete in 2016). John Laing Investments of the Maryland Transit Connectors team was also involved in the Eagle P3 project. It bought out Macquarie’s interest when its financing closed in August 2010.

The Purple Line shares many similarities with Denver’s Eagle P3 rail project, including using the DBFOM model and planning to make “availability” payments to the successful concessionaire over the term of the concession. Availability payments are annual payments that commence after the light rail line is operational and reimburses the concessionaire for its financial investment in the project. Deductions can be made from the payments if the concessionaire does not meet predetermined performance targets, such as on-time performance, vehicle cleanliness, and customer service.

The next step is for MDOT/MTA to issue a request for proposals to the shortlisted teams, which is anticipated in the spring, with the target for proposal submissions by the teams in the fall 2014. We will continue to monitor these exciting P3 developments in Maryland and throughout the country, and we are available to assist organizations interested in P3s.

Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.

Maryland recently issued its Request for Qualifications (“RFQ”) for the Purple Line light rail transit project, Maryland’s first public-private partnership (“P3”) under Maryland’s revised P3 law that took effect July 1, 2013. As we have previously reported, the Purple Line light rail transit project is planned to run through Montgomery and Prince George’s counties from Bethesda to New Carrollton, Maryland. Maryland intends to solicit a single private partner who will be responsible for designing, constructing, operating, and maintaining the project. The private partner will also help finance a portion of construction.

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The deadline for qualification submissions by interested concessionaires is December 10, 2013 at 12:00 p.m. EST. The Maryland Department of Transportation and the Maryland Transit Administration intend to review the responses and announce up to four shortlisted proposers in January 2014. After potential concessionaires are shortlisted, the plan is to circulate the first industry review draft of the request for proposals (“RFP”) to the shortlisted proposers in January 2014. The second industry review draft of the RFP is anticipated in March 2014, along with the pre-approval of vehicle suppliers submitted by the proposers. Maryland currently plans to issue the final RFP in May 2014, with a proposal due date of October 2014, award and execution of the P3 agreement in the winter 2014/2015, and financial closing in the spring 2015.

We will continue to monitor and report on these exciting P3 developments in Maryland and throughout the country.

Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.

Last week, the construction law section of the American Bar Association held its annual Fall Meeting. The program, held in Washington, DC, was entitled “Capital Projects: P3s, Design-Build, and Beyond.” The ABA Forum on the Construction Industry presented a well-run, compelling program that addressed many of the complex issues involving public-private partnerships (P3s).

Speakers explored various aspects of P3s at the state and federal level. They addressed the basics of P3s, including the variety of alternative project delivery systems (including design-build, design-build-operate-maintain, design-build-finance-operate, design-build-own-operate), the mechanics of how P3s work, and the perspectives and roles of general contractors, subcontractors, and design professionals. The speakers also addressed more complicated matters such as financing opportunities and challenges, payment security, federal “flow down” requirements and implications (such as Buy America, Davis-Bacon, etc.), and LEED/green issues for contractors and design professionals.

Some of the many takeaways from the day and a half program included:

• P3s not only generally shift risk from public owners to the private entities involved – the concessionaire and the design build contractor, but also shift control to these private parties for the design, and potentially, the operation and maintenance of the public asset.

• Early collaborative efforts in P3s involving design professionals, the design builder, and end users can result in a shorter construction schedule and other cost savings.

• Subcontractors and suppliers continue to have concerns regarding payment security:

• Although Maryland’s recently revised P3 statute includes a requirement for payment and performance bonds under the state’s Little Miller Act, not all P3 enabling statutes provide such security.

• Moreover, because the typical structure of P3s involves a public owner, a concessionaire, a design-build contractor, and trade subcontractors and suppliers, a concessionaire is often in the position of “contractor” and the design-build contractor as a “subcontractor” under the applicable mechanic’s lien and bond statutes. This effectively eliminates an entire tier of subcontractors/suppliers from protection under such statutes.

• Design professionals are working more frequently with or for contractors as part of design-build teams. This creates more opportunities to work hand-in-hand with the people who will build (and potentially, operate and maintain) the project, and also creates challenges involving the design professional’s liability – in particular, insurance coverage.

The potential benefits of utilizing P3s are undeniable:

• Access to private funding for public projects that could not otherwise proceed without additional sources of funding;

• Application of the strength of the private sector throughout the entire course of the project, including more flexible financing, advanced construction techniques, and project development and operational efficiencies that are not normally available on purely public projects; and

• Focus on energy efficient design and life-cycle costs because the entity responsible for designing and building the project is often also responsible for operating and maintaining the project for 20-30 years after construction.

