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Legal Issues Relating to Airport Commercial Contracts (2021)

Chapter: IV. COMMON CONTRACT ISSUES

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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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Suggested Citation:"IV. COMMON CONTRACT ISSUES." National Academies of Sciences, Engineering, and Medicine. 2021. Legal Issues Relating to Airport Commercial Contracts. Washington, DC: The National Academies Press. doi: 10.17226/26083.
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14 ACRP LRD 41 funds allocated to cover any potential liability owed due to the indemnification provision. Therefore, the court concluded that the contractor was barred from seeking relief, as the indemnifi- cation provision rendered the agreement void. This view is also reflected in state attorney general opinions, which generally follow the same reasoning. Ohio Attorney Gen- eral Opinion No. 96-060 states that the use of an indemnification provision must: (i) only obligate the state for the duration of the biennium in which the contract is executed; (ii) the clause must specify a maximum dollar amount for which the state is obli- gated and (ii) the amount thus specified must be appropriated and certified as available for payment. Accordingly, and similar to the Insurance Co v. District of Columbia decision, a munici- pality may not enter into an open-ended indemnity provision. Texas Attorney General Opinion No. GA-01 76 states that indemnifying a third party for damages arising from the third party’s acts creates a debt under Article XI, Section 7 of the Texas Constitution. A county may undertake such debt only if, at the time the debt is created, the county provides a means to levy and collect tax in compliance with Article XI, Section 7.62 In Georgia, state agencies are prohibited from agreeing to in- demnify third parties. Indemnification provisions have been de- termined to violate the prohibition against pledges of the state’s credit and prohibition against gratuities by the state.63 Indem- nification provisions have also been determined to be invalid as an unauthorized attempt to contractually waive the State’s sovereign immunity.64 2. Void as a Matter of Public Policy In addition to prohibitions on indemnification provisions under appropriations law theories, certain states prohibit in- demnification provisions in public contracts as a matter of policy. For example, North Carolina’s anti-indemnity statute, General Statute 22B-1, was created to prevent a party from shift- ing liability for damages resulting from its own negligence to another party. The statute makes cross-indemnification clauses unenforceable unless the promisor (the indemnifying party) is a proximate cause of the “loss, damage, or expense indemnified.” Further, Oklahoma Attorney General Opinion No. 06-11 (2006) concludes that the state is prohibited from entering into any contractual clause that limits the liability of a private party. This prohibition applies to all state contracts, regardless of the subject matter or the damages at issue. 3. Methods for Addressing the General Prohibition Indemnification clauses are routinely used in commercial contracts to manage and allocate risks, and vendors often re- quest their inclusion in contracts with “quasi-government” enti- ties such as airports. Generally, the best approach is to simply advise vendors that such clauses are typically not available in a government contract, and experience suggests that the private 62 See also, Brown v. Jefferson County, 406 S.W. 2d 185 (Tex. 1966). 63 Ga. Const. art. VII, Sec. IV, Par. VIII; Ga. Const. art. III. Sec. VI, Par. VI; 1980 Op. Att’y Gen. 80-67; Op. Att’y Gen. 74-115. 64 1980 Op. Att’y Gen. 80-67. procurement (i.e., the implementation contract) as well as the original contract. For example, the following clause could be in- cluded in a contract for a feasibility study: Firms participating in the planning and design of the work involved in this contract are excluded from participating in any part of the construction process, either as a prime or subcontractor. 3. Contact with Bidders Many procurement regimes have rules related to the permis- sible interactions with bidders for government contracts.58 New York has recently expanded disclosure requirements to contacts with firms potentially seeking contracts even if there is no active solicitation.59 IV. COMMON CONTRACT ISSUES A. Indemnification and Limitation of Liability As discussed in Section II.B, governments are generally pro- hibited from entering into contracts that involve the expendi- ture of funds unless such funds have been appropriated. One as- pect of this non-appropriation issue that is particularly relevant to commercial contracts is indemnification language as such clauses are generally found to violate appropriations require- ments. In the case of an open-ended or un-capped indemnifica- tion provision, the government entity agreeing to the indemnity has promised to pay funds that have not been and could not have been appropriated because their amount is unknown at the time the contract is executed. Contracts that require expendi- tures