Insurance Implications for Alternative Project Delivery

At the Boston meeting, Gregg Bundschuh of Greyling Insurance and Christopher DeBruin of Suffolk Construction Co. gave a presentation on new trends in insurance.  Some of the issues they highlighted are important when considering alternative project delivery methods.  In this post, I'll summarize Gregg and Chris' tips for structuring insurance for alternative delivery projects.

Integrated Project Delivery

A key insurance problem posed by IPD is that the contractual risk-sharing model for IPD participants is typically a no-fault model---risks (and costs) are shared among the participants without regard to fault or negligence.  Insurance, however, is typically keyed to notions of fault and negligence, and therefore traditional insurance policies are often a bad fit for an IPD project.  A further complication is posed by third-party claims---all project participants are liable for a third-party claim, no matter who caused the problem.  Again, this is an approach at odds with traditional insurance.  While the right insurance solution will vary from project to project, common ingredients will be a CIP (OCIP or CCIP) package of CGL, auto, BR, and pollution with broad subrogation waivers, and a custom-tailored PL policy.

Design Build

Gregg and Christopher highlighted the importance, and usefulness, of Contractors Professional Liability (CPL) insurance in a DB setting.  CPL provides two distinct but important coverages.  Part A provides coverage to the contractor for third-party claims arising out of alleged design errors by the contractor.  It effectively operates, for the contractor, as PL insurance does for the designer.  Part B provides coverage to the contractor for its own costs incurred as a result of errors and omissions made by the designer.  The designer's PL policy must be exhausted before Part B coverage will kick in, but Part B coverage also affords "difference in coverage" protection, and if the designer's PL policy excludes costs that the CPL would afford coverage for, the CPL will kick in and pay those costs regardless of exhaustion of the PL policy.  This helps cover common PL exclusions like mold, pollution, and residential projects.

P3

Unfortunately, I simply cannot do justice to the extensive discussion devoted to P3 insurance considerations.  Suffice it to say, for projects of the magnitude typical for a P3, the insurance issues are legion, and no one would ever expect to perform a P3 project without first crafting a project-specific stack of insurance custom-tailored to the particular risks that project posed.  For those interested in far greater detail, I recommend a detailed review of Gregg and Chris' written materials.

Learning how to do PPP Infrastructure Right from Denver RTD

Pranaya Shresta gave an excellent presentation of the project delivery approach slected by the Denver Regional Transportation District's for its $2.2 billion FasTracks project.  The project includes 122 miles of new commuter and light rail, 50 stations, and 31 new Park and Ride facilities creating 21,000 parking spaces.  The project is slated to open to riders in 2016, but so far it looks like this project will set an example of how to do PPP infrastructure right in the United States.

Aba forum division_4_aurora_light_rail_presentation_shresta_2012_11_27 from Roland_Nikles

The attached power point gives an overview of the system and how the work was delivered.  Pranaya stressed that the RTD worked hard up front to get buy in from all affected municipalities, and commitments were successfully tied down in an Intergovernmental Agreement before contracts were awarded.

The private public partnership includes about $400 million of financing from the design-build contracting team, which will also operate the facility for 29 years.   The project was expanded this past summer as a result of a successful unsolicited proposal received from Kiewit Infrastructure Company to add the 10.5 miles I-225 Rail Line.

The RTD is extraordinarily open and willing to share its lessons learned and experience.  If you are working on a project in your area, you will want to learn from Denver's experience.

Thank you to Pranaya Shresta, and to Jeff Jackmond for setting up this presentation.

Skinny Residential Towers Rise Again

My friends Jeff and Geraldine live a charmed life that we in the trenches can only dream about.  Jeff is a mathematics professor at University of Michigan and has spent the past couple of decades on a circuit that includes summers at their North Michigan cabin, fall semesters teaching at U Michigan, winter terms teaching at the Sorbonne in Paris, and spring terms teaching at the University of Pisa.  Through it all, Geraldine has maintained a very interesting blog, Travel Oyster.

