Georgia Moving Towards D/B for Road Projects

The Atlanta Business Chronicle has an article this week alerting us that the Georgia Senate unanimously  passed a bill that would pemit the Georgia DOT to proceed with best value design build projects for road, rail, bridge, and building projects.  The bill is off to the House.

“It will enable DOT to produce better projects quicker and less expensive,” said Sen. Steve Gooch, R-Dahlonega, chairman of the Senate Transportation Committee and the bill’s chief sponsor.The legislation also would provide more flexibility in contracting by doing away with a requirement that contracts go to the low bidder. Instead, the agency could award design-build contracts based on “best value.”

Gooch said the best value approach considers factors besides price. For example, he said the DOT might approve a bid calling for more expensive but longer-lasting building materials.

“Sometimes, the low bid does not result in the lowest price because of the number of change orders,” added Sen. Judson Hill, R-Marietta.

The measure also would add technology systems to the types of projects that could be developed using design-build. Electronic message boards using fiber optics have been cropping up along interstate highways with growing frequency.

The bill, part of the DOT’s agenda for this year’s legislative session, now moves to the state House of Representatives.

Is anyone monitoring this bill in Georgia?  Tracy Vann, I'm looking at you.  

The Bite of Sequestration: State by State

Wells Fargo Securities has compiled a useful state-by-state tally of the effect of sequestration.

Excluded from the sequestration process are Social Security, Medicaid, civil and military employee pay or veteran benefits.

The report analyses where reductions in defense spending will fall (Hawaii and Alaska head the list) and where non-defense spending cuts will take the biggest bite (DC, Maryland, Virginia and New Mexico head the list). 

February Presentation: Profit Strategies on Cost Plus Contracts

Join us for our February Presentation on February 26, 2013, Noon Eastern Time. 

Joel Rhiner sets the table: 

Construction managers operate in a fragmented marketplace with numerous competitors, none of which possesses a significant share of the overall market.  Historically, the high level of competition has created a low margin environment for construction management firms.  Recently, construction managers have contracted on projects with stated fees that are even lower than historical standards.  Is this just a product of a weakened economy creating an even more competitive environment; or have contractors developed additional ways to create margins outside of the traditional stated fee?  Several different ways that contractors can bill for “costs” that enhance returns beyond the stated fee will be discussed.  A focus on the different contractual clauses that may either allow or disallow these costs will provide attorneys a better understanding on how construction managers are enhancing their returns.  In addition, an analysis of the allowable cost language within the contract will provide insight into the best ways to protect their client’s interests when drafting contracts.

John Bailey of the Veritas Advisory Group in Dallas will be our presenter. 

Aba february 2013_presentation from Roland_Nikles

"Two-Step Design Build"

The January 28, 2013 issue of ENR Magazine includes just two women in its list of top 25 newsmakers for 2012.  One of these is Lisa Washington, DBIA Executive Director.  Lisa earned the honor for spearheading an effort with the U.S. Army Corps of Engineers and other federal agencies to adopt a two-step proposal process for projects. 

The two-step design build proposal process first short-lists three firms rather than five or more, and uses performance-based rather than prescriptive requirements to evaluate competing proposals.  The process also encourages payment of meaningful stipends to offset proposal preparation costs for competing entities. 

[Under single step RFP's firms devote significant time and money on their designs with less chance of winning the work.  It stands to reason that under those conditions pricing will build in more contingencies and margins for error]

"More creativity at less cost is the real intent of design-build," Washington says.  "Some [owners] say single step is faster--it isn't--or that a [low-bid] number up front offers them best value--it doesn't"   

DBIA says design-build is now used on 40% of all U.S. projects, so the goal is to get industry to use it correctly.  Washington has been pushing design-build best practices during her nine-year DBIA tenure.  Revenue from DBIA's "Education Tour" program has grown to $1.4 million in 2011 from $30,000 in 2004.

20 Year Anniversary of DBIA!

The Design Build Institute of America celebrates its 20 year anniversary this year.  The Forum and our Division 4 was on the forefront of this development with the publication of our Design-Build Deskbook, currently in its fourth edition (2010), Kerry Kester, John Heisse, and James Schenck, IV editors. 

