Public Private Partnerships (P3)

As we enter the New Year, here is a look at 5 areas that will be a hot bed of legal activity for contractors and their attorneys.

1.   Aggressive Union Activity.

Decreasing membership and market share, will cause Big Labor to ramp up efforts to “persuade” public and private owners to use an all union workforce.  This means increased picketing, bannering, and “ratting” of projects using non-union subcontractors.  On public projects, labor will continue to lobby government officials for the use of union only project labor agreements.  Owners and contractors need to be ready to combat labor’s tactics.

Union shop firms must be aware of their contribution requirements under their CBA.  The 2008 stock market crash (from which union pension funds have never full recovered), increasing vested liabilities from an aging workforce, and decreasing membership have lead many union health and welfare funds to be underfunded.  In fact, union pension funds may be the next big Washington bailout.  In the meantime, unions will aggressively pursue delinquent  contractors for contributions to health and welfare funds.

In Philadelphia (and perhaps around the country), eyes will be on jury’s verdict in the Ironworkers extortion trial involving former Ironworkers head, Joseph Dougherty.  A conviction could lead to a wave of indictments against union leaders that have engaged in similar tactics across the country.

2.  Increased Regulation of Contractors.

President Obama’s policy of creating a regulation nation continues unabated.  In 2014, the Obama administration issued 78,978 pages of new federal regulations many which impact contractors.  Any contractor or subcontractor performing work on a project receiving any form of federal funding assistance must be aware of the regulations that apply to them.

3.  Rising Default Rates.

With the federal reserve signaling the era of free money coming to an end, interest rates will rise.  Rising rates will make borrowing costs higher for both owners and contractors. Increased borrowing costs could lead many contractors to fail, especially firms that saw rapid expansion following the recession.  Owners may increasingly default as projects are increasingly difficult to finance.  Moreover, rising rates should slow the rapid increase in asset values, such as real estate.  This could make development projects less attractive leading to many proposed projects being shelved.  Bottom line for contractors, know you lien and bond rights.

4.  Growing Comfort with Public Private Partnerships.

Cash strapped state and local governments will continue to look to public private partnerships (PPP) as a way to fund infrastructure projects.  The success of high profile (and dollar) PPP projects in Florida, Pennsylvania, and Delaware will likely determine if the use of PPP as a source of infrastructure funding will increase in coming years.

5.  Continued Growth in Health Care and Institutional Construction.

Whether you agree with it or not, our current public policy is that everyone has a right to a college degree and healthcare.  Accordingly, the federal government has heavily subsidized higher education and healthcare.  Increased dollars in the hands of administrators in higher education and healthcare has lead to a building boom in these two sectors.  Eventually the music will stop, but in the near term contractors can expect increased work in these areas.