that have not been appropriated are generally deemed to be void.60 1. Void for Violation of Appropriations Law Principles Insurance Company of North America v. District of Columbia,61 is illustrative of the issue where the District of Columbia Court of Appeals considered whether an open-ended indemnifica- tion provision contained in a contract between the city and a contractor violated the Anti-Deficiency Act (ADA), which is the applicable statute prohibiting financial commitments in excess of appropriations. The court held that the indemnifica- tion provision violated the ADA reasoning that the ADA bars allocating funds that have not been properly appropriated by the legislature. The court noted that at the time of the contract, there was no possible way to know whether there were sufficient 58 See N.Y. State Fin. Law § 139-j; D.C. Code § 2-354.01a; N.J. Rev. Stat. § 52:34-10.1; 30 Ill. Comp. Stat. 500/50-39. 59 https://projectsunlight.ny.gov/Policy.pdf (last visited Dec. 14, 2019). 60 Indemnification of airports by contractors is also an important issue and is discussed along with sample contract language in Con- tract Risk Management for Airport Agreements, (Airport Cooperative Research Program Report 30, 2016). http://www.trb.org/ Publications/Blurbs/175240.aspx. 61 Insurance Company of North America v. District of Columbia, 948 A.2d 1181.

ACRP LRD 41 15 ered the enforceability of the indemnification provision in a contract between a municipal agency and a private party. The court held that the indemnification provision was valid and en- forceable reasoning that Florida’s Constitution grants munici- palities broad power to enter contracts, so long as the contract is not expressly prohibited by law. The court noted that no law in Florida limits a municipality from entering into a contract with an indemnification provision. Notably, the court rejected the municipality’s argument that numerous Attorney General opinions concluded that a state agency may not enter into a contract agreeing to indemnify another party if such indemnification would extend the govern- ments liability beyond the limits established in its limited waiver of sovereign immunity statute. The court noted that the limited waiver of sovereign immunity statute only applies to actions against the state (or state agencies) to recover damages in tort. The court concluded that the present issue was based in contract rather than tort. Therefore, the Attorney General opinions were inapplicable. In Fisher v. Biderman,68 the Supreme Court of New York considered whether the plaintiff, a citizen taxpayer, could seek injunctive relief and a declaratory judgment declaring that cer- tain contracts under which the city would indemnify a contrac- tor for negligence violated New York law. The court held that the indemnification provisions are valid under New York law noting that there is a distinction between indemnification pro- visions that exempt a contractor from liability to persons who have been injured due to the contractor’s negligence and indem- nification provisions that simply require one of the parties to a contract to provide insurance for all parties. The former is void and unenforceable as it offends public policy, whereas, the latter is deemed a valid business decision in which the court will not interfere. In Thyssenkrupp Safway, Inc. v. Hyland Hills Parks & Rec- reation Dist.,69 the Colorado Court of Appeals considered the enforceability of an indemnification provision contained in a contract between a municipality and a private party. While the court held that the private party was statutorily barred from seeking an indemnification claim, it noted that such claims were not necessarily barred. While Colorado law generally prohibits expending funds which have not been appropriated, there is an exception when a good faith dispute arises, which “shall not be a defense to a civil action for payment for such claim that no moneys have been appropriated for such claims.” To invoke this exception, a private party must: (i) comply with all provisions of the contract and (ii) submit a sworn statement under penalty of perjury that sets forth the additional remedy sought and pro- viding supporting data. Here, the private party did not provide such a statement and was barred from seeking the indemnifica- tion remedy. The opinion suggests, however, that had the private party provided the sworn statement, it may have been able to recover. 68 Fisher v. Biderman, 154 A.D.2d 155. 