Florida Construction Law Authority : Florida Construction Lawyer & Attorney: Becker & Poliakoff Law Firm: Construction Law

In my last post, I summarized the first half of my interview with Jane Garvey, the North American chair of Meridiam Infrastructure, one of the country’s leaders in public/private partnerships (“P3”). Here is the rest of the information she provided in that interview.

I asked her about the effect on P3 momentum caused by the Legislature’s failure to pass the P3 legislation during the last session. Most P3 participants, especially investors, would tell you comprehensive P3 legislation is critical to attract investments in P3 jobs because they create or advance the perception of stability in the P3 process. Many public owners are unsure of how to embark on P3 projects and, in the absence of comprehensive legislation to guide them, they tend to wallow around a bit, adding time, cost and anxiety to the process. Legislation tends to coalesce and educate public entities, prompting them to develop stable structure within their agencies to better anticipate and handle P3 opportunities. The failure of the Florida Legislature to pass P3 legislation during this past session disappoints, but Jane doesn’t believe it will stifle interest in Florida. Her perception is that the political and private will in support of P3 projects, already reflected in the substantial increase in the number of P3 jobs, will overcome the deficiency created by the lack of legislation. 

My last inquiry of Jane (we’ll be scheduling a follow-up interview shortly) involved her expectations about the use of P3’s in Florida in the near future. Jane pointed out that Florida was always among the national leaders in P3 on transportation projects (where a P3 statute has been in place for some time now). But she also pointed to the promise of P3 jobs in higher education. We’ve already seen significant higher education P3 jobs, from the University of Florida’s Innovation Village, to the dorms at the University of Central Florida, and the dorms and football stadium at Florida Atlantic University. I know of others currently being considered, but not yet ready for announcement. Jane knows of these too and feels this is the start of a new wave of P3’s in Florida that will take us far beyond the realm of transportation. It appears she’s right, so we’ll continue this series of interviews with P3 leaders in the future.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Jane Garvey, the North American Chair of Meridiam Infrastructure, knows a thing or two about public/private partnerships (“P3”). Meridiam is one of the country’s leaders in P3 projects, from compiling the P3 team and fertilizing it with ideas and experience to investing in the enterprise as a shareholder or lender. Jane is their top person in North America and shared her thoughts with me about Florida’s potential for P3 development. In this blog post and some that will follow, I will share her thoughts with you.

P3s are not ideal for every job. They’re more appropriate for large, complex, innovative projects not neatly fitting into traditional capital programs. The project must be critical to the public owner, as criticality will ensure the facility will be operated for the long-term, thus generating the necessary operational revenue to repay private investors and contractors for their risks. Criticality also ensures strong public sector buy-in, as lack of public commitment to the job may dilute the prospects of success. Historically, critical projects have included transportation as well as social infrastructure, such as schools, courthouses, and teaching hospitals.

The proposed P3 project must have a good revenue stream or it won’t attract investors or lenders. Stable revenue tied to the job, such as shares of federal funds, sales taxes or impact fees, will lure investors. Riskier prospects may deter investors. Without private funding, the P3 delivery method will fail, so it is important for funding to be attracted through assurances of stable revenue sources from which investors may earn an appropriate return on their investment.   

• Email This
• Print
• Comments
• Trackbacks
• Share Link

House Bill 337, codifying public/private partnerships (“P3”) in Florida, was approved by the House last week and sent to the Senate, but it died in the Senate without action before the end of the legislative session last Friday. Although this is a minor loss of momentum for P3s in Florida, it doesn’t change anything as there is still authority for public/private partnerships in Florida public construction. As one attendee asked me at one of our recent P3 workshops, “why do we need this legislation anyways since we can do public/private partnerships regardless of the bill?” He was right and I responded that the legislation had drastically increased statewide awareness of the P3 solution to the public construction budget crunch, which was really the best argument in favor of the bill. So although the bill didn’t pass, it won’t change much and P3s continue to be the hot thing in Florida construction. Stay tuned to this blog for further news, ideas and suggestions about P3s as the process continues gathering momentum even without Tallahassee’s help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

February 29, 2012, Daily Business Review, An ALM Publication
Reprinted with permission.

Board of Contributors: A win-win for public-sector projects

The Florida construction industry continues to limp along but relief may be on the way from the Florida Legislature. House Bill 337 and its companion, Senate Bill 576, have become the springboard for educating public agencies and contractors about the availability of public–private partnerships (P3) as the new means for delivering public construction projects in Florida.

Although P3 projects have already been available in some form in Florida, they have been infrequently used and familiarity with these types of projects among public entities and contractors has been scant. The legislation has increased awareness of the opportunities for P3 projects. But the bills, in their current form, may inadvertently burden the process with well-intentioned, but impractical, requirements.

P3 projects take many forms, but at their most fundamental level they are projects in which private entities finance, in whole or part, construction of public facilities in exchange for the opportunity to operate the facilities for decades thereafter. The private entities recoup their investment by retaining a portion of the fees generated by the facility.

