Other Contract Provisions

1
Other Contract Provisions

• Section IIB

• Buy America
• DBE
• Indian Preference
• Non-collusion
• OJT
• Changed Condition Clauses

p. 57-78
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1. Buy America
p. 57-61

• 23 USC 313
• ISTEA Section 1041(a) and 1048(a)
• 23 CFR 635.410
• All Federal-aid construction projects

• IRON STEEL only
• all manufacturing processes must take place
  domestically
• includes coatings on these materials
• Minimal use 0.1 (contract value) or 2500
• Waivers
• not in the public interest
• insufficient domestic supply of satisfactory
  quality

3
Buy America (continued)

• If domestically-produced steel or iron ingots
  are shipped overseas for any manufacturing
  process and then returned to U.S. , the resulting
  product does not conform with the Buy America
  requirement.
• Enforcement of Buy America is State
  responsibility.

4
Buy America Waivers

• Nationwide Waivers by FHWA rule making
• Specific Ferryboat parts in February 1994
• Pig iron, scrap, raw alloy materials, pelletized
  or reduced iron ore in August 1994
• Project Waivers
• Must comply with 23 CFR 635.410(c)(1) (public
  interest / unavailable domestically)
• Consider re-design with domestic
• HQ informal concurrence necessary (must provide
  project number, description, project cost, waiver
  item description, item cost, country of origin,
  reason for the waiver

p. 58-59
5
Buy America

• NAFTA does not apply
• NAFTA exempts grants, loans other forms of
  Federal Financial Assistance
• Buy America is NOT the same as Buy AmericaN

6
Comparison of FHWA FTABuy America regulations
7
Case Study?

• Buy America
• (Class Exercises p. 4)

8
2. Disadvantaged Business Enterprises

• 49 CFR Part 26
• 49 CFR Part 21
• 23 USC 140(c)
• 23 CFR 200 230
• All Fed-aid hwy const projects

• Ensure that DBE firms have the opportunity to
  participate in DOT funded contracts

p. 61-65
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What is a DBE?

• A DBE is . . . a for-profit small business
  concern
• (1) That is at least 51 percent owned by one or
  more individuals who are both socially and
  economically disadvantaged or, in the case of a
  corporation, in which 51 percent of the stock is
  owned by one or more such individuals and
• (2) Whose management and daily business
  operations are controlled by one or more of the
  socially and economically disadvantaged
  individuals who own it (49 CFR 26.5).

p. 61
10
Categories

• Black American
• Hispanic
• Native American
• Asian-Pacific
• Subcontinent Asians
• Women
• White Males

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Categories

• Black American
• Hispanic
• Native American
• Asian-Pacific
• Subcontinent Asians
• Women
• Others, if they can prove social economic
  disadvantage

12
History

• Prior to 1987 reference was MBE WBE
• STURAA of 1987 provided for
• DBE MBE WBE
• 10 DBE participation nationwide
• DOT uniform certification criteria
• Established DBE maximum business size standard
  of 15.370 million avg. gross over 3 years

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History

• ISTEA 1991 Increase from 15.370 million to
  16.6 million average gross receipts over 3 yrs
• TEA 21
• Preserved the inclusion of women in the
  disadvantaged category
• February 2, 1999 Final DBE Rule
• Major changes to implement the Adarand v. Pena
  Supreme Court Decision.
• Narrowly Tailored Compelling Government
  Interest

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DBE FINAL RULE CHANGES

• The 10 national goal is only a desired
  (aspirational) goal use evidence of local
  availability
• Public participation is required in establishing
  the overall goals.
• Goals
• Use race-neutral methods, such as technical
  assistance, to meet as much of the overall goals
  as possible.
• Set contract goals for remainder

15
Sources of Concern

• Certification
• An ineligible firm is certified.
• Example
• Front DBE acts only as a pass-through for
  the prime does no work has no workforce

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Sources of Concern

• Commercially Useful Function (CUF) DBE must
  perform its own work
• Cannot lease primes equipment
• Cannot use other contractors employee(s)
• Must purchase its own materials supplies