 DBIA

When DBIA was established in 1993, design-build authority at the state level was confined to Virginia. Today, only eight states limit public agencies' use of design-build procurement and there is not a single state in which design-build is not permitted in some limited fashion

Milestone: Bringing Design-Build to the States

When DBIA was established in 1993, design-build authority at the state level was confined to Virginia. Today, only eight states limit public agencies’ use of design-build procurement and there is not a single state in which design-build is not permitted in some limited fashion.

During DBIA’s first 12 years, members lobbied each statehouse to expand the delivery methods available to their agencies . Many within industry were wary of or resistant to this new method. From 1993 to 2001, the number of bills introduced in the states surged from just a few in the early years to 49. Even if these bills failed on the first or even the second attempt, visibility and awareness of design-build and DBIA was building.

In September 2002, DBIA released its first legislative tool kit for DBIA chapters and members. At that time, the delivery method was fully authorized in only a handful of states. The number of state bills exploded: In 2002, 143 were introduced and 52 passed. This trend continued until 2005, when 250 bills were introduced and 82 were enacted. By 2005, design-build was fully authorized in 16 states and widely permitted in 12 others.
While most states fully authorized design-build or widely permitted its use on building projects by 2005, the opposite was true in the transportation sector. In 15 states design-build was not authorized at all and in 13 states design-build was a limited option.

Design-build continued to lag in the transportation sector until 2009. At that time, DBIA made a concerted effort to expand design-build in the transportation sector and aimed its advocacy efforts at both the state and federal levels. Adding strength to DBIA’s push was passage of the American Recovery and Reinvestment Act (ARRA). It’s “shovel ready” mandate spurred statehouses into action. A record 100 design-build bills were enacted that year, the majority of which expanded design-build in the transportation sector. In January 2009, there were 13 states where design-build was not authorized and another 12 where it was a limited option. Within 10 months, the number of states without any DOT design-build authorization dropped to just eight.

Read the rest at DBIA.

Raising Taxes and Traditional Project Delivery

In 1979 California ushered in the anti-tax era in politics with passage of Proposition 13.  The nationwide anti-tax movement has stressed governments everywhere, and one consequence has been deferred maintenance and underinvestment in our infrastructure at the local, state, and national levels.  This is one of the reasons behind the growth of public private partnerships.  Governments have been looking for ways to have private investors fund infrastructure because they haven't had the money. 

PPP has been sold as a preferrable way to deliver infrastructure "because private development is more efficient and innovative."   But as demonstrated by the AOC's study for the Long Beach Courthouse, the metrics to prove this proposition are not very solid.  At the present time, hype, fashion, and lack of funds, more than hard metrics, is what dictates which project delivery system is selected.

Today, federal taxes are lower as a percent of GDP than at anytime since 1950 .  States, have similarly depressed tax revenues relative to their needs.  There is evidence, however, that additional revenues may be coming.  At the beginning of this year, the House of Representatives signed off on a tax rate increase for the wealthiest Americans.  And here is an article in the Wall Street Journal how state governors are starting to warm up to tax talk to fund infrastructure construction (quotation slightly condensed):

Republican governor Tom Corbett of Pennsylvania unveiled a plan Tuesday to generate nearly $5.4 billion in new revenue over five years by lifting a cap on gas taxes paid by wholesale gasoline dealers.

 Michigan's Republican Gov. Rick Snyder, who said infrastructure spending is a legislative priority for 2013, last month proposed raising both the gas tax and registration fees.

Democratic Gov. Deval Patrick of Massachussets wants to add $1.02 billion a year for transportation funding over the next decade. Last month, he proposed: raising gas tax, tolls and fees for vehicles that pollute more.

Virginia's Republican Gov. Bob McDonnell proposed scrapping the gas tax and increasing the sales tax to fund infrastructure needs

Two weeks ago, Wisconsin Republican Gov. Scott Walker's transportation-funding commission recommended raising the state's gas tax by five cents and creating a mileage-based registration fee for drivers. 

Remember that in 2003 the California electorate recalled Governor Gray Davis, in part because he had raised taxes on vehicle license fees.  Times they are a changing. 

As tax revenues increase with the improving economy and increased rates, states may have more flexibility in selecting which project delivery method they should adopt.  They will still be looking for solid metrics to decide which delivery method is best. 