69 Thyssenkrupp Safway, Inc. v. Hyland Hills Parks & Recreation Dist., 271 P.3d 587 (Colo. App. 2011). sector participant will find a way to resolve this problem either by absorbing this risk itself or through insurance coverages. In limited instance, it may be necessary for an airport to provide such indemnification. Below are “workarounds” that have been used to provide a limited form of indemnification. Appropriation. Indemnification provisions may be accept- able provided that: (1) they are capped to provide a maximum liability under the contract and (2) that maximum liability has been and remains appropriated. While this approach addresses the underlying issue of a potential unappropriated expenditure, the actual implementation of such an approach will necessarily depend on the jurisdiction’s appropriations procedures and process for certifying the availability of funds. In addition, this approach would likely require that the funds appropriated to cover the indemnification exposure remain appropriated, which means they would likely not be available for other purposes ren- dering this approach impractical in most situations other than short term contracts where the appropriation back stopping the indemnification may not be immediately needed. Insurance. Another avenue for funding a capped indem- nification liability is through insurance. If the indemnification liability is capped and the airport entity maintains insurance to respond to the potential liability, the contract would not create an exposure that has not been appropriated. An issue with this approach is that insurance may be purchased and renewed on an annual or periodic basis from annual appropriations, and there may be an issue related to what happens if future appro- priations are not made to maintain the insurance coverage, and whether, despite current insurance coverage, this future appro- priation issue undermines this approach. Contract Language. Another potential approach is to insert the phrase “to the extent allowed or permitted by law” into the indemnity provision with an accompanying severability provi- sion. As the indemnification language is prohibited, the added phrase may operate to nullify its effect with the severability clause keeping the rest of the contract intact.65 While this ap- proach may work in theory, having to explain that the govern- ment knew that the indemnity violated the appropriations laws but was left in due to expediency is not a welcome outcome.66 4. Exceptions to General Prohibition on Indemnification Contrary to this general rule, certain courts have found that certain contracts with open-ended indemnification provisions are permissible. In American Home Assurance Company v. National Railroad Passenger Corporation,67 the Supreme Court of Florida consid- 65 Herbert C. (Lee) Phillips, Indemnity Clauses in Local Government Contracts, 43 Colo. Law. 53 (December 2014). 66 Id. 67 American Home Assurance Company v. National Railroad Passenger Corporation, 908 So.2d 459.

16 ACRP LRD 41 mercially reasonable to require the vendor to accept a broad form of indemnification.70 This issue can become particularly problematic in connec- tion with professional services provided by architectural and de- sign firms. These firms typically will not accept a broad form of indemnification, and in these instances, it may be necessary for the airport to agree on a “split-indemnification” clause. Under such a clause, the vendor will agree to a broad form indemnifica- tion clause for everything other than professional services. With respect to professional services, negligence (i.e., malpractice) is required. While as a practical matter professional negligence is almost certainly the most important risk in such instances, the use of a split-indemnification clause is a compromise that most design professionals and government agencies are willing to ac- cept. A typical split-indemnification clause is set forth below: Indemnification, Contractor shall indemnify and hold harmless the Airport and its employees and agents from and against any claims, damages, liability and court awards, including cost and reasonable attorneys’ fees, to the extent such claims are caused by any negligent act or omis- sion of Contractor, its employees, agents, subcontractors or assignees, including, without limitation, the failure to per- form the Services in accordance with the requirements of applicable law, regulations and the generally accepted stan- dards of such profession or similar services. In addition, other than arising out of the performance of professional services, Contractor shall indemnify and hold harmless the Airport and its employees and agents from and against third-party claims, damages, liability and court awards, including cost and reasonable attorneys’ fees, to the extent such claims arise from or are related to the Contractor’s work. 7. Limitation of Liability Certain types of vendors, often those providing profession- al services, routinely request that an airport agree to limit the nature or amount of damages the airport can recover from the vendor. Two typical requests are the exclusion of consequen- tial damages and the limitation of liability to a set amount or an amount relative to the contract price or value. While such provisions are generally permissible, they need to be carefully considered to make sure that they are appropriate and protec- tive of the government parties. In Kansas Department of Labor v. Bearingpoint, Inc.,71 the state had hired Bearingpoint to conduct work on the state’s unemployment insurance systems. The state filed an action alleging breach of contract and claiming damages in excess of $100,000, and Bearingpoint counterclaimed for breach and damages in excess of $650,000. 70 ACRP LRD 30, supra note 60 comprehensively addresses airport contract risk issues, including contractor indemnification issues. 71 Kansas Department of Labor v. Bearingpoint, Inc., No. 05-4087- JAR (U.S. District Court Kan. 2006). 