Monday, November 12, 2012

Wisdom from the DBIA National Conference


It’s been a busy few months.  I just returned from the DBIA National Conference in New Orleans.  First, if you haven’t been to New Orleans lately, you should go.  It’s an extraordinarily beautiful city, and the food is amazing.  Be prepared to gain a few pounds.  Second, if you haven’t been to a DBIA National Conference, you should go.  The staff at DBIA, particularly Stephenie Zvonkovich, the DBIA Conference Planning Director, do an amazing job.  In addition to the DBIA staff, I want to give a personal thanks to all of the busy professionals on the National Conference Planning Committee who put in a huge amount of effort to review the hundred plus submissions, make recommendations on speakers, and follow up with speakers to create the best content on design-build in the country. 

We provided some amazing sessions, but one was exceptional.  Jamie Clarke, a Canadian explorer, was our final keynote speaker, and he was fabulous – funny, poignant, inspirational, add some superlatives and you get the drift.  If you are looking for a great motivational speaker, you could not do better.  For more info, here is a link to his website:  http://www.jamieclarke.com/

If you missed this year’s conference, DBIA will be selling the conference materials, and the materials should be available in the next few weeks on the website.  DBIA will also be providing continuing education credits for certification with the conference materials.

One of consistently terrific sessions at the National Conference is “Lessons Learned” from Mike Loulakis, and he didn’t disappoint this year.  I will be discussing a few of those cases in the weeks ahead.  Not surprisingly, Mike noted the Metcalf decision (see my previous post) as one of the “Big 2” of this past year.  The other decision was from the Civilian Board of Contract Appeals, Fluor Intercontinental, Inc., v. Dept. of State, 2012 WL 1144972 (March 2012).  The Fluor case revolved around the construction of an United States embassy complex in Astana, Kazakhstan.  The facts surrounding the case are in heavy dispute.  Fluor asserts that the government made representations regarding (among other things) the availability of local labor and materials as well as the status of providing utilities to the site.  The State Department claims that although it stated what it knew about these issues, that local labor and materials were acceptable for certain items and the intent was that the Astana authorities would provide utilities during construction, but it disclaimed its knowledge, and Fluor should not have relied on the statements in Request for Proposals or in the procurement process.  Instead, Fluor should have performed more due diligence on these issues.  As is typical with construction disputes, it is almost impossible to determine who is correct.  The CBCA found with the State Department and held that Fluor should not have relied on any representations during the procurement process.  Fluor argued that the State Department should have a duty under the covenant of good faith and fair dealing to provide accurate information; however, the CBCA essentially rejected the notion that the State Department had any obligation to get these representations right, as long as there was a disclaimer in the Request for Proposals. 

The CBCA’s position on the covenant of good faith and fair dealing is debatable and is currently up on appeal.  However, this case and the Fluor decision are not “wins” for the Federal government.  In fact, when one looks at the cases together, they are a massive setback for best practices.  If you have heard me speak, you know that my philosophy is to accurately and intelligently place risks on a project.  If the CBCA is correct, then the State Department left their proposers out in the cold on the procurement of a facility with complex security issues in a potentially volatile area of the world. 

I often wonder about the extent of knowledge of geography in our country, particularly when it comes to countries that have only been in existence for the past few years.  I have jeans older than Kazakhstan.  Here is a link to the Central Intelligence Agency website that shows its location:  https://www.cia.gov/library/publications/the-world-factbook/geos/kz.html.  It is surrounded on two sides by Russia and China and on the other side by three former Russian states, Turkmenistan, Uzbekistan and Kyrgyzstan.  Also, according to the CIA, it has vast natural resources, but it’s infrastructure is severely lacking. 

No one should treat this procurement as if it was in the United States.  Yes, business who propose on projects must do extensive investigation on the availability of local resources, but in this case, the party best able to gain intelligence on the availability of the local resources was the government, not the proposers.  The goal in any competition should be to select the design-builder best qualified for the project, not to shift the risk of every condition onto the design-builder.  The best practice in this case would have been for the government to set some general assumptions regarding the local conditions, allow the proposers to set their price based on those assumptions and then work collaboratively with the successful design-builder when those assumptions change.  Notice I said “when”, and not “if.”  The project has not been designed, yet.  Assume that changes will occur, and develop a communications protocol that will effectively manage the change.  If the Federal government continues on the path of stretching the boundaries on what is foreseeable with respect to risk, the cost of procurements will rise dramatically, and we all lose.  Let’s hope that we see a movement from the Federal government to reject these cases, if not from a legal standpoint, then for the sake of best practices and maintaining a viable industry.

Stay tuned for more wisdom from our fabulous speakers at the National Conference.
rob