While there has been increasing publicity involving P3s and the opportunities they present to address infrastructure and other public needs, enthusiasm must be tempered by obstacles that remain, including:

• P3 legislation differs from state to state. In some cases, the legislation must be amended to provide further flexibility for public entities to address their needs.

• For P3s to become reality, political support is critical. Further education of public officials and the local population on P3s is essential to obtain approval and support.

• There are significant transaction costs, which creates challenges for, and potentially prevents, the use of P3s on all but the largest projects. One solution is for the public entity to “bundle” a number of similar projects together as one P3.

• The absence of standard form agreements for P3s results in higher transaction costs for negotiating the various contract agreements.

We continue to track these exciting developments involving the use of public-private partnerships, and are available to assist organizations interested in P3s.

Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.

Risk is unavoidable. It doesn’t matter what part of a project you are involved in or if you are the architect, engineer or contractor. What does matter is having a plan because risk management brings value to your company’s work and the project as a whole. Join our Senior Counsel, Jennifer M. Horn, on Tuesday, October 1st for a seminar to discover how you can manage the technical, legal and financial risks when collaborating on a BIM project. Attendees will have the opportunity to network with panelists and other AEC professionals. Event Details: BIM.jpg Date: Tuesday, October 1, 2013 Time: 3:30 p.m. – 7:30 p.m. Location: The Grand Lodge of Maryland 304 International Circle Cockeysville, MD 21030 Cost: $60.00 per person Registration: To register for the event please click here. Earn Education Credits: Earn (2) AIA Health Safety and Welfare Education Credits Earn (2) Engineering RCEP Education Credits

As our readership knows, states are increasingly looking to public-private partnerships as a means of construction and development.  Maryland is one such state.  We previously reported that Maryland had revised its existing public private partnership (“P3”) law to encourage public-private project development in Maryland and address Maryland’s infrastructure needs.

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Governor Martin O’Malley has announced Maryland’s first P3 project under the new law, only one month after the law took effect.  Maryland is seeking a builder and an operator for the estimated $2.2 billion Maryland National Capital Purple Line light rail transit project that is planned to run through Montgomery and Prince George’s counties from Bethesda to New Carrollton, Maryland.  Maryland intends to solicit a single private partner who will be responsible for designing, constructing, operating, and maintaining the project, and the private partner will also help finance a portion of construction.  In return, the state plans to offer annual payments over a 35-year contract period (five years of construction and thirty years of operation).

Maryland is set to commit $400 million in construction funding to the project, which contemplates 21 stations along the route, including funding for county bus service, new intersections, and other road work.  Maryland also plans to commit $280 million for final design work and right-of-way acquisition.  The state is also hoping for about $900 million from the federal government to help construct the project.  The Maryland Department of Transportation’s Maryland Transit Administration (“MTA”) anticipates that private funding will be in the range of $400-900 million. The Governor estimates that the project could create more than 9,700 jobs for Montgomery County.

The Look Ahead

After the MTA received strong marketplace interest in a P3 for the Purple Line, the Maryland Department of Transportation issued a Pre-solicitation Report to the Maryland General Assembly in accordance with the revised P3 law.  Though Maryland must still jump through a number of administrative and procedural hoops before the project transitions from paper to reality (e.g., budget committee and Board of Public Works review and approval), it is anticipated that a request for proposals will emerge in the coming months.  A final request for proposals is not expected until Spring 2014, and construction is tentatively planned to commence in the Summer 2015 with completion in the Summer 2020.

The Purple Line light rail project is the first transportation-based P3in Maryland and represents an exciting opportunity in public-private construction in Maryland.  Maryland’s other P3 projects include the expansion of the Port of Baltimore and the redevelopment of two travel plazas along Interstate 95.

Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.

Jennifer M. Horn will be participating in a panel discussion focused on how you can manage the financial, legal, and technical liabilities and risks when using Building Information Modeling (BIM).

Reserve your seat today!

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Event Details:

Wednesday, June 12, 2013

Time:

3:30 p.m. to 7:30 p.m.

Location:

The Grand Lodge of Maryland

304 International Circle

Cockeysville, MD 21030

Cost:

$60.00 per person

Registration:

To register for the event please click here.