5. Practical Considerations As discussed above, in most cases and in most jurisdictions, indemnification provisions are disfavored or prohibited. While there are ways to deal with these prohibitions, they are compli- cated and inelegant and should be reserved for those rare situ- ations where there is significant operating or policy reasons to provide indemnification. From a practical standpoint, there are two main issues that arise with respect to indemnification provisions. First, airport employees may acquire certain goods or services using a vendor or contactor standard form of contract that includes indemni- fication provisions that while appropriate for private commer- cial customers may violate appropriations or anti-indemnity statutes. Since not all contracts can be reviewed by counsel, it is important for airports to both adopt rules and procedures pro- hibiting staff from entering into contracts on vendor forms (or at least flagging those that include indemnification provisions) and to provide sufficient training to ensure that those with con- tracting authority understand the issue. The second issue is when dealing with entities that are not used to contracting with government entities and do not under- stand or accept the fact that most government entities cannot provide indemnification. Often these vendors will claim that they get similar indemnification from other government enti- ties, but in the authors’ experience these claims are likely untrue. Another plea is that changing the form will involve “legal or cor- porate” and derail the process. Again, the authors suggest not giving into this claim. While escalating the conversation may cause a modest delay, it will most likely get the issue in front of someone from the vendor’s corporate or legal department who understands it, which will usually result in an acceptable solution. 6. Contractor Indemnification Whether by rule or policy, government entities tend to re- quire broad indemnification from contractors, which can cause challenges particularly when the government cannot provide a corresponding indemnification. In this context, “broad” in- demnification refers to a clause that requires the contractor to indemnify the airport for all claims “related to” or “arising from” the contractor’s work. It is not uncommon for vendors to re- quest that the indemnification clause be restricted to a “negli- gence” trigger. Essentially, this is a request by the vendor that it should only be liable and indemnify the airport if the vendor “did something wrong.” Typically, such vendors will argue that they cannot agree to a broad form of indemnification as their insurance only covers “negligence.” This is most likely a true statement in that most insurance coverages (other than prop- erty policies) only respond to negligence type claims. However, it does not mean that the vendor cannot agree to the indemnifi- cation provision. In such cases, the question is which entity, the vendor or the airport, should bear the risk of claims asserted by third parties when neither the airport nor the vendor has done anything wrong. When viewed in this light, the answer to the question is less clear, and in many instances, it is fair and com-

ACRP LRD 41 17 1. On-Time Completion. Substantial Completion of all aspects of the Project is achieved on or before [Date], as such dates may be revised by Change Order in accordance with the terms of this Agreement. The Parties hereby agree that any future adjustments to the Substantial Completion Date due to Excusable Delays shall not be deemed an ad- justment of the dates set forth in this Section. Any adjust- ment extending the completion dates set forth herein shall be made by the Airport in its sole and absolute discretion. 2. Cost Control. The total amount paid to the Con tractor for Work performed under this Contract is less than or equal to the Guaranteed Maximum Price (as established in the GMP Amendment and regardless of any increases authorized by subsequent Change order). In determining whether these objectives have been met, the Airport will evaluate whether the stated objectives have, in fact, been achieved. This decision shall be made regardless of the reason why the objectives have or have not been met, and the Contractor acknowledges and agrees that ten Per- cent of the Fee is put at risk by virtue of this provision and that the Contractor can lose entitlement to such portion of the Fee even if objectives are not met due to the fault of the Airport, the Architect/Engineer, the Code Official, events of force majeure or otherwise. 