Design-Build and Public Private Partnerships

A recent California case may force engineering, procurement and construction companies doing business with foreign suppliers to reconsider—and maybe rewrite—their contracts. In Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd., the California Court of Appeal held that parties may not contract around the formal service requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents, commonly referred to as the Hague Service Convention. The decision could have profound implications for international business.
Continue Reading EPC Contractors Procuring from Foreign Companies need to Reconsider their Contracts

Contractors may benefit in making a small equity investment in the projects they construct. The financial benefit can arise from the investment itself and from improved understanding and communication with the owner during construction itself.

In the past, it was not unusual for construction companies to make small equity investments in the projects they worked on. For example, a construction company building a power plant would take a 5% equity interest in the project. By taking a financial stake in the project, contractors planned to protect their business interest in the project. That was the theory, anyway. Many of these investments did not provide the good returns; often-times the return was negative. While the construction company’s management was great at operating the construction business, it was not so great when it came to the financing business. So the idea went out of fashion.
Continue Reading Contractors May Benefit by Taking Equity in the Project They are Constructing

In 2009, the California legislature amended Section 143 of the Streets and Highways Code and greatly expanded availability of the public-private partnership (“P3”) as a mechanism to finance transportation infrastructure projects. In early 2010, under the authority of the newly amended Section 143, the California Department of Transportation (“CalTrans”) began to implement part of the Presidio Parkway Project (“Project”) as a P3.
Continue Reading Public Private Partnership Upheld For Construction of Presidio Parkway

By Meredith A. Jones-McKeown

Most Local Governments Can Now Use Design-Build Methodology on Projects Over $1 Million

All cities can now use design-build project delivery systems for buildings with a value above $1 million. For solid waste management and wastewater treatment facilities, a pilot program also allows cities, counties, and special districts to use the design-build method on 20 such projects if valued above $2.5 million. Assembly Bill 642, codified at Public Contract Code §§ 20175.2 and 20193, took effect January 1, 2009. Existing law (Public Contract Code § 20133) already authorizes counties to use the design-build methodology for building and wastewater projects over $2.5 million.
 Continue Reading Two New Laws Create More Design-Build Opportunities for Local Governments and State Agencies

This article is part one of a series of three articles by the author regarding public-private partnerships.

By Edward B. Lozowicki

At an increasing rate, state and local governments are considering public-private partnerships, or "P3s," to finance, design and build public infrastructure projects. A P3 refers to a contractual agreement between a public agency and a private entity, whereby the private entity provides the financing, design, development, construction, operation, and/or maintenance of a public infrastructure project. It could be said that the trend in the U.S. toward P3 financing structures began in 1989, when California enacted Assembly Bill 680, authorizing P3s for several transportation projects and leading to the construction of two toll roads in Southern California. Today more than half the states have P3-enabling legislation, and P3s are being considered for an increasing number of projects. Canada has likewise seen the growth of P3s in recent years, with 27 such projects reaching financial closing between 2004 and 2007. Indeed, Canada now has a federal P3 office, and P3 agencies in Quebec, Alberta, Ontario and British Columbia.Continue Reading Public-Private Partnerships: A Growing Trend (Part I)

This article is part two of a series of three articles by the author regarding public-private partnerships.

By Edward B. Lozowicki 

The advent of public-private partnership agreements in turn gives rise to potential conflict with other statutes regulating procurement of public works projects. For example, is the P3 infrastructure project a "public work," and are "public funds" used to fund the project? If the answer to one or both of these questions is yes, then the private entity may incur liability if the design, construction and/or operation of the project would result in the violation of any local regulations pertaining to public works. For example, a "public work" could be subject to state prevailing wage laws, whereas a privately funded work would not.[1] Thus, the definition of "public work" and "public funds" as applied to P3s may lead to litigation if not addressed up front.Continue Reading Public-Private Partnerships: Potential Conflicts With Prevailing Wage Laws (Part II)

This article is part three of a series of three articles by the author regarding public-private partnerships.

By Edward B. Lozowicki 

In the United States, public contracts are generally subject to the competitive bidding process as a matter of public policy. This is considered the best way to serve the public interest, if for no other reason than to save the taxpayer money by securing construction services at the lowest possible cost. With the growth of P3s, however, local governments are more likely to apply alternative approaches for procurement, which in turn face criticism, and challenges in court.  Continue Reading Public-Private Partnerships: P3s and Competitive Bidding Laws (Part III)