Scathing Federal IG Report Excoriates Silver Line Project Oversight

Echoing concerns of various Congressmen, Governors and the DOT Inspector General, U. S. Transportation Secretary Ray LaHood last week chimed in on the latest round of scandals surrounding the way the Metropolitan Washington Airport Authority is managing construction of the Silver Line rail link between Dulles International and downtown Washington, D.C. “I have serious questions about how the board has operated. I want the people of the D.C. area to know that we don’t agree with what they’ve been doing,” LaHood said. “The thing that really pushed me over the top with the board is when I read in the Examiner that they gave a former board member a contract. … I think it’s too much inside politics.” One wonders how much inside politics Secretary LaHood thinks would be just the right amount.

The Inspector General report LaHood mentioned details the MWAA board’s weak oversight of the Silver Line project, lax ethics, no-bid contracts, conflicts of interest, and lack of transparency. Confronted with taxpayer and toll payer funded board expenses including a $9,200.00 airline ticket to Prague, a $4,800.00 first class ticket to Hawaii, three $1,600.00 dinner tabs, and two bottles of $119.00 wine, board member Michael L. O’Reilly could only characterize the situation as “a public perception problem. … We’ve gotten better, but we haven’t gotten to the point where people are going to praise us for our frugality.” It seems in Washington, public perception is only troublesome when it is correct.

Secretary LaHood’s comments on the IG report deftly separated the professionalism of the MWAA Silver Line project staff from the excesses of the board. “I have a great deal of confidence in the executive director of MWAA,” LaHood remarked. “Jack Potter is doing a very, very professional job. He’s trying to clean up a mess, and I have confidence that he can carry off Phase 2 of the line.”

Chicago Landmarks Commission Stalls Prentice Hospital Preservation Hearing

Northwestern University Medical School’s shuttered Prentice Women’s Hospital on the city’s central lakeshore campus of the University may be considered a thing of beauty by architecture buffs, but the controversy over what to do with the outdated shell, empty for the last 5 years, is getting very ugly. The University wants to tear down the structure and replace it on the high priced lakefront site with a modern medical research facility. Preservationist groups and architecture aficionados claim the existing shell can be adapted to research use, and that this early example of groundbreaking hospital configuration – four open plan “villages of care” on each floor – should be kept around for posterity.

Designed by Chicago architect Bertrand Goldberg, the Prentice Women’s building is ranked 11 on the National Trust for Historic Places list of most endangered buildings worth preserving. Goldberg’s 1970’s design has since been emulated by hospitals all across the country, in efforts to humanize and sensitize interaction between patients and caregivers in the hospital setting. Sixty prominent architects have petitioned Mayor Rahm Emanuel to force the University to save the structure, and Mayor Emanuel has punted the issue over to Landmarks Commission chairman Rafael Leon. Northwestern has agreed to delay demolition plans until the Landmarks Commission holds a hearing on the matter, yet chairman Leon refuses to put the issue on his agenda, further delaying a resolution.

The hospital campus, situated on the city’s prime Gold Coast lakefront just north of Navy Pier, is the site of ongoing high priced construction projects funded by some very generous benefactors, whose names now adorn the facades of the hospital structures they have funded. Controversy over these developments, and the congestion they cause neighborhood residents, is nothing new – one of the latest contretemps involved the helicopter landing pad atop the new Lurie Children’s Hospital. The University needs to restore the empty Prentice site to useful purposes. Anyone who forgets that Mayor Emanuel is a Northwestern grad school class of 1985 alumnus is missing the point.

Road Construction Boom Provokes North Dakota Housing Shortage

Out of state contractors submitting low bids on the booming North Dakota highway construction project schedule are discovering that housing for their workers near the job sites is very scarce, and very expensive. North Dakota Highway Department Director of Construction Cal Gendreau says the number of out of state contractors working on projects for his agency is up 20% from the level six years ago. North Dakota awarded 103 out of a total of 192 bids on highway projects to out of state contractors this year.

For both in state and out of state road builders, the oil patch construction boom in the state is shrinking the housing supply and driving rental prices through the roof. Spokane’s Acme Construction won a bid on an $18 million road widening job, only to find no place for workers to live near the site. The company ended up purchasing land along the road it was widening, bringing in two heavy duty diesel generators, two mobile homes and a small village of fifth wheel campers, and hooking it all up to a 1,000 gallon sewage holding tank to make room for the crew. Oftedal Construction’s Project Manager Mike Schriner is running a $62 million road job through the Badlands, and reports similar worker housing woes: “We’ve got guys living in tents in Little Missouri State Park.” Schriner’s employer put one employee to work full time just finding places for crew members to live. Trailers in nearby communities rent for $1,550.00 per month.

Of course, North Dakota taxpayers are footing the bill for all this expensive temporary housing. North Dakota DOT’s Gendreau says, “We know they need to cover their housing expenses and it’s built into their bid.”

Scandal Plagued SNC Lavalin Poaches CH2M Hill Executive As Its CEO

Rocked by recent police raids on its corporate headquarters and the scandalous departure of three top executives, Canadian engineering giant SNC Lavalin yesterday named Robert G. Card, former CH2M Hill executive and former U. S. Energy undersecretary, as its new CEO. Card is just coming off leadership of the construction of London’s Olympic Games facilities and infrastructure, on time and on budget.

March 26 SNC Lavalin CEO Pierre Duhaime announced his decision to leave the CEO post, and retired from the company in June, in the aftermath of his approval of $56 million in payments of apparent bribes to overseas agents for the procurement of engineering business. Duhaime’s exit followed right after the departure of two senior executives involved in the company’s Libyan operations and possible involvement in a scheme to smuggle one of Muammar Gadhafi’s sons into Mexico. Following Duhaime’s announcement, Canadian Mounties raided SNC Lavalin’s Montreal offices seeking documents related to Libyan bribery schemes.

SNC Lavalin is the ninth largest design firm worldwide, and also has substantial at risk construction contracting operations around the globe.

