Legislative Alerts: Legislative

Brief summary of how the recent PA budget effects GCAP issues.

Finally, the legislature did not act to extend the Education Empowerment Act which included the Mandate Waivers Program. Under the Mandate Waivers initiative, school districts were able to seek relief from Pennsylvania’s archaic Separations Act. Even though the program expired on June 30th, GCAP will keep working with its education and industry partners to find a way to give school districts the option of utilizing single prime when doing so makes the most sense for them. In the meantime, GCAP will continue to dispel the myth that bidding projects both ways ensures the best price in school construction.

GCAP is also monitoring work by the Senate Labor and Industry on HB 400. This legislation is intended to help the Commonwealth identify those bad actors who intentionally misclassify workers as independent contractors to avoid paying taxes, insurance costs and payroll deductions or to hire illegal aliens.

SB 601 – legislation authored by Sen. Pat Browne (R-Lehigh) – will protect contractors from being taxed twice for the same work via a business privilege tax. GCAP continues to work on the bill which would prevent double taxation on companies when they have their permanent base of operations in one municipality and a temporary job site trailer in another.

For most of the late spring and early summer, the most pressing issue in Harrisburg was passage of an “on-time” state spending plan for Fiscal Year 2010-11. While not without some last minute twists and turns, the Pennsylvania General Assembly presented HB 2279 (the Commonwealth’s 2010-11 General Fund budget) to the Governor on June 30th. As you have undoubtedly read already, it was the first “on-time” budget for Governor Rendell, and also his last.

Assuming receipt of $850 million in federal FMAP funds – an assumption questioned by some in the State Capitol – HB 2279 keeps state spending almost level when compared to the previous fiscal year. In addition, the budget bill signed by the Governor does not call for any new or increased taxes – especially those that would have been most harmful to companies in the Pennsylvania construction industry. At one point in the process, the discussion had focused on adding state’s sales tax to new items, including professional services (i.e. architectural and legal fees), to help increase state revenues. GCAP and the rest of the Commonwealth’s business community worked hard to educate lawmakers on the tremendously harmful impact such a decision would have.

If FMAP funds do not come, state budgeteers will need to march back to the negotiating table to figure out a way to close an $850 million hole so stay tuned.

Regional Director Walter Palmer, along with GBCA counsel and staff met with the Governor’s Secretary of Legislative Affairs, Colleen Kopp to discuss why GCAP opposes the Commonwealth crafting a PLA for SCI Graterford without having the contractors’ group at the table. Palmer discussed with the Kopp the ways in which GCAP could assist the Commonwealth in negotiating the best terms for a PLA at the Montgomery County prison. For more information about the meeting, please call contact Terry McDonough at 717-731-6272 or keystonecontractors@verizon.net.

Rep. Ron Miller (R-York) has introduced HB 2499 which would extend the Mandate Waivers program without imposing the requirement that a school district bid a project both single prime and multi-prime before receiving a waiver. GCAP is pleased that Rep. Miller is spearheading this legislation and will continue to work with him on it. The bill has been referred to the House Education Committee where it will begin its journey through the legislative process. For more information about the bill, please call contact Terry McDonough at 717-731-6272 or keystonecontractors@verizon.net.

A recent letter by Governor Rendell’s Secretary of Legislative Affairs to the Chairs of the Senate Labor and Industry Committee has put House Bill 400 (Construction Workplace Fraud Act) on hold – at least temporarily.  While the Governor supports efforts to protect workers and employers from those skirt the law when it comes to classifying employees, Secretary Colleen Kopp informed Sens. John Gordner (R-Columbia) and Christine Tartaglione (D-Philadelphia) that limiting such an effort to just the construction industry is not the right approach.  According to the letter, the Governor wants the Senate to amend House Bill 400 so that its provisions will apply to all industries.

Senate Committee staff had been working on an omnibus amendment to House Bill 400 that GCAP does not oppose.  If the legislature and the Governor can reach an agreement on what the bill should and shouldn’t cover, GCAP will review any final amendatory language and formally submit its position on the bill before it moves forward in the legislative process.

Readers in the mid-state and western PA learned recently that sentencing mandates and parole polices aren’t the only reasons Pennsylvania prisons are filled beyond capacity. Cliff Rowe, President of GCAP, wrote an op-ed telling Pennsylvania readers that the commonwealth has been unnecessarily hampered from increasing its prison capacity because of the Pennsylvania Separations Act of 1913.

The complete text of his op-ed follows:

Fight Pa. prison crowding by eliminating Separations Act
By Clifford R. Rowe Jr.