17
3. Indian Preference on Federal-aid Projects

• 23 USC 140(d) 23 CFR 635.117
• FHWA Notice 4720.7
• STAs may implement an Indian employment
  preference for projects on or near Indian
  Reservations
• Contractors can maintain permanent core crews

pg 65-68
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TERO Tax

• Tribal Employment Rights Office (TERO)
• Tax applied to projects within reservation
• Eligible for FHWA participation if the tax is
  applied to all contracts on the reservation
• Apply to the portion of the project within the
  reservation

p. 67
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4. Non-Collusion Statement

• 23 USC 112 23 CFR 635.112(f)
• All Federal-aid construction projects

• All bidders must include a non-collusion
  certification with their bid. Failure to submit
  will cause the bid to be non- responsive.

p. 68-69
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5. On-The-Job Training

• 23 USC 140(a) -- OJT Program
• 23 USC 140(b) -- Supportive Services
• 23 CFR 230 Subpart A
• All Federal-aid highway construction projects
• Improve access to skilled positions by providing
  training to women minorities
• Expand the labor pool to meet future needs
• Not limited to Minorities and Women

Pg 69-73
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Components

• Require use of USDOL or FHWA approved statewide
  apprenticeship or training programs
• State submits recommended statewide goals
• State assigns contract training goals
• Contractor provides actual training
• State report accomplishments on a calendar year
  basis (July)
• Forms 1391 (by contractor) and 1392 (by state)

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On-the-job Training

• Training programs
• USDOL, Office of Apprenticeship Training,
  Employer and Labor Services (OATELS)
• consolidation of old Bureau of Apprenticeship and
  Training (BAT) and the new responsibilities of
  the USDOL employer and labor liaison
• http//www.doleta.gov/atels_bat/
• STATE DOT, On-the-Job
• State specific
• Approved by the FHWA

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Trainee Wages/Contractor Reimbursement

• Standard trainee wages
• 60 for the first half
• 75 for the 3rd Quarter
• 90 for the last quarter
• Must be shown as trainee/apprentice on payroll
• Contractor reimbursement optional

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OJT Supportive Services

• Increase the effectiveness of the OJT programs
• Increase training opportunities
• Includes
• recruiting
• counseling
• remedial training
• Can be paid for using up to ½ of 1 of STP and
  BRRP funds

25
1996 Michigan OJT Program Experience
p. 72-73
Completed (25)
13 COMPLETION RATE
Not Completed (160)
Minority Male (6)
Caucasian (6)
Female (13)
1996 Training Slots Assigned by Project
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OJT Pilot Programs

• Michigan, Ohio, Colorado
• Training slots allocated to contractors (not
  projects) based on 3-year average gross receipts
• Gives contractor responsibility for planning,
  assigning, training, and retaining trainees
  considering long-range workforce needs

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Results from Michigans Pilot

• 1 OJT/4 mil in MiDOT contracts
• 67 graduates since 2002
• Graduates in
• Cement masonry
• Lab techs
• Carpentry
• Asphalt laydown
• Operating engineers
• No project cost

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6. Standardized Changed Conditions Contract
Clauses

• 23 USC 112(e)
• 23 CFR 635.109
• Apply to all Federal-Aid construction projects
• Three Different Clauses
• Differing Site Conditions
• Suspensions of Work Ordered By The Engineer
• Material Changes In The Scope of the Work
• Must be included verbatim in all contracts unless
  prohibited or otherwise provided by State law

p. 74-78
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Differing Site Conditions

• Two Types
• Type I - Subsurface or latent physical conditions
  that differ materially from the contract
• Type II - Unknown physical conditions of an
  unusual nature that differ from those ordinarily
  encountered

p. 74-76
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Differing Site Conditions

• Either party notify other
• In a timely manner.
• Engineer to promptly investigate and determine if
  adjustment warranted
• excluding anticipated profits
• Probably one of the most frequently cited clauses
  in contractor requested changes !!!!!!!!!

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Can adverse weather be a differing site
condition?
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Can adverse weather be a differing site condition?