Hydroelectric Power Opponents Face Federal Funding Cutoff

Environmental organizations opposing new hydroelectric dams or pursuing litigation seeking to tear down existing dams would lose all their federal funding under a bill introduced by Washington Congressman Doc Hastings. HR 6247, entitled “Saving Our Dame and New Hydropower Development and Jobs Act,” was introduced August 1 and referred to Hasting’s own House Natural Resources Committee and to Michigan Congressman Fred Upton’s Energy and Commerce Committee. Though any floor action on this bill will not likely take place until after the November elections, it already has the environmental groups it targets up in arms.

This simple 17 page legislative measure would strip all federal funding from regular dam construction opponents National Wildlife Federation, American Rivers and Trout Unlimited, which have received millions of taxpayer dollars in past years, and used that money to pay lawyers to bring lawsuits seeking to prevent new dam construction and also to tear down existing hydroelectric generating facilities. Natural Resources Committee spokesman Spencer Pederson describes the bill as “a policy statement about the importance of hydropower and how taxpayer dollars shouldn’t be used to destroy that resource.”

About 8% of American electricity is generated by hydroelectric facilities, with California having the largest number of power generating dams, and Washington having the largest overall hydroelectric generating capacity. California’s House Water and Power Subcommittee Chairman Tom McClintock has denounced American Rivers as an “extremist organization” in the past, and this new bill raises the ante on that remark, with American Rivers Senior Director of Government Relations Jim Bradley now calling HR 6247 “incredibly extreme.” Bradley says “it’s a little bit shocking for a member of Congress to create this kind of blacklist.”

Of course, dams are used for flood control and water conservation as well as power generation, especially in the western states. And the three groups targeted by this bill do have a history of going to court weighing in on the side of fish and other aquatic species whose habitats are affected by dam construction and operation. Nevertheless, the rhetoric already generated by introduction of this bill sounds more like election campaign talking points than serious policy debate. Only time will tell whether the measure ever gets out of the committees to which it has been referred.

Senate Finance Moves Forward On Energy Tax Credit Extension

Just before the summer recess in Congress was declared, the Senate Finance Committee passed a measure including a one year extension of production tax credits for wind and geothermal energy projects, making the incentive applicable to projects breaking ground any time until the end of 2013. The credit is set to expire at the end of 2012 unless both houses of Congress pass the measure, cobbled together by Senate Finance chairman Max Baucus and ranking member Orin Hatch. Reported out of the Senate Finance Committee on a bipartisan vote of 19-5, the bill includes a total of $205 billion in tax cut extensions for individuals and businesses.

While Committee passage of the bill is welcomed by energy businesses, some renewable energy advocates mourn that it does not go far enough. “A temporary tax provision I don’t think provides enough incentive for capital investment, and that’s what our industry needs,” according to Associated General Contractors of America Senior Executive Director of Governmental Affairs Jeff Shoaf.

American Council of Engineering Companies Vice President of Governmental Affairs Steve Hall, says the tax credits are “absolutely essential” for the health of the renewable energy economy.

The fate of this legislation when Congress reconvenes after the summer break is still uncertain. Tax credit extensions are just the first step in comprehensive reform of the Internal Revenue Code, and all such legislation may well be pushed back on the Congressional calendar until after the November elections. Furthermore, should some sort of tax cut extender bill get passed when Congress comes back into session, there will be heated debate over, and revisions to, the contents of this bill before anything reaches the Oval Office for signature.

Target Stores Files RICO Lawsuit Claiming Paving Fraud By Chicago Area Contractor

Target Stores has filed a civil lawsuit in federal court in Minneapolis under the Racketeering Influenced and Corrupt Organizations Act against Bridgeview based Rose Paving Company, LCH Pavement Consultants, United Paving Company, American Pavement Solutions, Asphalt Maintenance, Inc., and officers of several of the named companies, claiming that the defendants conspired to defraud Target of millions in a bid rigging and kickback scheme involving maintenance of parking lots at 1,700 Target stores across the country. Target alleges that LCH organized the participating paving contractors to divide up the $100 million worth of parking lot repair work by fraudulently inflating bids, agreeing to submit non-competitive prices on bids outside their corruptly designated territories, and requesting bids only from contractors in on the scheme.

Target also contends that participating paving contractors overbilled for work never actually performed, and charged for removal and replacement of asphalt all the way down to the substrate when the work done was only a surface overlay. The suit says Target was billed for and paid LCH for hundreds of thousands of dollars in work that was never done, and that LCH paid the contractors submitting false billings and then demanded kickbacks from them.

Store locations named in the complaint as being involved in the fraudulent billings include Target parking lots in Cicero and Lake Zurich. Other locations identified in the lawsuit include stores in California, Arizona, Montana, Virginia, Pennsylvania, Texas, Georgia and New York. Target claims the conspiracy began in 2009 and continued through 2012.

Sealed Court Conviction Left Trump’s Florida Deal To Go South

Records released last week by the U. S. Supreme Court reveal that when Brooklyn U. S. District Court Judge Leo Glasser sealed the record of Felix Sater’s conviction on a guilty plea to joining with crime syndicate members in cheating investors all across the country, while Sater awaited sentencing in the Brooklyn case, the secrecy order enabled Sater to bilk more than 100 other investors in Fort Lauderdale’s Trump International Hotel & Tower. The $200 million Las Olas Boulevard construction project now stands incomplete, empty, and chained off along Fort Lauderdale’s popular beachfront.

Joe Altschul, attorney for 75 of the bilked purchasers of units in the failed condominium hotel development explained why the Brooklyn court’s secrecy order aided in the fraud against his clients: “Each of these purchasers had a right to know who they were dealing with. It’s bad enough that they prop up Donald Trump as the developer, but then you find out that it’s not Trump but a convicted felon already charged in financial shenanigans.”

Briefs in the Supreme Court case contend that the Sater case is only one of many in the Eastern District of New York in which prosecutors get judges to seal conviction records of mobsters – records which should be public to protect other innocent investors considering putting money into deals with felons who have already pleaded guilty to financial fraud, but whose convictions the court keeps secret on the supposed basis of a need to protect the lives of crime figures cooperating in government investigations into mob activities. Lawyers involved in this particular case are especially miffed because in passing sentence Sater’s case Judge Glasser took a pass on the traditional measure of ordering Sater to make restitution to the folks he duped while secretly convicted on his guilty plea and awaiting sentencing. There’s nothing about that aspect of the case that could have contributed to avoiding a mob hit on Sater.