One of Geraldine's posts was on the residential towers of Pisa.  In Pisa in the 1200's, hemmed in by defensive city walls, it was the fashion of wealthy Pisans to construct pencil thin, tall residential towers.  Casa torres.  Galileo lived in one of them and showed the moons of Jupiter to Cosime II de Medici through his newly perfected telescope from the balcony. 

After 60 years of suburban expansion we are migrating back to the cities, and even though we are no longer hemmed in by city walls, space is at a premium and we are once again building tall residential towers.  In San Francisco, at the west approach to the Bay Bridge, the One Rincon Hill tower stands guard over an endless stream of taillights still heading to the suburbs at the end of the work-day.  This luxury tower was completed in 2008 and is now 97% occupied.

 In this Wall Street Journal article, Eliot Brown writes:

In New York, Tel Aviv, Vancouver and other cities around the globe, skinny apartment towers are on the rise, sprouting like luxury beanstalks from small lots—some only as wide as a handful of townhomes.

... While thin towers already crowd the skyline in land-starved cities like Hong Kong, developers elsewhere generally eschewed the slim structures, opting for larger, more stable floors—typically at least 10,000 square feet for tall buildings. But that's been changing lately. In New York, work has begun on the planned tower at 432 Park Ave., designed by architect Rafael Viñoly, that is expected to have approximately 8,250-square-foot floors and is slated to rise to about 145 feet taller than the Empire State Building. Just one block south of Central Park, the 1,004-foot-tall One57—which saw its crane break during superstorm Sandy—is under construction, with floors as small as 6,240 square feet. And the Cetra/Ruddy-designed One Madison Park, a 597-foot tower with 3,300-square-foot floors, is nearing completion.  ....

Building high, of course, gets expensive. As the floor count goes up, steel takes longer to lift and high winds can stall construction. Slender towers need a giant device, called a damper, toward the top to counter sway from wind. Without such features, buildings could rock to the point of making residents motion-sick.

"It's definitely not easy or cheap," said Michael Stern, managing partner of JDS Development Group, which is planning to soon start construction on a 679-foot tower on a lot just 43-feet wide down the block from One57. Rising high-end apartment prices, he said, have helped make such buildings possible.

Technology has also helped give rise to the buildings. For instance, the material of choice for apartment towers, steel-reinforced concrete, is more than twice as strong as a generation ago. Software in engineering offices can much better predict issues like how much a tower might sway, allowing for more efficient buildings with fewer columns.  "Ten years ago, the tools were a lot rougher," said Ahmad Rahimian, chief executive at WSP Cantor Seinuk, a structural-engineering firm that's currently working on at least a half-dozen narrow, tall apartment towers. "It's getting a lot more sophisticated."

Fetching a premium price of up to $90 million dollars for some penthouses, these towers, like the casa torres of old are upscale abodes for the masters of the universe, and living there is something that most of us can only dream about.

Fast Fish, Loose Fish

I hooked an interview with the general counsel of a major institution for a large case the other day.  I felt like some great fisherman upon the sea.  I had great recommendations from clients and from a trusted friend of the general counsel I interviewed with; I had the Construction Defects book for which I am lead editor hot off the presses to hand out as a party favor.  That fish should not have gotten away.  So I kick myself for not being sufficiently suave, too free in my assessment of a difficult case, too myself with someone who didn’t know me.

I was thinking of this on a jog, listening to Moby Dick.  This being the Wednesday after the election I was also musing on polls, the scramble for votes, and full of empathy for dashed hopes. Loose fish. 

And then Melville explained all: 

The allusion to the waif-poles in the last chapter but one, necessitates some account of the laws and regulations of the whale fishery, of which the waif may be deemed the grand symbol and badge.

It frequently happens that when several ships are cruising in company, a whale may be struck by one vessel, then escape, and be finally killed and captured by another vessel; and herein are indirectly comprised many minor contingencies, all partaking of this one grand feature. For example,- after a weary and perilous chase and capture of a whale, the body may get loose from the ship by reason of a violent storm; and drifting far away to leeward, be retaken by a second whaler, who, in a calm, snugly tows it alongside, without risk of life or line. Thus the most vexatious and violent disputes would often arise between the fishermen, were there not some written or unwritten, universal, undisputed law applicable to all cases.