Our Next Chair of Division 4

So this is not official until the annual meeting, and it won't take effect until September 1, 2013, but the governing committee has selected Arlan Lewis to be our next chair for Division 4.  As you can see, the women are swooning already ... This grainy photo was taken at the end of our Divison 4 dinner in Naples. 

Arlan will do a great job.  The dress standards will go up.  But the Division will be in good hands. 

Congratulations, Arlan ....

Ephemeral Naples

For its mid-winter meeting the Forum met at the Waldorf-Astoria, five miles up the beach from Naples.   Below and east of there is no-mans land: the Everglades, Ten Thousand Islands National Wildlife Refuge, Big Cypress National Park, and Florida Panther Wildlife Refuge.  Alligators prowl the highway known as Alligator Alley leading across to Miami.   They share apex predator status with Burmese pythons.  The snakes unlock their jaws and swallow baby alligators whole; the alligators snatch the snakes and devour them under water.

The Darwinian spirit infects local litigators too.  Arriving in Naples there was buzz at the Forum about the ongoing Tampa defamation trial against a local shock jock, Bubba the Love Sponge Clem.  The Plaintiff’s attorney visited a local steak house after court last week for dinner.   There, he was bemused by an attractive young woman.  Much drinking and flirting ensued.  At the end of the evening the woman asked if the attorney would please drive her car to her apartment, a short distance away, because she had consumed too much alcohol.  The gentleman obliged and was promptly arrested by the local police for drunk driving and was made to spend the night in jail.  The story is that the police had been alerted by the vixen and had been lying in wait for some time at her request.  Oh, and she was a paralegal for the defense firm.  This was all over the news with a non-sequestered jury.   At the trial court’s hearing on motion for mistrial—on the grounds that the publicity of the arrest must surely have contaminated the jury—it was confirmed that the woman had lied about the identity of her employer.  The paralegal and defense attorneys refused to answer questions, asserting their right against self-incrimination.  The judge refused to grant a mistrial.  As Kerry Kester might say, we are not in Nebraska anymore, folks.  And mind those snakes. 

A band of mangroves and a lagoon separate the hotel from the beach.  My room

afforded an expansive view across a long row of  condominium and hotel towers that line the Gulf of Mexico up and down the beach in this area.  One can imagine them watching out across the gulf, moment frame steel relics abandoned to hurricanes and a rising sea in the not too distant future.   Florida is flat.  The average elevation of Naples is less than 10 feet above sea level.  This week the waves lapped peacefully on a sliver of beach.  But far inland, on the way to the airport, I noted that construction excavations also exposed sand.  The landscape is covered with lakes and ponds.  Surface water is said to be just below the surface everywhere, and it won’t take much for this to be just above the surface.  So the state worries about global warming.  Predictions for sea level rise over the balance of this century vary from .5 feet to more than six feet.  Anyway it plays out, Florida will be affected more than most. 

Most of the construction in and around Naples took place after hurricane Donna made a direct hit on Naples and devastated the area in 1960.  My taxi driver on the way back to the airport says he arrived from Haiti fifteen years ago.  In 2002 to 2006 he drove cement trucks for Cemex.  “They paid me $1,050 per week,” he said.  “Things were really good.”  He speculated with the purchase of a plot of land for $12,000, but he couldn’t really afford it.  “Just pay me $2,000 and $100/month,” said the seller.  That worked out well.  In 2006 he sold the land for $60,000.  He promptly turned around and invested in two other lots for $25,000 each.  When the crash came, he was laid off by the cement company along with most other drivers, he lost one of his lots in foreclosure, and the other one is now worth $5,000.  “It’s not coming back the same,” he says. 

In the meantime, at the upscale Gulf Coast InternationalProperties website they are bullish: 

“It appears that the worst is behind us and the future is paved in (developing) dirt.  All across Southwest Florida the business of building is once again booming.  It’s not just a single-family home here and there in The Moorings or small multi family developments in Old Naples but the larger developers like D.R. Horton and GL Homes are making land purchases on a large scale.  In Lee and Collier county 2700 single and multi-family permits have been pulled.  In the City of Naples single-family permits are up more than 50% over last year according to the Naples Daily News.  If you drive through the streets of the downtown neighborhoods whether it be Port Royal, Aqualane Shores, or The Moorings, there is new construction everywhere you look.” 

There will be construction.  There will be actions for damages.  The humidity was low this week.  I saw no alligators, but I’m sure they were there just out of sight.