When prosecutors and the courts contribute to the ongoing frauds of criminals against the investing public, and then shirk responsibility for making whole the folks they are supposed to protect from mob activities, it makes honest people in the construction business wonder whose side these public officials are on.

Sater owns a $4.8 million condo on Fisher Island, and allegedly paid the mob $1.5 million to be let in on the Fort Lauderdale Trump project. One of the lawyers involved in the Supreme Court case which resulted in release of the sealed record of Sater’s conviction is former federal judge Paul Cassell, who blames Judge Glasser for not immediately making Sater’s guilty plea conviction public. “The court illegally gave away millions to a criminal,” Cassell says. Miami first Amendment lawyer Tom Julin agrees. “It’s the worst thing a court can do. In a day and age when economic crimes can affect massive amounts of people, there’s a real danger in super sealing these kinds of judicial proceedings.”

Senate Finance Committee Wimps Out On Tax Reform

Thursday’s meeting of the Senate Finance Committee was supposed to be this nation’s first step toward comprehensive reform of the Internal Revenue Code, attacking a list of 75 different special interest tax incentives that don’t really have anything at all to do with social policy – the usual justification for special interest benefits conferred by Congress through tax code loopholes. Instead, it turned out to be a clear demonstration of just how wimpy Senators can be when faced with taking away tax benefits for their own constituents.

Here are some of the specialized tax advantages that were on the agenda for termination, but ended up being retained in future tax years: 1) accelerated depreciation for capital improvements at NASCAR racetracks (wonder what the social policy behind that one could be?); 2) millions of dollars in rum tax rebates for Puerto Rico and the U. S. Virgin Islands (wonder which Senate Finance committee members drink daiquiris?); 3) economic development tax credits for StarKist’s tuna cannery in American Samoa; 4) tax credits of $2,500 for buyers of electric motorcycles and other low speed electric vehicles (the Senators did remove golf carts from the list of qualifying electric vehicles, though). Out of 75 special interest tax benefits on the termination agenda, the Senators could only agree that 20 were fit for elimination. Characterizing these moves as “more than baby steps,” Finance Chairman Max Baucus crowed “I’m proud of what we’ve done as a committee.”

Other committee members were somewhat more truthful in their remarks defending the small number of special interest perks removed from the tax code in the committee report, which won’t even get a vote in either house until mid September, when the six week summer recess concludes. Michigan Senator Debbie Stabenow candidly pleaded for the NASCAR accelerated depreciation as a job saver in her state: “Big tax reform is where we need to look at all this stuff,” she said. Meaning, let’s kick this can down the road until after the elections. Oklahoma Senator Tom Coburn was more candid. “Nobody wants to make the hard choices around here,” he intoned.

Bankruptcy Could Shutter 13.5% of Illinois’ Power Generating Capacity

Three months ago executives at Midwest Generation, operator of six coal fired electric power generating plants in Illinois, announced they were closing two of the plants in Chicago, as part of an environmental deal to avoid expensive stack gas cleaning installations at the creaky old facilities at the Fisk and Crawford plants. Earlier this week the same executives said they may not be able to keep their other four Illinois coal fired plants open, as low natural gas prices and resulting low rates for electricity threaten the company with bankruptcy.

Closing of the Fisk and Crawford plants as the company has agreed to do will put about 180 employees out of work. The six Midwest Generation plants provide electricity to power 5 million homes in the state, but the grid operator is obligated to keep supplying electricity to those customers even if all six plants are shuttered. Nevertheless, closing all six plants would throw 1,000 people out of work, and shut down 13.55 of the total power generation capacity in Illinois.

Midwest Generation’s parent Edison International says it will not provide financial support for Midwest. If Midwest filed for bankruptcy, as it is threatening to do, its bondholders would have to decide whether to keep the remaining plants in Romeoville, Joliet, Waukegan and Pekin open for business, by funding environmental upgrades Midwest does not have the cash to pay for, sell them, if a buyer could be found, or shut them down and abandon them. In any event, Midwest predicts it will default on a half billion dollar debt repayment due next June.

Company officials are in negotiations to restructure $3.7 billion in unsecured debt in order to avoid bankruptcy. Analysts predict Midwest’s cash flows will remain negative until at least 2016 without a sharp upturn in utility rates. Parent Edison International’s profits are down 46% from a year ago.

Highway Trust Fund Bill Tightens “Buy American” Requirements

In a small nod in the direction of workers at American steel mills and fabricators, and at other businesses manufacturing products for road building and mass transit use, Congress tightened up “buy American” requirements on projects partly paid for with federal tax dollars. The new bill eliminates one loophole in the buy American laws, which allowed use of foreign produced steel and manufactured products on portions of construction if a major project was split into multiple contracts or awarded in phases. Under the MAP-21 bill extending the Highway Trust Fund for 27 months, if any one of the split up contracts has federal money in it, all of the related products must also abide by the buy American rules.

And the new legislation also requires mass transit projects to publish a detailed explanation, with a public comment period, before waiving buy American rules for mass transit construction contracts. In past years, this waiver publication and comment requirement only applied to highway construction. Now, citizens will be able to know ahead of contract bidding why local transit officials find it necessary to use foreign made materials and products in their construction jobs. Seems like Congress is at long last wising up to the need to keep taxpayer funded job creation on American shores.

California High Speed Rail Details Emerging

Now that the California legislature has approved a $4.5 billion bond issue in order to claim $3.2 billion from federal taxpayers toward construction of a promised high speed rail link between Los Angeles and San Francisco, details of the difficulties faced in actually building the railroad tracks for these bullet trains are beginning to be released for public consumption. Here are just a few notes from detailed analysis of the proposed routing for the first 130 mile segment from Madera to Fresno, to be built at a cost of $2.6 billion out of the total budget of $68.4 billion for the entire project:

The California Department of Transportation anticipates it will cost $226 million and take three years to relocate a short stretch of highway 99 through Fresno where the roadway now nestles right up against the Union Pacific rail yards between Ashlan and Clinton Avenues. In order to make room for the bullet train tracks, 2.5 miles of the road will have to be torn up and replaced about 100 feet to the west, a frontage road will be built, along with 3 new Route 99 interchanges, and 50 private properties will be condemned and purchased by the state, displacing an assisted living facility, a mobile home park, a truck stop, an RV dealership, several motels, and two self storage facilities. The bullet train project budget will have to bear the cost of relocating all of these businesses.