Perhaps the only formal whaling code authorized by legislative enactment, was that of Holland. It was decreed by the States-General in A.D. 1695. But though no other nation has ever had any written whaling law, yet the American fishermen have been their own legislators and lawyers in this matter. They have provided a system which for terse comprehensiveness surpasses Justinian’s Pandects and the By-laws of the Chinese Society for the Suppression of Meddling with other People’s Business. Yes; these laws might be engraven on a Queen Anne’s forthing, or the barb of a harpoon, and worn round the neck, so small are they.

I. A Fast-Fish belongs to the party fast to it.

II. A Loose-Fish is fair game for anybody who can soonest catch it.

But what plays the mischief with this masterly code is the admirable brevity of it, which necessitates a vast volume of commentaries to expound it.

First: What is a Fast-Fish? Alive or dead a fish is technically fast, when it is connected with an occupied ship or boat, by any medium at all controllable by the occupant or occupants,- a mast, an oar, a nine-inch cable, a telegraph wire, or a strand of cobweb, it is all the same. Likewise a fish is technically fast when it bears a waif, or any other recognized symbol of possession; so long as the party wailing it plainly evince their ability at any time to take it alongside, as well as their intention so to do.

 These are scientific commentaries; but the commentaries of the whalemen themselves sometimes consist in hard words and harder knocks- the Coke-upon-Littleton of the fist. True, among the more upright and honorable whalemen allowances are always made for peculiar cases, where it would be an outrageous moral injustice for one party to claim possession of a whale previously chased or killed by another party. But others are by no means so scrupulous.

Some fifty years ago there was a curious case of whale-trover litigated in England, wherein the plaintiffs set forth that after a hard chase of a whale in the Northern seas; and when indeed they (the plaintiffs) had succeeded in harpooning the fish; they were at last, through peril of their lives, obliged to forsake not only their lines, but their boat itself. Ultimately the defendants (the crew of another ship) came up with the whale, struck, killed, seized, and finally appropriated it before the very eyes of the plaintiffs. And when those defendants were remonstrated with, their captain snapped his fingers in the plaintiffs’ teeth, and assured them that by way of doxology to the deed he had done, he would now retain their line, harpoons, and boat, which had remained attached to the whale at the time of the seizure. Wherefore the plaintiffs now sued for the recovery of the value of their whale, line, harpoons, and boat.

Mr. Erskine was counsel for the defendants; Lord Ellenborough was the judge. In the course of the defence, the witty Erskine went on to illustrate his position, by alluding to a recent crim. con. case, wherein a gentleman, after in vain trying to bridle his wife’s viciousness, had at last abandoned her upon the seas of life; but in the course of years, repenting of that step, he instituted an action to recover possession of her. Erskine was on the other side; and he then supported it by saying, that though the gentleman had originally harpooned the lady, and had once had her fast, and only by reason of the great stress of her plunging viciousness, had at last abandoned her; yet abandon her he did, so that she became a loose-fish; and therefore when a subsequent gentleman re-harpooned her, the lady then became that subsequent gentleman’s property, along with whatever harpoon might have been found sticking in her.

Now in the present case Erskine contended that the examples of the whale and the lady were reciprocally illustrative to each other. 

These pleadings, and the counter pleadings, being duly heard, the very learned Judge in set terms decided, to wit,- That as for the boat, he awarded it to the plaintiffs, because they had merely abandoned it to save their lives; but that with regard to the controverted whale, harpoons, and line, they belonged to the defendants; the whale, because it was a Loose-Fish at the time of the final capture; and the harpoons and line because when the fish made off with them, it (the fish) acquired a property in those articles; and hence anybody who afterwards took the fish had a right to them. Now the defendants afterwards took the fish; ergo, the aforesaid articles were theirs.'

