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P3 Update: New Hampshire
July 29, 2016
New Hampshire legislation, known as Senate Bill 549 and signed into law on June 16, will take effect August 15. It’s the first law in New Hampshire that authorizes the use of P3 projects for transportation and infrastructure, the National Council for Public-Private Partnerships said.
“A solid, modern and safe transportation infrastructure is critical to the success of our people and businesses, and public-private partnerships can play an important role in advancing our transportation goals,” Gov. Maggie Hassan said in a recent statement.
The law in New Hampshire establishes the Public-Private Partnership Infrastructure Oversight Commission that will comment on and approve or deny requests for relevant P3 proposals, the law states.
The commission is expected to provide qualification criteria to bid for each project, including providing for the submission and evaluation of unsolicited proposals. Further, the commission is to deliver a report within 30 days of the commission’s approval or denial of a request for proposal of a P3 project to the state’s House and Senate Ways and Means and Transportation committees. The report must include details about the project’s policy and regulatory structure; issues of taxation and profit sharing; advertising and marketing details; and the financial valuation of the state transportation facility.
Suppliers to such P3 projects should consider payment assurance, as many states in which P3 statutes exist leave suppliers open to unsecured risk, said Connie Baker, CBA, director of operations for NACM’s Secured Transactions Services (STS). Bonding requirements, if any exist, on these types of privately funded but otherwise public projects vary state to state and depend on the type of project. For instance, transportation may have requirements that are different from an education project, or vice versa. This makes requesting payment bond copies before shipping an extremely important step in evaluating risk for a company. If they don’t exist, consider requiring customers to take out a bond or ensure they are creditworthy.
Look for Boilerplate Language in Construction Terms, Conditions
July 29, 2016
When accepting terms and conditions attached to a purchase order (PO), one size does not fit all. Indeed, many of the terms and conditions seen often by Sam Smith, regional finance manager with Crescent Electric Supply Co. of East Dubuque, IL, are boilerplate and don’t always apply to a company’s business.
When dealing with terms and conditions proposed by a customer, credit managers must look out for a number red flags, Smith said during NACM’s 120th Credit Congress & Expo in the Building and Construction—Executive Exchange Panel. Initially, every credit team should create a company policy and procedures and ensure that department staffers, as well as the sales team, have been trained on them. This includes what to do if a term or condition from a customer needs to be stricken or should be added. Without policy in place serving as a foundation, a company’s credit department risks having to soothe disgruntled customers and handle delayed payments, potentially with damaging legal ramifications. “The ultimate cost is loss of customers and financial exposure,” Smith said.
The following are among types of terms and conditions that Smith advises credit professionals to be wary of:
- Ties to other contracts. Boilerplate contract language credit managers should look for includes: “This PO incorporates by reference all terms of subcontractor’s contract with the general contractor …” If Smith sees this type of language, he automatically redlines such text, as it can bring too much unknown liability to his firm. If he gets pushback from clients, he’ll contact them, get a copy of the underlying contract and try to narrow such terms and conditions to the section of the prime contractor’s contract that directly relates to Crescent’s portion of the work.
- Liquidated damages. Search for language such as: “If materials are not delivered by X date, damages of $/day will be incurred …” Such language could obligate his firm to the terms of another, unseen contract, which is usually unacceptable and should be redlined.
- Indemnification clauses. Expressions like “hold harmless,” “indemnify,” or “defend” should be eliminated. These clauses attempt to shift the potential costs from one party to another and protect a party to a contract from financial losses related to the performance of another involved in the contract. In rare cases, these types of terms are allowed at Smith’s firm if they are limited to the value of the purchase order alone, he noted.
P3 Update: Louisiana
July 29, 2016
The state government in Louisiana has joined dozens of other states of late in adopting new public-private partnership (P3) laws that target the transportation sector.
Louisiana legislation, known as Act 519 and signed into law June 13, extends the Louisiana Transportation Authority’s ability to use P3s to the state’s Department of Transportation and Development, according to the new law and the National Council for Public-Private Partnerships.