According to plans of the high speed rail authority, 30% of the construction work on the project must be performed by small business subcontractors, and the authority is considering an additional requirement that one third of that goal, or 10% of the entire project budget, must be spent on work performed by minority and women owned businesses. In Chicago area government construction projects, the usual contract requirement is for 30% of the work to go to MBE/WBE trade subcontractors. It remains a puzzlement why California’s goals for disadvantaged business participation are so much lower.

Overall Construction Spending Rises Slightly

Commerce Department figures released yesterday point to strengthening home building as the driver for a slight overall increase of 0.4% in construction spending in June. May’s gain in overall construction spending was also revised upward to 1.6%. While employment in the construction sector of the U. S. economy still lags painfully behind many other recovering parts of the American economy, any signs of returning health in the construction sector are encouraging.

Overall construction spending now sits at a seasonally adjusted annual rate of $842.1 billion, up 12.9% from the February 2011 twelve year low. Nevertheless, current levels are only about half of what economists say is needed for healthy growth in construction. June’s overall construction numbers were driven upward by a 1.3% increase in housing construction, to an annual rate of $256.6 billion. Private nonresidential construction rose only 0.1% to $302.3 billion, with spending on office and hotel construction going up while shipping center construction declined.

Overall government construction spending is flat at $274.2 billion annually, with federal spending down 1.6% while state and local construction layouts are up a slight 0.2%. Though these numbers don’t signal any resounding strength in a construction industry recovery, in today’s struggling economy, any uptick is welcome.

Obama Administration Signs On To Six Month Congressional Budget Deal

In a statement signaling Obama administration agreement with the House and Senate deal for a six month continuing resolution to fund federal government agencies past the upcoming elections, White House Press Secretary Jay Carney also took the opportunity to let legislators know President Obama is not likely to agree to any 2013 budget cuts below the $1.047 trillion spending cap passed in last year’s Budget Control Act. Carney’s statement points out that while the administration welcomes the agreement, heading off massive layoff warnings to employees of federal government contractors, is a “welcome development,” but warns the president “has made clear that it is essential that the legislation to fund the government adheres to the funding levels agreed to by both parties last year, and not include ideological or extraneous policy riders.”

With the beginning of federal fiscal year 2013 less than two months away, the House has passed only six of the needed spending bills, with House Appropriations Committee approval of five more. There has been no action whatsoever on spending legislation in the Senate. Both houses will begin a six week summer recess days from now.

The continuing resolution will not be introduced or passed until Congress comes back into session in September, but the administration’s announcement of agreement with the deal between Speaker Boehner and Majority Leader Reid is certainly enough to let corporate lawyers at huge government contractors breathe more easily as they decide not to have their companies pass out WARN Act layoff notices to hundreds of thousands of their co-workers. The economic panic likely to have resulted from such mass notifications could not have helped either party in the upcoming Presidential and Congressional elections.

Our political leaders should all be severely embarrassed that it nearly always takes until the day before legal deadlines expire to get anything at all done in this gridlocked Washington D.C. political world, despite the fact that the agreed action is really helpful to citizens and constituents of both parties, and for the nation as a whole.

Safety Just Isn’t Safe Any Longer

Egged on by well heeled lobbyists hired by American business interests, the Republican Luddites in the House have pushed through relatively unnoticed HR 4078 – a 92 page bill that threatens to grind to a screeching halt all the progress of the last 25 years in enhancing the safety of the jobs we go to, the cars we drive, the toys our children play with, the medicine we take, the food we eat, the water we drink, and even the air we breathe. Euphemistically entitled the “Red Tape Reduction and Small Business Job Creation Act,” the legislation bars all federal regulatory agencies from promulgating any significant new safety rules from the date of passage until the Secretary of Labor certifies that unemployment is below 6.0%. This has to be one of the most stupid bills ever passed by either house of Congress.

Although economists of every stripe have long since debunked the notion that federal safety rules hamper job creation, Republican politicians cling to that mantra. Truth is, Congress is powerless to eliminate the social costs of safety. All Congress can do – and this bill does it in spades – is shift those costs from a few pennies each paid by every citizen back to the shoulders of those few and nearly invisible families affected by the tragedy of hundreds of thousands or even millions of dollars in medical bills, lost income, and often permanent disability suffered when unsafe jobs, cars, toys, medicine, food or water sicken, injure or kill a family member. Republicans want, for reasons known only to the lobbyists from whom they receive their campaign donations, to take us back to the days at the beginning of the industrial revolution when it was a worker’s tough luck if an on the job injury cost him or her an arm, leg, lung or paralysis, and left his or her family destitute as a result. They would rather have a citizenry of amputees, invalids and cripples on the public dole than an additional 2% of able bodied unemployed workers.

If this legislation makes sense, it is only the political sense of pandering to a business constituency at the expense of Americans of all stations in life. There is not a shred of economic sense, social justice sense, or even common sense in this bill. Each and every one of us has benefitted from the advances in the safety and healthfulness of our jobs, cars, toys, medicines, food, water and air produced by the last quarter century or more of federal safety rules. The only ones who would benefit from passage of this horrible bill in the Senate are Republicans who collect huge campaign funds and Super Pac donations from special interest business lobbyists when they vote in favor of this law.

Pray for us all that the Senate leaves this piece of miserable and misery inducing legislation on the table in a darkened committee room where it belongs. Pray even harder that President Obama has the guts to veto it if it should ever reach the Oval Office.

WARN Notification Crisis Averted In Budget Deal

As we predicted in this space just a few hours ago, Speaker Boehner and Majority Leader Reid just announced a deal for a six month long continuing resolution maintaining federal government agency spending at the $1.047 trillion level for the first six months of federal fiscal 2013, which begins October 1, 2012. The announcement averts the spectre of hundreds of thousands - or even millions – of WARN Act notifications of impending layoffs to employees of government contractors whose businesses might have been affected by loss of revenue from federal contracts should an election eve budget battle in Congress have raised the possibility of a government shutdown a month before Presidential and Congressional elections.