A common man looking at this decision of the very learned Judge, might possibly object to it. But ploughed up to the primary rock of the matter, the two great principles laid down in the twin whaling laws previously quoted, and applied and elucidated by Lord Ellenborough in the above cited case; these two laws touching Fast-Fish and Loose-Fish, I say, will on reflection, be found the fundamentals of all human jurisprudence; for notwithstanding its complicated tracery of sculpture, the Temple of the Law, like the Temple of the Philistines, has but two props to stand on.

Is it not a saying in every one’s mouth, Possession is half of the law: that is, regardless of how the thing came into possession? But often possession is the whole of the law. What are the sinews and souls of Russian serfs and Republican slaves but Fast-Fish, whereof possession is the whole of the law? What to the rapacious landlord is the widow’s last mite but a Fast-Fish? What is yonder undetected villain’s marble mansion with a doorplate for a waif; what is that but a Fast-Fish? What is the ruinous discount which Mordecai, the broker, gets from the poor Woebegone, the bankrupt, on a loan to keep Woebegone’s family from starvation; what is that ruinous discount but a Fast-Fish? What is the Archbishop of Savesoul’s income of L100,000 seized from the scant bread and cheese of hundreds of thousands of broken-backed laborers (all sure of heaven without any of Savesoul’s help) what is that globular 100,000 but a Fast-Fish. What are the Duke of Dunder’s hereditary towns and hamlets but Fast-Fish? What to that redoubted harpooneer, John Bull, is poor Ireland, but a Fast-Fish? What to that apostolic lancer, Brother Jonathan, is Texas but a Fast-Fish? And concerning all these, is not Possession the whole of the law?

But if the doctrine of Fast-Fish be pretty generally applicable, the kindred doctrine of Loose-Fish is still more widely so. That is internationally and universally applicable.
What was America in 1492 but a Loose-Fish, in which Columbus struck the Spanish standard by way of wailing it for his royal master and mistress? What was Poland to the Czar? What Greece to the Turk? What India to England? What at last will Mexico be to the United States? All Loose-Fish.

What are the Rights of Man and the Liberties of the World but Loose-Fish? What all men’s minds and opinions but Loose-Fish? What is the principle of religious belief in them but a Loose-Fish? What to the ostentatious smuggling verbalists are the thoughts of thinkers but Loose-Fish? What is the great globe itself but a Loose-Fish? And what are you, reader, but a Loose-Fish and a Fast-Fish, too?
 

Adding Rings to the City of Houston

I'm reading through the 10/15/12 issue of ENR, and note that the Texas DOT is adding another ring road for the city of Houston, a 184 mile outer  loop.  Three segments (37 miles) were awarded on September 27, 2012 to Zachary-Oderbrecht.  This $1.04 billion contract includes 50 bridges, frontage roads, and drainage and utility infrastructure. 

Ring roads circle the center, they allow movement and development along the periphery.  They sniff about the center.  My relatives lived on the sixth Ringstrasse in Vienna before WWII.  We recently visited the building they used to own and found the daughter of the caretaker still remembering the grandparents.  That ring road was built outside the original city walls in open space that once was reserved for military parade grounds.  Ring roads strike me as the opposite of Roman city roads, which emanate from the city center and are outward looking.  

The poster at left was produced by the Rice School of Architecture, located in Houston. They collected ring roads from 27 international cities and layered them all at the same scale.  As it turned out, Houston has the largest system of those they surveyed, with Beijing  second.  With unlimited space to expand into, Houston, like the great sequoias out west, marks its age with rings.

Texas Senate Bill 1420 granted TxDOT the authority to develop the Grand Parkway through public-private partnership.  Some notable features are that the DOT, at its election, may choose to have the contractor provide 15 years of maintenance of the road after completion.   Zachary-Oderbrecht submitted a wide variety of alternate technical concepts for consideration by DOT, and 10 of these were approved and incorporated in the proposal. 

Design work will begin shortly, and construction is slated to start in early 2013. 

Does anyone have information on the awarding process?  How many proposals, etc.?  This will be a toll road, but the article does not indicate who is providing the financing, or how the revenue risk is allocated. 

If you have information, join the conversation.