Pennsylvania’s Rising College Tuition Isn’t Helped by Outdated Construction Law

Recently Penn State University announced they approved a tuition increase for incoming students, joining Temple University and University of Pittsburgh. As families continue moving from a pandemic towards normalcy, I am sure the last thing they wanted, or expected, was to see the price tag of education to increase for their students.

A lot of costs go into the background of the high costs of college. Facilities management and maintenance are one important component. If construction procurement reform had been put in place, to put us in line with the rest of the country, I wonder if this tuition increase could have been avoided. As one of the last few states requiring the use of multiple prime contractors on each public construction project, and enforcing it more strictly than other states, Pennsylvania is stuck with an archaic business practice. Referred to in Pennsylvania as the Separations Act, this requirement was enacted in 1913.

So, what exactly is the Separations Act? And why should students at state-related universities care?

In essence, the Separations Act forces the public owner, like the state-related universities, to serve as the general contractor for a project and each of the multiple primes contracts directly to the public owner. Without a single entity directing the project and with plenty of finger-pointing, this is an inefficient contract delivery method fraught with problems such as delays and claims, which are the norms and culprits leading to public projects being over-budget.

This multiple prime delivery system is virtually nonexistence in the federal, private, residential, and commercial markets – and in fact when the state-related universities spend their own money for construction projects, they very rarely use multiple prime delivery because they want their money spent efficiently. Yet the state-related universities are forced by state law to use the multiple prime delivery system when it is building projects funded by the state.

On average, a multiple prime delivered project costs 10% more. For that reason it makes sense for these schools to avoid this process when spending money from alums and other contributors. One would think our legislature would have that same sentiment about taxpayers that these colleges have for their donors.  

It’s time to modernize the Separations Act by affording our public sector a list of proven delivery methods to select from. Construction is not a one-size fits all industry and there is no perfect delivery method. A construction client’s priorities (i.e., cost, quality, time, safety, etc.) vary from project to project and the customer should be allowed the opportunity to select the most appropriate delivery method for a particular project on a case-by-case basis. Senate Bill 823 of 2020 provided those options.

By no means am I saying that modernizing the Separations Act is the be-all end-all solution to stop tuition inflation, but when Pennsylvania knowingly operates inefficiently while my neighbors see a tuition increase at our fine state-related institutions, I feel inclined to speak up. Now is the ideal time to address inefficiencies in our procurement process on behalf of current and future college students.

Happy Anniversary!?!? Pennsylvania Begins Its 108th Year Overspending on Public Construction

Next time you drive by a public-school building under construction, know that our state is intentionally spending 10% more on that project because of an archaic law that only exists in Pennsylvania.

On May 1, 1913, Governor John Tener put his signature on legislation to enact the Pennsylvania Separations Act.  Tener assumed our state’s top office as we were coming off of a construction scandal involving the Pennsylvania State Capitol.  State Treasurer William Berry had found that there had been an unappropriated cost for our state capitol’s construction of over $7.7 million ($211,282,599 today).  Mr. Berry found many questionable charges, which led to the conviction of the building architect and the former State Treasurer.  Due to today’s technology, every cent that is spent is easily tracked.

At the time, in 1913, a Separations Act-type law was the norm in America.  However, it is not the norm today as every other state, the federal government and the private sector enjoy options in construction delivery.  Yet Pennsylvania remains the lone holdout that mandates the Separations Act which requires the use of multiple prime delivery.

Supporters of the Separations Act like to debate the statement that Pennsylvania is the only state left with this cumbersome contracting requirement and they believe there are two other states joining us.  They feel that North Dakota and New York join us.  These two states have chipped away at their multiple prime mandate, allowing flexibility in public contracting methods depending on the type of project.  But regardless of whether Pennsylvania is the only state or one of three states, it’s a pretty weak defense to keep a law on the books that wastes tax dollars.

So, what is the Separations Act and multiple prime delivery? And why should taxpayers care?

The Separations Act requires that public entities, like a school district, solicit and receive at least four separate bids for one construction project.  This is referred to as the multiple prime delivery method.  Let that sink in – four separate companies tasked with building one project.  This multiple prime delivery method requires the public entity to hold and manage the multiple contracts, making the public entity responsible for coordination of contracts.  Consequently, the public entity increases its contractual liability exposure and is forced to be involved in contractual disputes among the primes.