While drafting of the actual continuing resolution could take a few more weeks, announcement of the deal should dry the sweat on the brows of dozens of government contractor employment lawyers who were facing a fish or cut bait decision deadline under the WARN Act in two days. Whew!! In their desire to take off for their six week recess, Congressmen and Senators have finally realized that the fallout from failure to act on this important matter would likely have resulted in a pox on both their houses in the forthcoming campaign season. The citizens can only hold out faint hope, though, that this announcement is a harbinger of any significant increase in the level of responsible leadership we can expect from Washington, D.C. politicians.

Is The Silver Line Burning Up The Gold?

According to a 44 page Inspector General report issued last week, lax Federal Transit Authority supervision over construction of the 29 station, 23 mile, $6.8 billion Silver Line rail service from Washington D.C. to Dulles International Airport is leading to cost overruns, schedule delays, and imperiling passenger safety on the trains scheduled to begin service on part of the project next year. Plagued by political battles over funding and passenger safety, the project has been attacked by politicians in some Virginia counties concerned that construction of the rail line will destroy the pastoral nature of their communities.

According to the IG report, FTA took 2 years to complete testing of bridge pilings criticized by the project’s chief bridge manager as unsafe for rail operations and below the FTA standard of 50 year useful life expectance, due in particular to excessive corrosion caused by stray electrical currents affecting the pilings nearest the power rails. Furthermore, the report points out, FTA has not yet insisted on a recovery plan from WMATA for late delivery of the rail cars to move as many as 60,000 riders per day expected to use the line once it opens next year.

Congress won’t approve a fiscal year budget, and attrition is taking a toll on the work forces of many federal government agencies as a result. Is it any wonder that bureaucrats in understaffed offices like the FTA are taking too long to act on problems they know about?

Chicago Bridge & Iron Acquires Shaw Group

In an engineering merger that will create one of the biggest professional service firms in the energy sector of the world economy, Chicago Bridge & Iron announced yesterday it is paying about $3 billion in cash and stock to buy up Baton Rouge based Shaw Group, another engineering and construction firm deeply involved in the energy sector. According to leaders at both companies, the resulting entity will “Become fully diversified across the entire energy sector.”

Shaw Group will become a business sector of worldwide CB&I under the brand name “CB&I Shaw.” Shaw Group Chairman J. M. Bernard is leaving the consolidated business once the deal closes in the first quarter of next year. Some speculate he will run for public office. Shaw Group’s shares traded up 65% to $44 per share in premarket transactions on the announcement.

WARN Layoff Notices Could Spur Congressional Budget Deal

Congressional leaders are working feverishly on a six month continuing budget resolution they hope to announce later today or tomorrow, which would avert the threats of huge defense contractors and other businesses trading with the federal government to issue their employees hundreds of thousands of layoff notices required by the WARN Act. That law requires employers of more than 100 workers to give 60 days warning of layoffs planned in response to foreseeable events – events like federal government shutdowns or deep spending cuts at government agencies. Some states have stricter laws requiring 90 days notice.

Employers face fines up to $100/day/employee for failing to give the required layoff warning. August 2 is the 60 day deadline before the October 1 start of the federal fiscal year. So, without Congressional action which can be predicted to keep government agencies spending next fiscal year, notices could go out later this week. If they do, each party will blame the other for the ensuing economic panic. The Obama administration’s Labor Department has already issued guidance to government contractors contending that no WARN Act notices need to be given at this point in time, but that guidance will not be binding on the courts which will apply the act – and the fines – should a shutdown actually happen, and result in contractor layoffs. Defense contracting giant Lockheed Martin says it may issue as many as 100,000 WARN notices if Congress does not pass a deal, or at least announce one. EADS is following suit. Boeing says it is planning for a “worst case scenario.”

Other government contractors have declined to comment, while their employment lawyers try to parse the latest Labor Department guidance.

Economists predict the worst for American businesses if mass notices go out. “If I’m being warned about my job,” Bank of America economist Ethan Harris says, “then I’m going to start acting as though there’s a real chance that I won’t be employed coming forward. It will have a freezing up effect.”

Whether or not a deal can be reached remains to be seen. The only certain thing is that the politicians on both sides of the aisle are more highly motivated by the uncertainty respecting who the voters will blame for the mess than they are about exercising real leadership for their constituents.

LEED Release Delayed Amid Controversy

The U. S. Green Building Council announced last week that it will delay release of Version 4 of its environmental rating system for construction projects, and extend the comment period through December 10, 2012, due to an unprecedented level of 22,000 comments on the current draft. After further comment, voting on the new version will likely be delayed until next June.

USGBC has already certified 40,000 construction projects in 130 countries worldwide, and it says 1.5 million square feet of new building space is certified daily. Special interests throughout the construction industry are seeking through comments to “fix” the latest draft. The U. S. Chamber of Commerce, National Association of Manufacturers, American Chemistry Council, and American High Performance Buildings Coalition all contend the proposed standards will unfairly affect market share for their products.

Isn’t that just what LEED is supposed to do? By getting building materials deemed harmful to the environment out of use, indoor air quality and people’s health are supposed to improve. Let’s hope the USGBC can hold the line against makers of noxious products who are just trying to hold onto the old ways.

Wind Energy Tax Credit Expiration Threatens Illinois’ Economy With Lost Billions

According to an Illinois State University report released this month, wind farms in the state will add $5.8 billion to the Illinois economy over the life of the projects. However, much of this economic resurgence is threatened by Congressional inaction over renewal of the wind energy tax credit which expires at the end of this year. ISU’s Center for Renewable Energy Director David Loomis says in the study report that Illinois wind farms have created 19,047 construction jobs here, plus 814 long term jobs in maintaining and operating the huge windmills. Landowners with turbines on their property earn $13 million each year from lease payments, and the wind generators pay $28.5 million per year in property taxes to local governments.

Loomis points out that wind farm construction is now at a standstill because of the threatened tax credit expiration. Sierra Club Illinois Chapter President Jack Darin says that renewal of the tax credit “is critical for the health of our environment.” Illinois’ wind farms already produce enough electricity to power nearly 200,000 homes per year. Great Plains Laborers District council Legislative Affairs Director Mike Matejka points out that “Wind jobs are very, very important as we bridge the recession.”