The most prevalent examples thus far of P3 projects have been toll roads. Recent examples also include the Port of Miami Tunnel, sports arenas for the Florida Panthers and the Miami Marlins, the Florida Atlantic University football stadium and dorm construction, as well as dormitories at the University of Central Florida. The University of Florida is currently engaged in a significant P3 project combining private business enterprises and university educational facilities within a new mixed use complex approximately a half-mile away from campus.

With the current public budget crisis, combined with Gov. Rick Scott’s recent request that $250 million of Public Education Capital Outlay funds be returned to the state, public agencies are at a loss about how to fund new facilities, let alone maintain old and aging facilities. Private enterprise could come to the rescue by offering a P3 arrangement.

The Legislation
Under the pending legislation, private entities may approach a public agency at any level of government with ideas for P3 projects. Under the current version of the bills, the public entities would already have policies in place for receiving such ideas from the private sector, addressing issues such as opportunities for competition through public notice (but not traditional bidding or procurement procedures), criteria for choosing among competing proposals, financial analyses of the proposals, etc. The public agency would not be required to select the proposal with the lowest bid amount, but rather may consider price as only one of many factors in evaluating competing P3 proposals.

The bills also permit private entities, who have determined the unmet need for specific public facilities or infrastructure, to submit unsolicited bids pursuant to which the private companies would build and operate the facilities or infrastructure using private funds, rather than wait for public agencies to put P3 projects out for bid. Customarily public agencies request bids from private contractors, but under the pending legislation private contractors may solicit the opportunity to build those facilities before the public agency ever issues a request for bids or proposals. In fact, the private entities could propose P3 projects even before the public agency ever realized there was a need for the facility in the first place. Giving private construction consortiums the opportunity to generate their own work could provide a muchneeded economic stimulus in Florida public construction.

Business Opportunities
The construction industry has noticed the business opportunities P3 projects may provide. People are getting excited about the prospect of builders creating their own business by approaching public agencies with unsolicited ideas for P3 opportunities.

This is a win–win situation: It could put many contractors back to work on lucrative deals as long as the builders can carry the construction costs for a little while. It can also provide public agencies with the much-needed facilities, infrastructure and maintenance they seek, but for which public funding is not available.

Concerns
The trade association Construction Owners Association of America presented a very successful seminar on the pending legislation and P3 projects in general, generating high attendance from public agencies, contractors, lenders, insurers and other industry participants. But as momentum for P3 projects increases, concern grows over whether the pending legislation may contain too many rigid requirements to induce free enterprise to jump on the bandwagon.

For instance, the legislation mandates onerous guidelines be implemented by private agencies before they can consider any P3 project. It also provides that, after the private entity invested significant time and money in developing an unsolicited proposal, it would be put out for competition to other contractors who could submit competing bids without having incurred the costs of developing the initial idea. The legislation would require legislative approval for every P3 proposal at the state government level although the approval procedure is much simpler at every other level of government.

Issues such as these could stifle private interest in P3 projects unless they are addressed before the bill becomes law. Otherwise many industry participants anticipate they will have to work together to fix some of these glitches in a glitch bill to be presented next year. Despite these misgivings, indications are that visionary private entities and public agencies will plan on working together on P3 projects, regardless of what Tallahassee does. The pending legislation does not appear to hurt momentum, but a well-drafted bill could stimulate this process more than anyone initially envisioned.

If passed, the new legislation would take effect July 1, 2012. It will usher in a new era of public construction in Florida, fueled by creative public– private partnerships. The bill presents fascinating and promising opportunities and potential as long as it is not weighed down by bureaucratic requirements and impractical procedures. Many interested and affected parties are working with legislators to try to streamline the bill. In the meantime, you can follow the bill’s status by visiting www.flsenate.gov and typing in SB 576.

Lee Weintraub, a shareholder at Becker & Poliakoff in Fort Lauderdale, is board certified in construction law by The Florida Bar. He represents clients in litigation, arbitration and transactions.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 House Bill 337 and Senate Bill 576, similar companion bills expanding the use of public/private partnerships (“P3”) as the new public construction delivery method of the future, continue to progress through legislative committees. Other than a few amendments, they remain largely intact and appear likely to be passed. Although the statutes would likely need some glitches corrected, they have definitely caught the attention of industry participants. Recent seminars I have held or participated in on P3 projects have generated significant attendance and interest and there is quite a buzz about the prospects of P3. I have been interviewed by a few reporters, indicating that even the media is getting excited about this.

Stay tuned for further updates and start planning now for how you can catch this wave of the future of public construction in Florida. Watch this blog for more updates on the status of the pending legislation and other items of interest.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 Senate Bill 576 on public/private partnership construction was drastically revised, but the core facets of the legislation, opening the door to great public construction opportunities, remains unimpaired. And the bill is gaining momentum as it continues to pass through legislative committees.