2. Service Level Agreements The use of contract incentives is broad and can be included in a multitude of contract types. Incentive concepts, along with penalty concepts, are core components of a service level agree- ment. SLAs are often exhibits to a master service agreement that set forth, as discussed further below, performance benchmarks, incentives and penalties, and other issues related the SLA, but it may be more prudent to develop standalone, integrated service agreements to address all issues in one place and reduce the risk of inconsistencies and oversights. SLAs are typically used when a particular function, as op- posed to a discrete service, is outsourced to a service provider and usually when the outsourcing is intended as a longer-term operating arrangement. SLAs are particularly prominent in the outsourcing of business processes (payroll, finance and account- ing, human resources, data entry, logistics, food service, and customer service/call center), information technology (tech- nology development, maintenance, operation, and support and telecommunications), and knowledge process (data analysis, research and development, and product and process develop- ment). The concepts are applicable to many other functions that lend themselves to establishing and benchmarking services levels and developing incentive or penalty mechanisms. SLAs operate from a scope of work. Such scopes are criti- cal and should state with as much specificity as possible both the services that the airport requires and that the contractor is obligated to deliver, including setting specific metrics for those services. Service levels typically measure things like responsive- ness, performance, accuracy, cost, revenue, and any other im- The contract’s limitation of liability provision stated that Bearingpoint’s damages to the state or any third party arising out of or in any way related to the contract were not to “exceed the fees paid to Contractor hereunder.” The court looked to the plain meaning of this provision, and since the state had not paid Bearingpoint anything when the lawsuit was filed, it held that the language completely precluded recovery by the state. The court did permit the state’s right to raise setoff defenses to the contrac- tor’s counterclaim, but it is unlikely that this is what the govern- ment had expected when it executed the contract. While it may seem attractive to prohibit limitation of liabil- ity provisions altogether to avoid such a situation, the failure to reasonably limit contractor’s liability and expose them to un- limited liability may prevent firms, particularly more sophisti- cated firms, from bidding on work thus limiting competition and driving up price. B. Contract Incentives, Penalties and Service Level Agreements Historically, contract holders only had breach of contract and damage provisions to manage a contractor’s performance. Incentive clauses and service level agreements (SLAs) provide tools within the operation of the contract to shape and manage performance without having to (while still retaining the abil- ity to) declare a contractor in breach. In order to leverage these benefits, it is important to carefully analyze, develop and draft the incentive and service level language. 1. Incentives In order to avoid the disagreement and potential litigation that incentive provisions are designed to avoid and to aid in ad- ministration of incentive provisions, incentives should be mea- sured against objective measures and with a minimum of ex- cuse provisions. For instance, if the incentive is based on project completion, it is much easier to administer if incentive is earned simply if the project is delivered or not without the resorting to excuse provisions and arguing over the cause of late delivery. This approach works best with repeat contractors or contrac- tors that work on multiple projects. If, for instance, the delay was caused by weather, such a contractor might be more willing to accept missing the incentive this time because the weather might turn in its favor on the next incentive period or project. In addition to incentives, penalties (other than traditional liquidat- ed damages-type penalties) or putting a portion of a contractor’s fee at risk can be helpful in achieving the optimal mix of carrots and sticks. The following language combines a bonus provision with a portion of a fee at risk and the concept of objective deter- mination of the bonuses and penalties. Section 1. Subject to the terms and conditions of this Agreement, the Fee shall be increased by Ten Percent (10%) if both of the objectives set forth below are met and shall be decreased by Ten Percent (10%) if either or both of the objectives set forth below are not met. The objectives are as follows:

18 ACRP LRD 41 the Service Credits are a reasonable estimate of the antici- pated or actual harm arising from Contractor’s breach of its Service Level obligations. Service Bonus Section 1. Service Bonus Amounts. If the Contractor ex- ceeds [SLA defined service] within the applicable Service Level period, the Airport will be obligated to pay to Con- tractor the corresponding service bonus specified in the table below (“Service Bonus”). The SLA would contain a table that sets forth: (1) the service level metric; (2) the time frame for exceeding with metric, if ap- plicable; and (3) the service bonus amount, either as number, a percentage of a fee or some other formula. Service Credit Earn-back Section 1. Service Credit Earn-Back. Contractor may earn back some or all Service Credits incurred during a Contract Year due to Service Level failures, as follows:   (a)  Within [ ] days of the end of a Contract Year, Con- tractor shall submit to Customer a report of all its Service Level failures incurred during the Contract Year, including the following information:   (i)    Statistics showing Contractor’s performance of the applicable Service for each [applicable period];   (ii)  Contractor’s annual average [applicable period] performance; and (iii)  The amount of any Service Credits imposed for such Service Level failures.   (b)  If Contractor’s annual average performance equals or exceeds the applicable Service Level, then Contractor shall be relieved from paying any Service Credits assessed during the applicable Contract Year. C. Rights in Data The allocation of rights between an entity providing techni- cal data and software to an airport is an important issue to be addressed in commercial contracts. There are divergent views on how this should occur with one view holding that a govern- ment is entitled to unlimited rights in data and software created under a publicly funded contract with the opposing view hold- ing that requiring a contractor to give up valuable intellectual property rights curbs innovation and decreases competition.72 In the federal context, the Federal Acquisition Regulations in- 72 Steven W. Feldman, Government Contract Guidebook § 11:11 (October 2019 Update). portant metric that can be reasonably identified and measured. These levels will be used to measure whether the contractor’s performance was at or below expectations and serve as the basis for the incentive/penalty structures. Incentives are usually a bonus or fee increase for exceeding service levels. Such incentives must be structured, however, so that the bonus is sufficient to incent the contractor to act but not so high that the value of enhanced contractor performance to the customer is less than the value of the bonus. Penalties are typically a reduction in the fee or service credit to be paid by the customer for services in a subsequent period. While incentive/penalties are the core concepts, there are variations of these structures that may also be helpful in shap- ing contractor performance. Under the “earn-back” concept, the contractor may be allowed to earn back some or all of any pre- viously invoked penalties through improved and/or sustained performance. Alternately, penalties may increase incrementally as a contractor fails to meet service levels. Due to the enterprise nature of the services often provided under SLAs and the corresponding liability exposure, contrac- tors may seek limitation of liability language in SLAs. Given the risk to the customer for failure of these enterprise services, this risk should remain with the contractor who can deal with that risk through insurance or other means. Examples of service bonus, service credit and earn back pro- visions, include: Service Credit Section 1. Service Credit Amounts. If the Contractor fails to [meet SLA defined service] within the applicable Service Level response time, the Airport will be entitled to the cor- responding service credits specified in the table below (“Ser- vice Credits”), provided that the relevant failure did not result from an Airport Cause. The SLA would contain a table that sets forth: (1) the service level metric; (2) the time frame for complying with metric, if applicable; and (3) the service credit amount, either as number, a percentage of a fee or some other formula. Typically, service credits are considered liquated damages, and SLAs should include a liquidated damages clause as follows. However, certain states have refused to enforce liquidated dam- age clauses that give the non-breaching party the right or option to elect remedies. Accordingly, in such states, the SLA should state that liquidated damages are the exclusive remedy, not grant the right to elect alternative remedies, and expressly exclude ser- vice credits from any cumulative remedies clause. Section 1. Compensatory Purpose. The parties intend that the Service Credits constitute compensation to Airport and not a penalty. The parties acknowledge and agree that Airport’s harm caused by Contractor’s failure to meet its Service Level obligations would be impossible or very diffi- cult to accurately estimate as of the Effective Date and that

ACRP LRD 41 19 the government’s purposes, and (5) disclose the software to and reproduce it for use by the government’s support service con- tractors for the aforementioned purposes.78 State and municipal regulation and guidance on this issue is much less instructive. A 2003 article in the Public Contracting Law Journal described state contracting terms and conditions related to intellectual property as an “inconsistent patchwork.” This patchwork consisted of and tends to remain a mix of regu- lations, guidance, and standard contract provisions along with continuing silence on the issue. To the extent that the issue is addressed in most procurement systems, it is addressed either through general work product provisions and, in some cases, through specific rights in data language. For instance, the District of Columbia has regulations ad- dressing issues related to patents and copyrights associated with work product and work done in connection with a government contract.79 The District’s standard contract provisions, however, include a detailed rights in data provision that reflects the con- cepts included in the Federal Acquisition Regulations.80 