With all this economic activity at stake, it seems odd that nobody in Washington, D.C. is interested in passing a simple bill extending the tax credit before it is too late to prevent major hits to the wind industry here.

University Of Illinois To Rebid Tainted Architecture Contract

University of Illinois Trustees voted last week to rescind and rebid a controversial $4.6 million architecture contract awarded to BLDD Architects for renovation of the Urbana campus Natural History Building, now partly closed and crumbling 120 years after it was first built. The tainted contract was originally awarded to BLDD, where architect Bruce Maxey owns 8.9% of the company, and is married to U of I’s associate director of planning Jill Maxey, who is in charge of campus construction. Jill Maxey has been reassigned to a different job on campus.

According to board Chairman Christopher Kennedy, “It was a short discussion. We don’t want any more ethical issues associated with the university. We get public money and we have to hold ourselves to a higher standard.” Before the Trustees’ vote, university administrators had twice refused to go along with a Procurement Policy Board recommendation that the tainted contract be cancelled because of ethical violations. Randy West of BLDD said of the Trustees’ action: “While we are saddened by today’s decision, we are gratified that all involved agree that BLDD made all required disclosures, showing its strong commitment to transparency throughout the process.” Of course, in Illinois, the disclosure that “We have clout and the inside track to this contract,” is apparently all that is required to be “ethical” when it comes to taking millions of taxpayer dollars.

According to Mike Bass, the university’s senior associate vice president for building and financial services, rebidding the contract may delay the project and add to the cost of renovations. Any such added costs should be recovered from the Maxey family and any other university officials involved in letting this sordid episode run on for years before correcting the obvious ethical lapses.

Interior Releases 285,000 Acres For Solar Power Development

Interior Secretary Ken Salazar announced July 24 that the Obama administration has approved 17 tracts of federal lands in six western states for development of commercial scale solar power projects, streamlining the process of environmental review for developers seeking to site solar power plants on these federal properties. California has 153,627 approved acres, Nevada has 60,395 acres, New Mexico has 29,964 acres, Utah has 18,658 acres, Colorado has 16,308 acres, and Arizona has 6,465 acres. Salazar described the plan as “a roadmap for solar development for decades to come.”

Solar Energy Industries Association President Rhone Resch said the plan is a “detailed environmental analysis that will dramatically speed the permitting process.” Environmental groups also responded favorably to the announcement. “This is a huge step forward for the Bureau of Land Management,” said National Wildlife Federation’s Policy Director for Public Lands Kate Zimmerman. Helen O’Shea of the National Resources Defense Council echoed Zimmerman’s praise for the plan. “This is a really big milestone in terms of environmentally sensitive and responsible development.”

Salazar’s Interior Department has already approved 17 utility scale solar power projects which will produce electricity to power 1.7 million homes when completed. He predicts that solar power developments on federal lands could eventually generate enough energy for 7 million homes.

Apartments Likely Driver Of Any Chicago Construction Employment Upturn

Employment in Chicago’s construction industry has been declining by 5,000 to 6,000 jobs each month recently, dropping more steeply than any other significant metropolitan market in the United States. Ironically, the only hope for the near future arises out of the city’s and nation’s foreclosure debacle – the need for more rental apartments to house dislocated former homeowners. Though Mayor Emanuel has recently announced commitments by such corporate giants as Google, Sara Lee, MillerCoors and United Airlines to move office jobs into the city, much of that workforce will be located in existing vacant office space, such as Google’s lease of 400,000 square feet in the Merchandise Mart.

On the other hand, new apartment construction in the city is showing some slow but hopeful growth. Recently launched projects in the residential high rise market include the Kennedy family’s 500 unit, 50 story apartment tower on Wolf Point, and the 42 floor, 332 unit Summit on Lake at 73 East Lake Street, now under construction. Chris Kennedy describes the family’s Wolf Point project as “a billion dollars coming into the city when all is said and done,” including not only the 50 floors of small apartments appealing to “young people without cars” and two office towers to be built later. Forty-second ward Alderman Brendan Reilly is still dealing with community opposition to the Wolf Point project, which will obstruct the delightful views of neighborhood residents recently purchasing expensive condos nearby.

It will be years before we know whether these new rental units will be abandoned by their tenants when the housing market finally turns around, if ever, but the apartment developers are betting billions on substantially full occupancy, at least until their apartment projects can be fully depreciated and sold off as condos.

Much Ado About Nothing In Englewood Flyover Minority Deal

Congressman Bobby Rush wouldn’t give the press a look at the “memorandum of understanding” he says he negotiated with IHC Construction/Illinois Constructors Joint Venture, the successful bidder on METRA’s $93 million Englewood Flyover rail overpass construction contract to boost minority employment on the project, probably because the deal is essentially meaningless for increasing employment in the Englewood neighborhood. The project is intended to untangle one of the most congested rail bottlenecks in the United States, and reduce freight train interference with commuter rail service on Chicago’s south side.

Ballyhooed last week as a boosting employment for Englewood residents, the deal really does little or nothing for jobs in the neighborhood. According to METRA officials, the deal sets up a community liaison to facilitate contacts between contractors on the project and minority businesses and workers, and provides mentoring for African American owned companies. What it doesn’t do is require the general contractor to hire companies not included in its bid to METRA. If it did, that would violate state bid shopping laws. While IHC President David Rock says “It’s my goal to get some local folks jobs,” he quickly adds “They still have to be able to do the work.” Given the high rate of gang related shootings in Englewood, what happens when skilled construction tradespeople in Englewood get work, is that they move out of the neighborhood.

The contractors and subcontractors on this project will be required to submit certified payrolls including the ZIP Codes of each worker on the site. It would be an interesting academic exercise for some local Ph.D. social science student to use the Freedom of Information Act to obtain them, and do an analysis of the worker migration out of Englewood during the course of the construction work. However, it’s doubtful anyone will go to such lengths to test whether Congressman Rush has actually done anything at all to improve overall employment of Englewood residents by this headline grabbing, legally unenforceable “memorandum of understanding.”