Without one company in charge of the construction project, the multiple prime requirement is cumbersome and sets the stage for adversarial relationships amongst the prime contractors, resulting in a drastic rise in change orders and claims on multiple prime delivered projects.  Additionally, without one contractor guiding the project, there are multiple project schedules, and this lack of collaboration eliminates the prospect of early completion.  In the private sector, like the healthcare industry, it’s typical to read in the newspaper that the new hospital was built under budget and ahead of schedule – wouldn’t it be nice to afford the public sector similar contracting options that others benefit from?

There is draft legislation that would bring Pennsylvania inline with the rest of the country when it comes to project delivery for public construction, but most importantly it would save tax dollars.  This legislation would allow the public entity to choose between four different delivery systems: Design-Bid-Build Multiple Prime (current mandate), Design-Bid-Build Single Prime, Construction Management At Risk, and Design Build.  To the non-construction professional these terms might be foreign to you.  While there are thousands of resources that explain the various delivery systems (and I don’t mind pointing people in the right direction if requested), I’ll try to keep the explanation simple: each of the listed delivery systems have a different entry point to have the construction team join the design team.  Due to design and construction teams joining forces at different times, depending on the selected delivery system, the systems vary in collaboration as illustrated here:

Now I’ve been told that the Separations Act is a tough issue for the general public to understand.  Personally, I thought an issue that saves tax dollars is something the masses can get behind.  But perhaps I can use an analogy that may help:

  • Can you imagine if the Philadelphia Eagles had four head coaches?  This lack of leadership would result in chaos on the field with players unsure who to listen to.
  • Or what if the Pittsburgh Symphony Orchestra had four principal conductors?  The crowd would need aspirin and earplugs if the orchestra were to receive four different directions.

On Pennsylvania public construction projects, we have four head coaches and four conductors all giving different orders.  There is no perfect construction delivery method, and our industry has evolved since the days of Governor Tener.  We have adapted delivery methods in response to the customer’s changing circumstances.

The customer should be afforded the opportunity to select the most appropriate delivery method for a particular project on a case-by-case basis as cost, quality, and time vary from project to project.  Flexibility to choose the most effective and efficient project contracting method will enable local public entities to control costs on building projects, which ultimately saves tax dollars.    

Our Students Deserve Better – Support House Bill 163 & Senate Bill 823

Bravo to Governor Tom Wolf and to Sen. Vincent Hughes for raising awareness and wanting to address the dangerous lead and asbestos contamination in structures and water systems across Pennsylvania. Concerning the school buildings, our students deserve better than current conditions (if you have not seen the videos on Sen. Hughes’ website click here: https://www.senatorhughes.com/toxicschools/).

Wanting our children to be educated in 21st century schools is commendable; however, constructing and renovating the schools with a procurement law enacted in 1913 is foolish and wasteful. Over a hundred years ago, Pennsylvania legislature enacted the Separations Act. This Act mandates that public construction projects be delivered by multiple prime contractors. Every time you drive by a public construction project just think to yourself: this project has (at least) four companies in charge. This process often leads to delays, lawsuits, conflicts, etc., and it averages about 10% more than contracting methods that the rest of the country utilizes. Because of the inefficiencies of the multiple prime contracting method, Pennsylvania is the only state left to require such a cumbersome construction delivery process. 49 states join the federal government and the private sector in allowing choice in project delivery. It’s time for Pennsylvania to do so as well.

There are two pieces of legislation that can modernize the Separations Act: House Bill 163 and Senate Bill 823. These bills can allow for savings in public construction. Tax dollars do not grow on trees and with that in mind we should be stewards of tax dollars to assure construction projects are built efficiently. Additionally, it’s a big election year so we’ll likely hear a lot about education and jobs. Just think if the $1 billion that Governor Wolf is suggesting for public infrastructure comes to fruition and the Separations Act is modernized, we can spend it wisely resulting in more school projects, which results in more construction jobs.

2018 PA Budget Hearings with DGS

As was the case the last year, the Separations Act was a discussed topic during the Budget Appropriation Hearings with the Department of General Services.

In the Senate, DGS Secretary Topper was asked questions about the Act by Senator Folmer. The gist of the Secretary’s comments related around DGS experiencing increased administrative costs, but they are unsure if total cost is more. DGS would like to continue to study the issue more.

As for the House, Representative Everett led the way with the questioning. Topper echoed his comments from the Senate – increased administrative overhead in the norm for a Separations Act project, but he felt there was a need for more studying of the issue. Everett countered with hints about a new legislative strategy that allows for the current multiple prime delivery system to be used if that’s what the public owner chooses; however, the public owner can also select from other delivery options too.