RIGHTS IN DATA (a) “Data,” as used herein, means recorded informa- tion, regardless of form or the media on which it may be recorded. The term includes technical data and computer software. The term does not include information incidental to contract administration, such as financial, administra- tive, cost or pricing, or management information. (b) The term “Technical Data,” as used herein, means recorded information, regardless of form or characteris- tic, of a scientific or technical nature. It may, for example, document research, experimental, developmental, or engi- neering work, or be usable or used to define a design or pro- cess or to procure, produce, support, maintain, or operate material. The data may be graphic or pictorial delineations in media such as drawings or photographs, text in specifi- cations or related performance or design type documents or computer printouts. Examples of technical data include research and engineering data, engineering drawings and associated lists, specifications, standards, process sheets, manuals, technical reports, catalog item identifications, and related information, and computer software documen- tation. Technical data does not include computer software or financial, administrative, cost and pricing, and manage- ment data or other information incidental to contract ad- ministration. 78 DeVecchio, supra note 75, at 5C. Federal Acquisition Regula- tions 52.227-14, Alternate III, para. (g)(4)(i), “Restricted Rights Notice,” para. (b). 79 27 DCMR 3100, et. seq. 80 District of Columbia, Standard Contract Provisions, https://ocp. dc.gov/sites/default/files/dc/sites/ocp/publication/attachments/ Standard%20Contract%20Provisions%20-%20July%202010.pdf (last visited Nov. 4, 2019). clude specific regulations and language related to the allocation of these rights.73 As discussed below, this issue is treated with much less specificity at the state and municipal level. That being said, it is an important issue that should be addressed in cer- tain airport commercial contracts, and the Federal Acquisition Regulations concepts can be instructive in addressing the issue and drafting appropriate language. In the Federal Acquisition Regulations context, the acquir- ing government entity’s rights in technical data and software depends, generally, on whether the data or software was devel- oped pursuant to a government contract or developed through private expenditure.74 Generally, if data or software is developed pursuant to a government contract, the government obtains “unlimited” rights. If data is developed using private funds, the government obtains “limited rights,” and if software is devel- oped using private funds, it obtains “restricted rights.” 75 Limited rights in data includes “data, other than computer software, that embody trade secrets or are commercial or finan- cial and confidential or privileged.”76 Restricted rights software “means computer software devel- oped at private expense and that is a trade secret, is commer- cial or financial and confidential or privileged, or is copyrighted computer software, including minor modifications of the com- puter software.”77 Under Federal Acquisition Regulations, there are three alternate restricted rights clauses with the broadest providing for the government to acquire the rights to: (1) use the computer software with the computer for which it was ac- quired, even if that computer is transferred to a different govern- ment installation, (2) use the computer software with a backup computer, if the computer for which it was acquired is inopera- tive, or use or copy or transfer the software to a replacement computer, (3) copy the computer program for archive or backup purposes—the Federal Acquisition Regulations provide the government with the right to reproduce all computer software, not just the program, for these purposes, (4) modify or combine the software with other software and “adapt” the software for 73 48 C.F.R. § 27.400, et. seq. 2019. 74 Feldman, supra note 72, at § 11:13. 75 W. Jay DeVecchio, Rights in Technical Data & Computer Software Under Government Contracts: Key Questions and Answers, 10-10 Brief- ing Papers 1 (September 2010). These unlimited rights include: (i) Data first produced in the performance of this contract; (ii) Form, fit, and function data delivered under this contract; (iii) Data delivered under this contract (except for restricted computer software) that con- stitute manuals or instructional and training material for installation, operation, or routine maintenance and repair of items, components, or processes delivered or furnished for use under this contract; and (iv) All other data delivered under this contract unless provided otherwise for limited rights data or restricted computer software in accordance with paragraph (g) of Federal Acquisition Regulations 52.227-14. 48 C.F.R. § 52.227-14(b)(1) 2019. 76 48 C.F.R. § 27.401 2019. The Federal Acquisition Regulations also include the alternate definition “Limited rights data means data (other than computer software) developed at private expense that embody trade secrets or are commercial or financial and confidential or privi- leged. Id. at §27.404-2(b). 77 Id. at §52.227-14, para. (a).