University Of Illinois Gets Second Rap On The Knuckles Over Architect Contract

Wednesday, July 18, the Illinois Procurement Policy Board unanimously rapped University of Illinois administrators on the knuckles over the award of a $4.3 million architecture contract to a firm partly owned by the husband of a university administrator involved in the architect selection process. This second stinging rebuke will sent the matter to the Illinois Inspector General for investigation. The Procurement Policy Board again voted 4-0 to recommend voiding the two year old architecture deal, based on findings that the university administration violated state law when it failed to bring the potential conflict of interest to the attention of the state’s chief procurement officer for higher education Ben Bagby at the time the contract was initially awarded in 2010. Bagby, however, has remained adamant in his defense of the arrangement.

On completing its review of the situation, the Illinois Inspector General’s office can recommend referral of the issue to state or federal prosecutors, or the firing, fining or suspension of university officials. Procurement Policy Board member Ed Bedore could not hold back his disgust with the callousness of university administrators to their ethical obligations to taxpayers. “I just hope the university does a better job with their law students than they do with their attorneys in their offices,” Bedore said. “I would hope that the U of I would take this back, or the board of trustees would open the windows and raise the blinds and shed some light on this.”

University Board of Trustees Chairman Christopher Kennedy indicated that the board would be reconsidering the matter of the architecture contract during its retreat and monthly board meeting in Chicago this week. “The taxpayer should have confidence that their money is being spent without conflict. We don’t want any appearance of conflict when it comes to contracting,” Kennedy said. “We take a lot of public money, and people ought to trust the University of Illinois. The board will hold the university staff to the high standard of no perception of conflict of interest.”

Only the ultimate outcome of this disgusting incident will tell, however, whose “perception of conflict of interest” counts for anything in Illinois public contracting.

IDOT Ordered To Pay McDonough $2 Million And Lift Suspension

When a controversy about accounting treatment of certain design firm expenses factored into contract overhead rates turned up after IDOT neglected to audit the billings of consultant McDonough Associates for nine years, IDOT’s chief Procurement Officer Bill Grunloh suspended the firm for three years in a fit of pique, and held back nearly $2 million in contract payments billed by McDonough. Now a Chicago U. S. District Judge Milton Shadur has ordered IDOT to cough up the money and lift the suspension.

Describing the suspension as violating the procedures provided for in the Illinois Administrative Code for contractor suspension, Judge Shadur said “Grunloh’s actions were in clear absence of jurisdiction and exceeded his authority.” Last Friday Judge Shadur chided IDOT’s lawyers for the agency’s suspension of McDonough for “an illegitimate reason.” He went on to say “this is the way the agency performs on a continuing and regular basis … If applied to every project … we would still be operating with horse and buggy because IDOT would never get anything done.”

Judge Shadur’s orders put an end to what McDonough’s lawyers describe as “an abuse of power,” and yesterday IDOT began paying out the $2 million owed to McDonough.

Baker’s Dozen Chicagoland Specialty Contractors In Midwest Top 50

ENR won’t be issuing its Top 50 Midwest specialty contractor list until the September 24 issue this fall, but when it does, there will be at least 13 Chicago area contractors on the list. These companies represent 10 different specialties, and they are: demolition contractor Break Thru Enterprises of Lombard; electrical contractors Broadway Electric of Elk Grove, Kelso-Burnett of Chicago, and Maron Electric of Skokie; erection contractor Area Erectors of Rockford; excavators Ryan Inc. of Janesville Wisconsin and Stark Excavating of Bloomington; foundation contractor Case Foundation of Roselle; glazing contractor MTH Industries of Hillside; masonry specialist James McHugh Construction of Chicago; paving contractor L. Keeley of Sauget; piping contractor Mechanical, Inc. of Freeport; and roofer Tecta America of Rosemont.

This looks like some good news for our neck of the woods, but final analysis awaits the September 24 issue of ENR and the accompanying financial data on these companies.

METRA Approves $141 Million Flyover Contract With Increased MBE Quota

METRA’s board yesterday approved award of the construction contract for the $141 million Englewood flyover project to reduce freight train conflicts with commuter rail operations on Chicago’s south side, after three Congressmen withdrew their objections to limited minority employment in connection with the construction. The Congressmen, led by First District Democrat Bobby Rush, pulled back their resistance based on agreement by IHC Construction/Illinois Constructors, the winning bidder, to increase MBE participation from the contractually required 25% up to 40%.

Though details of the MBE increase remain undisclosed, it is unclear how more MBE subcontracting can significantly increase the number of jobs for workers living in the predominantly black Englewood neighborhood. There is no way to guarantee that the black owned businesses in the neighborhood can find the increased number of skilled minority tradespeople the Congressmen want, living in Englewood. As construction on this project proceeds, it will be very interesting to learn whether the certified payrolls of the participating MBE subcontractors actually include increased numbers of workers with Englewood ZIP codes.

University Of Illinois Chooses To Ignore New Anti Corruption Law

In the wake of the impeachment and corruption conviction of former Illinois Governor Rod Blagojevich, the Illinois Legislature created a five member Procurement Policy Board to review and advise state agencies about public contracts where potential conflicts of interest could arise. Governor Quinn appoints one member, and each of the legislative leaders in the Illinois House and Senate appoints a member. Now, in another display of the rampant arrogance which has recently rocked the administration of our state’s biggest and most important public institution of higher learning, University of Illinois officials have chosen to ignore the Board and its contract review process in connection with awards of $4.67 million in design contracts for the $70 million renovation of the school’s 120 year old and partially closed crumbling Natural History Building. The design contracts in question were awarded to BLDD architects, a firm partly owned by the husband of University of Illinois Associate Director of Planning Jill Maxley, who also formerly worked at BLDD.

Despite the obvious conflict of interest in the awards of these 2010 and 2011 design contracts, the university administration refused to alert the Procurement Review Board about the situation until March, 2012. And now, in the face of a unanimous Review Board vote recommending that these contracts be voided for conflict of interest, has announced its intention to go ahead with the conflict laden contracts anyway. Ben Bagby, our state’s chief procurement officer for higher education, has boldly asked the Procurement Review Board to waive the obvious conflict of interest. According to Bagby, “You take a situation and you learn from it. Hopefully these things won’t have reoccurrence so things can be looked at early on and ahead of the game.”