• Generally - No
• Unsuccessful contractor arguments
• Saturated soil conditions differed materially
  from representations in contract
• High soil moisture could not have been
  anticipated
• Many cases have shown that weather conditions,
  regardless of severity, can never be a differing
  site condition
• However, some cases have shown relief under an
  impossibility of performance
• Unusually severe weather may constitute an
  excusable delay

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Suspensions Of Work Ordered By The Engineer

• In writing and for an unreasonable period of time
• For an activity not customary to highway
  construction
• Not due to contractors actions
• Contractor request compensation or time

34
Causes of Compensable Owner Delay

• Failure to make timely progress payments
• Delay in issuing the notice to proceed
• Delayed approvals
• Improper inspections
• Failure to act on contractor requests
• Non-cooperation

35
Significant Changes In The Character Of Work

• Engineer can alter the work or the quantities as
  necessary without invalidating the contract
• If significant change to character of work an
  adjustment will be made
• Significant change two scenarios
• alteration results in materially different work
  requirements
• major item changes /- 25
• Exclude anticipated profit

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What is a major item? (1998 FHWA Survey)

• Any item (4 states)
• At least 10 of original contract value (15
  states)
• Exclude lump sum (OR)
• Exclude mobilization (NM)
• 12.5 (MO), 15 (TN), 20 (VT)
• 5 (8 states)
• Variable amount (3 states)
• Specify a threshold amount
• No definition (4 states)

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Are deleted items covered under the significant
changes in the character of the work clause?

• Not specifically addressed in FHWAs regulation
• Covered by most STA specifications and in the
  AASHTO Guide Specification 109.5 (Eliminated
  Items)

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Case Study?

• Differing Site Conditions(Class Exercises p. 7)

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Changed Conditions/Delays 1(Class Exercises -
Page 4)

• D.A. Elia Construction Corp. was contracted by
  the New York State Thruway Authority (NYSTA) to
  repair 4 concrete piers supporting the
  Castleton-on-Hudson Bridge. NYSTA required that
  Elia repair more but smaller areas of the piers
  than were identified in the bid documents. The
  contract had advised bidders to conduct their own
  inspections as the bid documents indicated only
  major repairs were approximations subject to
  field conditions.
• Elia did not conduct its own inspection but
  rather based its bid on the assumption that an
  accurate field inspection of the piers by recent
  hammer soundings had been completed.
• Elia sued NYSTA seeking compensation for
  additional work and costs.
• Is Elias claim justified?

40
Changed Conditions/Delays 1(Class Exercises -
Page 4)
The Court of Claims dismissed Elias claim
finding that the increased number of repairs did
not reflect a qualitative change in the work.
Even though significantly more areas required
repair, the total area repaired was comparable to
original estimates. Elia could not reasonably
rely on bid documents for anything more than an
approximation of the necessary repairs.
The Significant Change Clause is intended to
compensate the contractor for additional costs
that result from the increased quantity
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Changed Conditions/Delays 2(Class Exercises -
Page 4)

• Huff Enterprises was contracted by the Triborough
  Bridge Tunnel Authority to construction office
  facilities. The contract contained a standard
  requirement that a 10-day written notice of delay
  be given to the owner. Full completion of the
  project was delayed for more than 2 years largely
  to the Authoritys revision of construction
  plans, which required Huff to perform extra work.
  Huff failed to provide written notice at the
  start of the delay.
• After completion, Huff sued the authority,
  seeking to recover delay damages as well as
  compensation for the extra work.
• Huff claimed that the Authority repeatedly
  deliberately ignored, and therefore, waived the
  contractual notice requirement. But, the
  Authority had verbally told Huff that any claim
  for delay damages should be submitted along with
  other claims at the end of the project.
• Huff said it was established practice between the
  parties to bypass the strict mandates of the
  contract by not making notice of each item
  causing delay.
• Does Huff have a legitimate case against the
  Authority?

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Changed Conditions/Delays 2(Class Exercises -
Page 4)

• The court found there was no extensive record of
  timely written correspondence between the parties
  addressing the disputed subject matter. The
  Authority only sought to dismiss the claims
  relating to delay damages and not those for the
  extra work.

Strict compliance with notice requirements is
essential.
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Time for a break !