A recent decision to move Pennsylvania inmates to other states has editorial boards calling for Pennsylvania policymakers to address the problem of prison overcrowding.

Sentencing mandates and parole policies certainly play a role in causing prisons to be filled beyond capacity, but the General Contractors Association of Pennsylvania believes there is another issue that continues to go unnoticed — the commonwealth has been unnecessarily hampered from increasing the capacity the Department of Corrections so sorely needs.

Spring 2009 was the target for the state Department of General Services to award contracts for six prison construction projects to expand its inmate capacity. It now is March 2010; three projects with a total value of $35 million have been awarded, and three with a value of more than $800 million remain on hold.

While delays happen and it is easy to blame bureaucracy, DGS is not at fault. The real culprit is the Pennsylvania Separations Act of 1913.

Under this archaic act, the government entity in charge of a project is required to bid separately and award separately a minimum of four prime contract packages; general trades, electrical, plumbing and HVAC. Each of the prime contractors has a separate (thus the name Separations Act) contract with the governmental entity awarding the work. This is an inefficient contract delivery method fraught with problems like schedule delays and claims.

When DGS decided to move forward with its expansion project, it bid contracts under the widely supported “best value design-build” delivery system that would have enabled construction to begin as soon as possible after a contract was awarded. Further, the attractiveness of the design-build delivery system is that DGS can select a single contractor that is completely responsible for the design and construction of a project for a lump-sum price. Given time constraints and budgetary considerations, design-build is clearly in the taxpayers’ best interest.

Unfortunately, a legal challenge filed by the Pennsylvania Associated Builders and Contractors chapters and other contractors have caused interminable delays. While the primary target of the challenge was another issue dealing with project labor agreements, the pending litigation also contended that the design-build procurement method does not comply with the Pennsylvania Separations Act.

As a result, instead of being able to move forward, contractors, subcontractors, architects and engineers are spinning their wheels — wasting hundreds of thousands of dollars on bidding and re-bidding projects that are likely to be re-bid yet again.

This waste of time, energy, and resources is all because the DGS must conform to the Separations Act — a statute that exists in only a handful of states. Nor is it a project-delivery system used in the federal, private, residential or commercial markets.

It is clear to us that the Separations Act is again wreaking havoc on important taxpayer-funded construction. Six prison projects — projects that would improve public safety, provide hundreds of much needed jobs and would otherwise be completed under a widely supported design-build delivery system — remain on hold.

The negative impact of the Separations Act is not limited to prison expansion. It also is a stumbling block for school districts that seek to use single prime or alternative delivery methods it deems best to complete priority construction projects.

GCAP believes it is time to repeal this antiquated and pointless statute. Until we do, more practical and efficient options such as design-build and single prime contracting will not be available to the DGS, school districts or other public agencies in Pennsylvania.

GCAP recognizes that prison overcrowding is a multifaceted problem caused by many things and requiring many solutions. However, the Commonwealth cannot afford to ignore the obstacle the Separations Act has become. No matter what policy changes may be on the horizon, the need for well-constructed facilities, built on-time and on-budget, will always be an essential part of the equation and in the best interests of the taxpayer.

On March 17, the Senate Education Committee held a public hearing to hear why the General Assembly should vote to extend the Mandate Waivers Program. Representing GCAP was H. Glenn “Bub” Manning, a Professional Engineer and Principal with the Quandel Group.

Manning told the panel that while no delivery method is perfect, multiple prime or “separated prime” projects run the risk of having one of the separate prime contractors negatively impact the project’s timeline and costs and affect the performance of the other primes. Even under the best circumstances, separated prime contracting is an inherently adversarial system that requires extra management oversight by the school district to avoid costly change orders and other delays. Choosing a single prime contractor can streamline this hierarchy of responsibility.

He effectively countered a presentation made by the Concerned Contractors group saying that the reality is that more often than not, a school district will not get an accurate comparison if they bid a project both ways because the market does not behave the same way for both methods of contracting.

In addition, Manning underscored comments made earlier by GCAP’s education partners, telling the Committee that the mandate waivers programs allows school districts to thoroughly deliberate the pros and cons of each delivery method, solicit expert advise and seek public input before bid day – that is how any comparison should be made. He stressed that GCAP’s recommendation is to maintain the Mandate Waiver Program and to allow the individual school districts and their design professionals to assess the local market conditions in their districts and decide which delivery method best fits their situation and is best for their constituents.

For more information about the hearing, please call contact Terry McDonough at 717-731-6272 or keystonecontractors@verizon.net.