Congress is seeing the mid-term elections through without a significant new infrastructure spending bill in play. However, the current House and Senate conference on the transportation appropriations for fiscal year 2019 indicates that Congress will reject the president’s recommendation to significantly cut discretionary spending for transportation, which instead is headed for another boost next year.
Both the House and Senate bills provide $46 billion for the Highway Trust Fund, which is a $1 billion increase over FY 2018. Each chamber wants to provide additional spending for highway and BUILD grants, previously known as TIGER grants. The conference committee just needs to agree on the amounts.
Congress enacted H.R. 4754 to address the slow approval of change orders and the resulting lack of timely payments to contractors. The new law requires that for every solicitation for a contract to be awarded to a small business, the prospective bidders must be provided with the federal agency’s policies or practices for compliance with the Federal Acquisition Regulations on Requests for an Equitable Adjustment (REAs) when a change order is issued. The FAR requires the agencies to respond to REAs in “the shortest practicable time.”
If the agency does not have a policy or information on its past practices regarding REAs, then it must start collecting that information for a three-year period. The agency must collect data on whether it responded to a REA within 30, 60, 90, 180 or 360 days from receipt of the REA, or whether the agency responds to REAs after the completion of the contract.
Gathering information on federal agency practices is a good first step to address compliance with FAR rules on change orders.
Congress failed to pass H.R. 4486, which would have exempted the Miller Act bond thresholds from the required indexing for inflation for all federal acquisition thresholds. The bill passed the House but stalled in the Senate. The Miller Act bond threshold is scheduled to be reviewed in 2020 and could be increased from $150,000 to $200,000.
According to the data compiled by The Surety & Fidelity Association of America, the federal government’s exposure to loss from default would increase by $300 million annually, and subcontractors would be working on larger jobs without payment protection.
At several Senate committee meetings, concern was expressed over a “Dear Colleague” letter from the Federal Transit Administration that suggested that loans under the Transportation Infrastructure Financing and Innovation Act program would be treated as part of the federal funding in a project rather than as the state or local match. This would be a significant change in policy, and some argued that the TIFIA law is clear that such loans are not federal funding because the states repay the loans with local funds. If the FTA proceeds with this new policy, there may be fewer applications for TIFIA loans.
Twelve federal agencies signed a memorandum of understanding to work together under an executive order that President Trump issued in 2017 and to reach environmental and other permitting decisions within a goal of two years. A single agency would take the lead and set the time frame for major projects that require an environmental impact statement. The MOU is intended to create best practices for agency cooperation and does not give project sponsors any new recourse or remedies.
This was the second of a two-year session for most states, the majority of which focused on their FY 2019 budget. Several states had heated battles while others needed one or more special sessions to finish their budgets. Colorado, Delaware, Georgia, Iowa, Kentucky, Massachusetts, Mississippi and Missouri enacted infrastructure spending packages this year.
State legislatures remain interested in public-private partnerships. New Jersey enacted a law that grants broad authority to the state, local governments and school districts to use P3s; however, these entities must utilize a project labor agreement and pay state prevailing wages. The new law also includes a provision that requires the general contractor, construction manager or design-build team to post a performance bond and a payment bond that comply with the Little Miller Act.
Missouri expanded its existing P3 law for the Highways and Transportation Commission to allow political subdivisions to use P3s and to allow the commission to use P3s for stormwater facilities and systems.
Delaware and Vermont enacted laws to enable the use of P3s. Delaware’s new law allows county and municipal governments to enter into P3s for public lands through a lease, concession agreement, easement or license agreement. Vermont enacted a pilot project to permit the use of P3s for transportation projects.
Michigan created a new Infrastructure Council to develop a multiyear plan for asset management in the state. The council has a broad mission, including reviewing funding and financing models, best practices and impediments to delivery.
A P3 bill for public buildings recently was introduced in Ohio, and a bill for P3s for virtually any kind of public works projects was introduced in Pennsylvania. These bills could move later in the fall.
Retainage got more complicated in Rhode Island and Vermont. Under prior law in Rhode Island, retainage was released when the public entity accepts the project. The new law allows retainage to be released at substantial completion, except for the following amounts: 0.5 percent for unknown or foreseeable defects that may become known in the first year after substantial completion; 2.5 percent for incomplete, incorrect or missing deliverables; 150 percent of the reasonable cost to complete or correct incomplete or defective work items; and an amount for the reasonable value of claims and any costs, expenses and attorneys’ fees incurred as a result of the claims if permitted in the construction contract for the person seeking the payment of retainage.
In Vermont, a new law prohibits a contracting entity or contractor from withholding as retainage any amount due and owing for materials delivered to the construction project and that are covered by a manufacturer’s warranty or graded to meet industry standards, or both. The new law applies to public and private construction.
Rhode Island and Vermont also considered, but did not make significant increases to, the state bond threshold. In Rhode Island, legislation that would have allowed payment and performance bonds to be waived for projects up to $250,000 was rejected as way to cut costs in the state budget.
Vermont considered a proposal from its state transportation agency raising its bond threshold to $1 million so small contractors could participate in paving projects under Indefinite Delivery Indefinite Quantity contracts. After discussion in the legislature raised the possibility of unpaid suppliers and unqualified contractors, the agency withdrew the recommendation in favor of further study of the issues.
A new law in California now authorizes counties to use the construction manager at-risk method for any kind of infrastructure project, including, but not limited to, buildings, utility improvements associated with buildings, flood control and underground utility improvements, and bridges (but excluding roads). The project cost must exceed $1 million. Existing law requires the construction manager at-risk to possess or obtain sufficient bonding for the construction services portion of the project.
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