The changes in the new bill from the original version include:

1) public entities may contract for 3P projects only with legislative approval or if consistent with local government appropriation process as evidenced by approval of the project in the public entity’s work program;

2) detailed instructions on public notice, opportunity for competing proposals to be submitted on any 3P project, and the manner of selecting among competing proposals (traditional procurement requirements and bid protests don’t apply here);

3) prohibition against the use of state funds unless the project is for a facility owned by the public entity or a facility whose ownership will be conveyed to the public entity;

4) the private entity must provide an investment-grade technical study prepared by a nationally recognized expert detailing the finance plan, including required payment & performance bonds plus, in appropriate circumstances, letters of credit and guarantees from parent companies, lenders and equity partners;

5) the requirement that the 3P agreement ensure a negotiated portion of revenues from fee-generating projects are returned to the public entity over the life of the agreement; and

6) specific provisions addressing the financing of the job, such as the conditions for loans from the public entity for construction, suggestions for innovative finance techniques, and the prohibition against indemnity agreements from the public entity or pledging of security interests in the public entity’s assets.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The movement towards public/private partnerships (“3P”) as the wave of the immediate future in public construction continues to gain momentum. Construction Owners Association of America (“COAA”) is presenting a workshop on this topic on February 10, 2012 at 10:00 am in Orlando. The site appears to be the Hilton Hotel on International Drive, but I’ll forward definitive details as soon as they are available.

The program will begin with a presentation from the University of Florida about a sizeable 3P project they are undertaking just east of campus on the site formerly occupied by Alachua General Hospital. Next will be a presentation from a private developer out of San Diego with extensive experience with 3P projects around the country to discuss how they have selected, funded and administered 3P jobs. These two presentations alone, while not constituting the entire program, will give great insight into the 3P opportunities we will soon face in Florida, from both the owner’s and contractor’s perspective.

The program will then continue with a short lunch presentation by me on the status of the pending 3P legislation, about which I have previously blogged, as well as a summary of what that legislation would provide. Next (subject to final confirmation) will be a presentation by George Burgess, former Miami-Dade County Manager and current COO of Becker & Poliakoff, on funding options for 3P jobs – where to find funds and creative ways to come up with them. George was very involved in putting together 3P jobs for Miami-Dade County, such as the current tunnel construction and the various Metrorail stations. He sits with me on Becker & Poliakoff’s 3p team. 

The workshop will close with a question and answer session. Watch this blog for a copy of the agenda and registration form in the near future. Catch the wave – 3Ps are the wave of the immediate future, providing great opportunities for public owners, as well as private contractors, subcontractors and developers. Learn about them now and start positioning yourself to capitalize on them.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

People sometimes assume the law is a certain way because they believe it would be “unfair” for it to be any other way. Well, the law is not always “fair.” 

To make sure you do not make an incorrect assumption regarding the recoverability of home office overhead damages from a government entity, you should be aware of Martin County v. Polivka Paving. In that case, Polivka constructed soccer fields for Martin County. Because of undisclosed soil conditions, the project took much longer and cost much more than expected. Polivka was successful at the trial court level, with the jury awarding Polivka its contract balance, its additional costs incurred as a result of the challenging soil conditions and a portion of its home office overhead for the amount of time the project took to complete beyond what was expected.   

The appeals court held firm to the letter of the law, however, and struck the jury’s award of home office overhead damages. The appeals court held that the law says a contractor may not recover home office overhead costs from the government unless the government fully suspends the contractor, the government required the contractor to stand by during the suspension and the contractor was unable to take on additional work that would have absorbed the home office overhead otherwise paid for by the suspended project. Despite Polivka’s damages expert explaining how he determined the amount of Polivka’s unabsorbed home office overhead attributable to the impact of the undisclosed soil conditions, the appeals court said the damages are not recoverable because Polivka was not completely idle during the extended period. Given the court’s ruling, Polivka (and contractors like it in the future) will not be allowed to recover any of its home office overhead, no matter how great the impact was or how high of a percentage the project was of its overall business.

The moral of the story is, never assume what the law is. It might not always be what you think would be “fair” and sometimes the courts are unwilling to be swayed from the letter of the law by arguments about what would be equitable in a given situation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Are you actively engaged in public construction? Are you thinking about getting into public construction, since that’s where most of the construction work is nowadays? Don’t make the mistake of thinking the rules for public construction are the same as for private work. They’re actually quite different and ignorance of the differences can be devastating for your company. On the other hand, mastering the public construction rules before you start will position yourself for the efficiencies and profits you need in this economic climate.

Becker & Poliakoff is responding. First, you’ll notice more public construction related entries included in this blog, interspersed with the other private and general entries you’ve come to love. Additionally, Becker & Poliakoff is developing a continuing education seminar focused on public construction that will include segments on how to get on public agencies bid lists; bid preparation, submittal, and protests; public construction contracts; payment and performance bonds; prompt payment statutes; and the False Claims Act.

So keep an eye on this site for more information or email us at lweintraub@becker-poliakoff.com if you would like to ensure you receive details as the seminar is rolled out.

• Email This
• Print
• Comments
• Trackbacks
• Share Link