Personally, I think if the DGS was serious about wanting to study the issue more they should make three phone calls to Pitt, PSU & Temple. When these schools receive state funds they have to abide by the Separations Act and build as the school’s call it: ‘the DGS way’ but when these schools build with their own money they build using Design-Bid-Build with Single Prime; Design Build; Construction Management At Risk; and PSU is even trying IPD. All DGS would have to do is review projects built on these campuses using multiple prime compared to using a variety of single prime. End of ‘we need data’ story.

Click here to hear DGS Topper answer questions from Senator Folmer: https://pasen.wistia.com/medias/6d6hud1x5z

Pennsylvania’s Top Construction Stories of 2017

The news was overwhelming in 2017. From healthcare mergers and insurance coverage to gender inequality to natural disasters to international relations to political squabbling…. Every time you looked at your phone or watched the nightly news there appeared to be another breaking news crisis being reported. Meanwhile the construction industry kept chugging along, adding jobs to the payrolls and improving the quality of life. That’s not to say that 2017 was just another typical year for the construction industry. No not at all. Last year we experienced some remarkable events.

Below are the top Pennsylvania construction stories of 2017 according to me. I kept them brief so you can breeze through it quickly, but if you want more information on any item listed please don’t hesitate to contact me at 717-731-6272 or Jon@KeystoneContractors.com.

Lastly, let me know what you think. What construction story in your mind did l leave off my list? Or what item did I list that is not a big deal?

Enjoy and keep in mind they are not listed in any particular order:

Amazon H2 Fever

After an announcement that it would build a second North American headquarters, online retail giant Amazon snagged 238 bids for its “HQ2” and the construction industry was on the edge of its seats wondering if this massive project would be built in their region. But I think construction professionals and the general public also were hoping that any sort of tax incentives included in the bid would not hurt their region too much in the future. Pennsylvania had numerous sites submit a bid. For more on Amazon H2 and the crazy amount of incentives click here:   http://www.businessinsider.com/amazon-hq2-cities-developers-economic-tax-incentives-2017-10/#memphis-tennessee-60-million-1.

 

Silica Standard Arrives

After a lengthy extension to review input from industry stakeholders, OSHA’s new silica standard went into effect on September 23, 2017. What that means for the construction industry is that contractors who engage in activities that create silica dust, such as cutting, grinding/ blasting concrete, stone and brick, must meet a stricter standard for how much of that dust workers inhale. The same goes for the employers of the tradespeople working around such activities. Numerous trainings were held and educational materials were produced to prepare the industry for this new standard. Many organizations, like KCA, even teamed with OSHA to host informational roundtable discussions. For more information please contact the KCA or visit: https://silica-safe.org/regulations-and-requirements/osha.

 

Opioid Crisis Continues to Plague Construction

The opioid epidemic is hurting America. Scary stats when you consider that our country makes up 5% of the world’s population, yet we consume 80% of the opioid supply and we are losing 100 people a day. The construction industry has been suffering along with most every other industry too. While it is not an easy task to find the stats by industry, insurance underwriter CNA estimates that 15.1% of construction workers have been affected by the opioid crisis. Much like the rest of society, KCA finds these stats unacceptable and we are doing something about it. Our plans are currently developing and we could use your help to implement them. If you want to join the fight to help Pennsylvania’s construction industry tackle the opioid epidemic, get in touch with us. This offer is extended to all – KCA members, nonmembers, organizations, etc. Together, we can make a difference.

 

USGBC releases LEEDv4 and AIA Updates its Contracts

Both of these items are similar in that in both instances two groups – U.S. Green Building Council and AIA National – worked with their respective memberships and industry stakeholders to update something that is of value to the construction industry. The USGBC issued its updated version of LEED version 4 and AIA issued its 10-year update of its contract documents. Both are also similar in that while they might have been updated in 2017, the industry can still use the previous version a little bit longer to have time to get acquainted with the newer version. The overall sentiment is that both are improvements from the previous version, encouraging collaboration in construction. For more information on LEEDv4 click:  https://www.usgbc.org/leed-v4-old-new and for information AIA contracts: https://www.aiacontracts.org/.

 

Philadelphia is Carrying Good Times into 2018!

By all accounts, 2017 was a great year for the construction industry in the City of Brotherly Love. But 2018 is going to a new level in Philadelphia. More than 8 million square feet of development is forecasted in Philly. To put this into perspective, during 2017 Philadelphia finished 3.3 million square feet of construction. A big chunk of this upcoming work will come from Aramark’s new headquarters, uCity Square on Market, and One Franklin Tower in Logan Square. For more information click here:    https://philly.curbed.com/2017/11/30/16715170/philadelphia-new-construction-analysis-2018.

