Legal Issues Related to Large-Scale Airport Construction Projects (2020)

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Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. ACRP LRD 38 3 LEGAL ISSUES RELATED TO LARGE-SCALE AIRPORT CONSTRUCTION PROJECTS By Pramen P. Shrestha, University of Nevada, Las Vegas, NV; Brandon J. Davis, Nossaman LLP, Los Angeles, CA; and Ghada M. Gad, California State Polytechnic University, Pomona, CA. PREAMBLE This digest addresses key legal issues that public agencies face with complex airport construction projects, with a focus on issues related to the use of alternative project delivery methods (PDMs), when compared to the traditional design–bid–build (DBB) delivery method. Legal issues, in this digest, are defined as those causing risks for the parties that could potentially result in legal liabilities, claims, and related project impacts. As such, the digest will cover topics related to design, environmental permitting, contract procurement and management, phasing of construction, insurance requirements, local issues and out- reach, dispute resolutions, funding, remediation of hazardous materials, incentives and disincentives, project closeout, and operation and maintenance. This digest is not only intended to provide information for legal professionals, but should also be useful to transportation agency administrators, contracting officers, construction managers, engineers, and contractors, as well as financial managers. This digest is also not intended to promote an airport’s use of a particular project delivery method, because industry trends change and additional opportunities arise for delivering airport construction projects. Instead, it is intended to provide an overview of legal and other issues that airports face when delivering large-scale airport construction projects and how these issues have manifested themselves in the context of several case studies. I. INTRODUCTION According to data provided by Statista (2018), there are 5,136 paved public airports in the United States. Public airports are open for use by the public. Although most of these airports have been delivered (designed, constructed, operated, and main- tained) using traditional project delivery methods (PDMs), air- ports are increasingly turning to alternative PDMs. These alter- native PDMs include lump-sum design–build (DB), progressive DB, construction manager at risk (CMAR), and various forms of public–private partnerships (PPPs). This shift to alternative PDMs has been prompted by changes in procurement laws, funding limitations, an increase in project complexity, unique design considerations, and concerns about project cost over- runs and delays. One of the key changes enabling this shift was the FAA’s Advisory Circular AC 150/5100-14D, published in September 2005, which formally accepted the use of alternative PDMs for the design and construction projects of airports (FAA 2005a). With the environment for airport development in the United States being very dynamic, including major innovation trends in airport and passenger facilitation, increased global demand, and a forecast of passengers doubling by 2030, these alternative PDMs offer a plethora of opportunities for constant improve- ment within national airport systems. These improvements tar- get more efficient operations, happier passengers, and increased revenue generation (Ahasic and Sheren 2017). Airport authori- ties thus have started using alternative PDMs with the aim of lowering project costs, expediting schedules, and reducing an airport’s risk exposure during design and construction phases (or, in some cases, operation and maintenance phases) of their projects. Alternative PDMs still come with implementation chal- lenges, because there are many ways in which airport authorities can procure projects, given specific laws and regulations. Legal issues related to airports, especially issues related to large-scale airport programs, tend to involve increased risk and complexity. This increased risk and complexity are attributed to many fac- tors, including project management needs and contract struc- ture. The contract structure can be dictated by federal, state, and local regulations, as well as by source funding requirements and the involvement of critical third parties, including airlines, concessionaires, and rental car companies. Such requirements affect the procurement process, from environmental permitting through award. They also affect a host of contractual provisions, from the definition of the project scope, to the form of dispute resolution, to how a project is operated and maintained. This complexity is increased by the suite of alternative PDM options that an airport authority can potentially employ, thereby impli- cating the parties’ responsibilities and liabilities. Several ACRP studies have addressed contract-related legal issues at airports. For example, ACRP LRD 30: Contract Risk Management for Airport Agreements identifies risk issues in specific types of agreements, including construction, and sug- gests contract provisions to best manage these risks, including insurance provisions. ACRP LRD 16: Procurement of Airport Development and Planning Contracts compiles procurement re- quirements specifically applicable to airport contracting. These and other reports (e.g., ACRP Report 33: Guidebook for Develop- ing and Managing Airport Contracts; ACRP Report 36: Airport/ Airline Agreements—Practices and Characteristics; ACRP Report 66: Considering and Evaluating Airport Privatization; ACRP Synthesis 1: Innovative Finance and Alternative Sources of Rev- enue for Airports; and ACRP Report 21: A Guidebook Selecting Airport Capital Project Delivery Methods) provide information applicable to large-scale airport programs, but are not tailored to comprehensively address the legal issues that are encoun- tered during large-scale airport construction projects. This

Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. CONTENTS Preamble, 3 I. Introduction, 3 A. Scope and Objectives, 4 B. Limitations of the Study, 5 II. Project Delivery Methods, 5 A. Overview of Construction Contracts Under Various Delivery Methods, 5 B. Statutory Framework for Construction Contracts Under Various Delivery Methods, 5 C. Forms of Project Delivery Methods, 6 III. Selection Process for a Project Delivery Method, 9 A. CMAR Case Study Results, 10 B. Progressive DB Case Study Results, 11 C. Lump-Sum DB Case Study Results, 11 IV. Project Funding, 11 A. CMAR Case Study Results, 12 B. Progressive DB and Lump-Sum DB Case Study Results, 13 V. Contract Procurement, 13 A. CMAR Case Study Results, 14 B. Progressive DB Case Study Results, 14 C. Lump-Sum DB Case Study Results, 15 VI. Contract Management, 15 A. CMAR Case Study Results, 16 B. Progressive DB Case Study Results, 16 C. Lump-Sum DB Case Study Results, 17 VII. Environmental Requirements and Permitting, 17 A. CMAR Case Study Results, 18 B. Progressive DB Case Study Results, 18 C. Lump-Sum DB Case Study Results, 18 VIII. Design and Construction, 19 A. CMAR Case Study Results, 19 B. Progressive DB Case Study Results, 20 C. Lump-Sum DB Case Study Results, 21 IX. Insurance Programs, 21 A. CMAR Case Study Results, 22 B. Progressive DB and Lump-Sum DB Case Study Results, 23 X. Dispute Resolution, 23 A. CMAR Case Study Results, 23 B. Progressive DB and Lump-Sum DB Case Study Results, 24 XI. Remediation of Hazardous Materials, 24 A. CMAR Case Study Results, 25 B. Progressive DB Case Study Results, 25 C. Lump-Sum DB Case Study Results, 25 XII. Project Incentives and Disincentives, 25 A. CMAR Case Study Results, 26 B. Progressive DB Case Study Results, 27 C. Lump-Sum DB Case Study Results, 27 XIII. Project Handover Phase, 27 A. CMAR Case Study Results, 28 B. Progressive DB Case Study Results, 28 C. Lump-Sum DB Case Study Results, 29 XIV. Operation and Maintenance Phase, 29 A. CMAR Case Study Results, 30 B. Progressive DB Case Study Results, 30 C. Lump-Sum DB Case Study Results, 30 XV. Conclusions, 30 A. Conclusions from CMAR Case Study Projects, 30 B. Conclusions from Progressive DB Case Study Project, 31 C. Conclusions from Lump-Sum DB Case Study Project, 32 References, 32 Acronyms, 34 Appendix A: Case Study Questionnaire, 35 2 ACRP LRD 38