Bagby protests too much, as The Bard says. In the past two years the Procurement Review Board has looked over 678 potential procurement conflicts of interest, and stung the submitting agencies with recommendations that contracts be voided only four times. Three of those recommendations involved University of Illinois contracts with BLDD, including the Natural History Building situation. In the case of the Natural History Building the University claims it put up a so called “Chinese Wall” to keep Jill Maxley out of decisions involving her husband’s firm, but Jill Maxley was still copied on e-mails discussing the project while the BLDD proposal was pending, and Maxley delegated the selection process to her subordinate Tony Battaglia, whose brother in law works for BLDD. Battaglia himself also plays in a band with BLDD employees.

University officials claim they “didn’t realize” they needed to send the conflicts of interest to the Procurement Review Board. For a University boasting one of the state’s premiere law schools, this sort of thinking is unimaginable. There must be dozens of law faculty members who could have been consulted about the issue for free. The winds of arrogance in Champaign blow the stench of corruption all across our state.

Wind Power Tax Credit Debate Goes Political

With the current federal wind energy production tax credit of 2.2 cents per kilowatt hour expiring December 21, 2012, layoffs in the wind energy and related industries, and rapidly falling natural gas prices are driving the debate over extension of the tax credit into the public arena. Spain based Gamesa Technology Corporation will lay off 20% of its U.S. workforce in September because of uncertainty over the fate of the expiring tax credit, according to spokesman David Rosenberg. Though Florida based NextEra energy will finish out currently ongoing developments to add 1,300 megawatts of capacity, there are no new projects slated for 2013, according to spokesman Steve Stengel. Wind turbine parts maker Mitsubishi Power Systems is mothballing a brand new $100 million parts factory in Arkansas as the tax credit expires, and taking a $250 million loss on write down of its turbine inventory.

In Texas, the nation’s largest generator of wind power, development is grinding to a halt. “Without the tax credit, I don’t think Texas will see any wind farm development,” according to Pecos County Economic Development Director Doug May. Texas wind power industries are facing the twin challenges of plummeting natural gas prices and maxed out power transmission grid capacity for moving wind power from the arid plains to population centers.

Since 1992, Congress has renewed the wind power tax credit seven times, and allowed it to expire three times. Each expiration was followed by a 73% to 93% drop in turbine installations. This year will be no exception, according to Alex Klein, research director for HIS Emerging Energy Research. Expiration of the federal production tax credit, he says, “shifts the costs of the renewable portfolio from the federal taxpayer to the electricity consumers in that state. The market will be pretty challenged without the PTC.”

Speaking in favor of renewal of the production tax credit at the opening of Spain based IngeTeam’s wind energy component factory in Menomonee Valley, Wisconsin Thursday, U. S. Energy Secretary Steven Chu urged prompt Congressional passage of a bill extending the tax credit. From the other side of the political aisle, Texas Republican Congressman Michael Conway is urging a phase out of the wind energy incentives, and a return to purely economic forces within the electric power market. “Scaling back the production tax credit will affect jobs. I get how hard that is,” Conway says, “But for the greater good of this country, we can’t continue to do things the way that we have.”

Without regard to the policy considerations surrounding development of renewable energy resources of all descriptions in our nation, it seems election year politics are going to decide which way the wind blows.

Nationwide Insurance To Exclude Coverage For Fracking Waste Damages

In an apparent response to legislative maneuvers intended to restrict natural gas fracking activities, and the attendant negative publicity surrounding the practice, Nationwide Insurance confessed Thursday that an internal underwriting memo circulating on environmental group websites which states that fracking risks will now be excluded from Nationwide liability insurance policies covering gas companies, the landowners who lease property for fracking operations, and the contractors who provide water, pipe, lumber and heavy equipment to fracking operators, is in fact genuine. According to the internal memo, “After months of research and discussion, we have determined that the exposures presented by hydraulic fracturing are too great to ignore,” the memo states. “Risks involved with hydraulic fracturing are now prohibited for General Liability, Commercial Auto, Motor Truck Cargo, Auto Physical Damage and Public Auto coverage.”

Nationwide spokesperson Nancy Smeltzer says the Columbus, Ohio insurer did not intend its personal and commercial lines policies to cover fracking risks. Smeltzer admitted the memo is genuine, but says it was not intended for public dissemination. Aon risk solutions Director of Environmental Practice Jeffrey Hanneman describes Nationwide’s move as really unique, and denies it is the beginning of an insurance industry-wide trend to limit coverage for fracking operators and ancillary contractors. On the other hand, Associated General Contractors of New York State President Mike Elmendorf says Nationwide’s move is bad news for his members who provide goods and services to gas well drillers. Elmendorf points to an extensive record of safely handled fracking operations across the nation, and, in a play on Nationwide’s TV advertising slogan, says, “It’s hard to fathom the rationale for this decision. It would seem Nationwide is not on job creation’s side.”

Texas Facing Major Road Funding Woes

By 2015, Texas may be all out of money to keep highway construction abreast of population and job growth, according to Texas Department of Transportation CFO James Bess, who describes the perilous fiscal status of his agency as “entering into an era of uncertainty.” El Paso State Representative Joe Pickett echoes the concerns of Bess. “People don’t believe there’s a crisis because there are plenty of orange barrels. … How long before the borrowed money dissipates and we don’t have any more money to build?”

Apparently, the answer is the end of 2014. The Texas legislature has authorized TDOT to borrow $17.3 billion for transportation projects, but repayment will cost as much as $31.1 billion over 25 to 30 years. Nevertheless, TDOT will spend morrow than it is authorized to borrow in the next two years: $10.5 billion this year, and $9.3 billion next year. Of that total $19.8 billion, $6.7 billion is from one time sources that won’t be available in the future.

Texas motor fuel tax revenue – the state’s major funding source for road building – generates $2.6 billion annually, but the state needs $14 billion per year to keep up with population growth. Part of the problem has been the penchant of legislators over the years to raid highway funds for fire and police salaries and operating expenses, and now that big chicken is coming home to roost. One proposal is to raise auto and truck license plate fees by $50 per year, but that would hardly fill the budget gap. Even in Texas there aren’t half a billion cars and trucks.

If you plan to drive through Texas in the future, make sure you have a good spare tire. You will probably run into lots of potholes.