 

Separations Act Gets Some Attention

As stated in my blog last week, the Separations Act had some memorable moments in 2017. To read this post click:   https://wordpress.com/post/buildingpa.blog/267.

 

Federal Tax Legislation Helps Construction Industry

Before ringing in the New Year, Congress passed a comprehensive tax reform legislation that will lower rates, spur economic growth and have a positive impact on construction businesses for years to come. The AGC of America put together a comprehensive chart to illustrate the benefits of this tax reform package:  http://images.magnetmail.net/images/clients/agca/attach/1218_House_Senate_Tax_Reform_Comparison_v6.pdf.

 

Harrisburg has Big Plans in its Sights

During 2017 two mega projects having been moving closer to the bidding/construction stages. The one project, the Federal Courthouse, has been in the works for the better part of the past decade, but it received a big boost early in 2017 when it received funding authorization. Since this funding announcement, the GSA has been moving quickly on this $200 M-plus, 243,000 square foot Federal Courthouse project. This project has encountered a few snags this past Fall, but hopefully it will break ground soon. Here is a blog post I wrote about this project: https://wordpress.com/post/buildingpa.blog/51.

Another project on the mega scale includes the vision that Harrisburg University has in constructing the tallest building in Harrisburg. In the Fall of 2017, the school announced plans to build a 36-story, $150 M mixed-use tower that will feature 200,000 square feet of educational space that includes fitness center, conference space, hotel, and housing for 300 college residents. For more information:  http://www.cpbj.com/article/20171115/CPBJ01/171119902/harrisburg-university-plans-to-build-citys-tallest-tower.

Separations Act in 2017

During 2017, there were some memorable stories involving Pennsylvania’s  Separations Act. Today I’m going to touch on a few of the major stories.

But before jumping right into the fun, here’s a quick explanation of the Separations Act: this law requires public construction projects in Pennsylvania to build utilizing a multiple prime delivery system and hire at least four prime construction companies for one project. Our state is one of three states that require this handcuffing of public agencies to build in this cumbersome manner – don’t get me wrong the multiple prime delivery system can be a good option depending on numerous factors (owner’s expertise, complexity of project, budget, schedule, etc.), but multiple prime is one of many delivery options. The construction industry has evolved over the years and we now have more innovative and collaborative team approaches to consider, yet our state only allows one delivery option. Considering that the multiple prime delivery system is rarely used in the rest of the country, federal government, and private sector, it’s time for our state to amend our law and allow options in construction delivery systems.

Here we are in 2017 and PA is still mandating we follow this ancient law that impedes the construction industry from progressing. However, our current state is led by a self-proclaimed Harrisburg outsider, so maybe Governor Wolf will play a vital role in advancing the construction industry, and maybe, just maybe the Harrisburg outsider moniker played a role in kick-starting efforts in advancing the construction industry in 2017. Without further ado, here are my top Separations Act stories of 2017:

2017 Senate Appropriation Hearing

On Monday, February 27, 2017, the Separations Act got off to a good first step this year during the PA State Senate Appropriations Committee hearing. At this event, the Governor’s appointed Department of General Services Secretary Curt Topper said: “we face some significant constraints that the private sector does face when it comes to managing our money efficiently. So, for example the Commonwealth, when we go to market in order to contract to do construction, we are bound by the Separations Act of 1913. We are one of only three remaining states in the U.S. that has a Separations Act. That Separations Act requires that we do business less efficiently than we could otherwise do business.” Bravo to Governor Wolf for appointing a forwarding-thinking individual like Secretary Topper who sees an issue and wants it addressed to improve the Commonwealth. Plus, bravo to Secretary Topper for knowing that you were appointed to do a job and you didn’t let politics get in the way.

Click here to Secretary Topper’s hearing:  http://www.pasenategop.com/budget-hearings-summary/

Here is an OpEd on his testimony:  http://www.yorkdispatch.com/story/opinion/contributors/2017/03/07/oped-s-time-repeal-separations-act-pa/98857412/

Here is commentary from Philly Inquirer’s John Baer: http://www.philly.com/philly/columnists/john_baer/Another-old-PA-law-enters-the-states-fiscal-follies.html

 

Pennsylvania Organizations Want Change

What happened on that Monday in February of 2017 had tremendous reach beyond the room where the Senate Appropriations hearing was held. Organizations across the Commonwealth had a bounce in their step, as an executive in the governor’s cabinet publicly supported modernizing the Separations Act. This newly formed coalition mobilized in 2017 and even launched an online petition (located here:

https://www.change.org/p/time-to-modernize-the-pa-separations-act). More to come from this coalition in 2018.

 

A Union Uses Separations Act to Gain Marketshare Over Another Union

In a bizarre twist of fate, a school in the Pittsburgh area signed a project labor agreement (PLA) which pleased the union construction sector in that area. Promoted as a tool to assure labor harmony, West Jefferson Hills School District could not imagine their PLA project being shut down when one building trades union sued the school district, architect, construction manager, and others – but that’s exactly what happened. The plumbing contractor filed suit claiming that the site utility work outside the building footprint should have been assigned to them and not the general trades contractor. It is typical on a construction project (public and private) to have the plumbing contractor perform plumbing work from inside the structure to five feet outside the building. Yet, this plumber wanted work to exceed the ‘typical’ scope of work and this contractor wanted the site utility work assigned to them, which took work from the general contractor, site contractor and the Laborers Union. The Court of Common Pleas of Allegheny County sided with the plumbing contractor stating that the project ‘willfully’ violated the Separations Act. This ruling changes years of precedence that could have major consequences on construction in Pennsylvania – both public and private.

 

 

Separations Act Project a Mess on a Grand Stage

The saying goes, that nothing attracts a crowd like a crowd. Well, in construction, nothing attracts the masses like a massive project. Originally set to open during November of 2015, the State Correctional Institution Phoenix in Montgomery County, PA, which is the largest public building project in our state’s history, is way over-budget and years past schedule. Since this project is so mammoth and expensive, it has the attention of many people statewide, from construction professionals who want to see how it’s built to concerned tax payers who want tax dollars spent efficiently. But a disastrous, multiple prime construction project should have been foreseen since it took years to bid the project, bidding three times over the timeframe of two Governors – Ed Rendell and Tom Corbett. I could go on and on about the mess that is the SCI Phoenix, but I think the PA Corrections Commissioner John Wetzel summed it up best in a Senate Budget hearing when he said: “It’s been a terrible construction project.”  For more information on this developing, and apparently never-ending story, click here to read one of the many articles on it:   http://www.philly.com/philly/news/crime/prison-graterford-phoenix-phila-convention-center-20170901.html

 

Well those are my top Separations Act stories of 2017. They were each briefly presented but if you would like additional information on any item listed please do not hesitate to contact me. Also, if you have an opinion on these stories or think I’m missing an item, I’d like to hear from you.

Looking for a Good Construction Article to Read?

What does a four-time NFL Super Bowl Champion, a public relations specialist, and a human resources expert have in common? Each has been featured in the Keystone Contractors Association Construction Industry Articles of Interest webpage.

When I came on board at the KCA I expressed a desire to place a strong emphasis on education and the sharing of best practices. I was right at home with the KCA membership as they too feel strongly about education since it’s a vital aspect of career development. Members devoted time to creating our educational programming. Some topics were better suited for an in-person seminar/ presentation, while other topics were better in an article format. With the latter in mind, we created an online format.

During the past few months of its existence, we have been fortunate to have such intelligent and motivated professionals wanting to be featured on this new resource. We are extremely pleased to feature such diverse and important topics on this website. Sami Barry of Helbling & Associates, penned an article on women in the construction workforce; Tom Kennedy, UPMC consultant, wrote about Integrated Project Delivery from the Owner’s perspective; Rocky Bleier, Vietnam Veteran, Steeler Legend and Owner of RBVetCo, authored an article about teamwork in construction; plus, Jason Copley of Cohen Seglias, and Joseph Bosik of Pietragallo Gordon Alfrano Bosik & Raspanti, wrote separate articles about the Mechanics’ Lien Law.

The newest articles come to us from Christopher Martin, President of Atlas Marketing, and Thomas Williams, Partner at Reager & Adler PC. Mr. Martin’s article is on crisis communications. As an expert in this field, adding his insights to this serious topic was a no brainer. As a result of his interest in educating the construction community, we are in the talks now to create an educational program to prepare construction companies in responding when a crisis happens. Mr. Williams’ input is on a new contract provision being inserted by the Pennsylvania Department of General Services for construction services. Due to the potential ramifications of this new governmental clause, the KCA is leaning towards hosting an educational program on this subject matter too and it’s nice to know we have Mr. Williams if we go that route. Thanks to the proactive, and knowledgeable, input from both professionals KCA is able to educate the construction industry on serious topics.

If you want to be added to this resource, and position yourself as a construction industry expert of a specific topic, we’d like to hear from you.

To view the KCA Construction Industry Articles of Interest visit: https://keystonecontractors.com/industry-articles.