20 ACRP LRD 41 (2) Use the computer software and all accompanying documentation and manuals or instructional materials with a backup computer if the computer for which or with which it was acquired is inoperative; (3) Copy computer programs for safekeeping (archives) or backup purposes; and modify the computer software and all accompanying documentation and manuals or instructional materials, or combine it with other soft- ware, subject to the provision that the modified portions shall remain subject to these restrictions. (g) The restricted rights set forth in section 42(f) are of no effect unless (1) the data is marked by the Contractor with the fol- lowing legend: RESTRICTED RIGHTS LEGEND Use, duplication, or disclosure is subject to restric- tions stated in Contract No. ______ with (Contractor’s Name); and (2) If the data is computer software, the related com- puter software documentation includes a prominent statement of the restrictions applicable to the computer software. The Contractor may not place any legend on the computer software indicating restrictions on the District’s rights in such software unless the restrictions are set forth in a license or agreement made a part of the contract prior to the delivery date of the software. Failure of the Contractor to apply a restricted rights leg- end to such computer software shall relieve the District of liability with respect to such unmarked software. (h) In addition to the rights granted in Section 42(f) of this clause, the Contractor hereby grants to the District a nonexclusive, paid-up license throughout the world, of the same scope as restricted rights set forth in Section 42(f) of this clause, under any copyright owned by the Contractor, in any work of authorship prepared for or acquired by the District under this contract. Unless written approval of the Contracting Officer is obtained, the Contractor shall not include in technical data or computer software prepared for or acquired by the District under this contract any works of authorship in which copyright is not owned by the Contrac- tor without acquiring for the District any rights necessary to perfect a copyright license of the scope specified in the first sentence of this paragraph. (i) Whenever any data, including computer software, are to be obtained from a subcontractor under this contract, the Contractor shall use this clause 42, Rights in Data, in the subcontract, without alteration, and no other clause shall (c) The term “Computer Software,” as used herein means computer programs and computer databases. “Computer Programs,” as used herein means a series of instructions or statements in a form acceptable to a computer, designed to cause the computer to execute an operation or operations. “Computer Programs” include operating systems, assem- blers, compilers, interpreters, data management systems, utility programs, sort merge programs, and automated data processing equipment maintenance diagnostic programs, as well as applications programs such as payroll, inventory control and engineering analysis programs. Computer pro- grams may be either machine-dependent or machine-inde- pendent and may be general purpose in nature or designed to satisfy the requirements of a particular user. (d) The term “computer databases,” as used herein, means a collection of data in a form capable of being processed and operated on by a computer. (e) All data first produced in the performance of this Contract shall be the sole property of the District. The Contractor hereby acknowledges that all data, including, without limitation, computer program codes, produced by Contractor for the District under this Contract, are works made for hire and are the sole property of the District; but, to the extent any such data may not, by operation of law, be works made for hire, Contractor hereby transfers and assigns to the District the ownership of copyright in such works, whether published or unpublished. The Contractor agrees to give the District all assistance reasonably neces- sary to perfect such rights including, but not limited to, the works and supporting documentation and the execution of any instrument required to register copyrights. The Con- tractor agrees not to assert any rights in common law or in equity in such data. The Contractor shall not publish or reproduce such data in whole or in part or in any manner or form, or authorize others to do so, without written con- sent of the District until such time as the District may have released such data to the public. (f) The District will have restricted rights in data, including computer software and all accompanying documentation, manuals and instructional materials, listed or described in a license or agreement made a part of this contract, which the parties have agreed will be furnished with restricted rights, provided however, notwithstanding any contrary provision in any such license or agreement, such restricted rights shall include, as a minimum the right to: (1) Use the computer software and all accompanying documentation and manuals or instructional mate- rials with the computer for which or with which it was acquired, including use at any District installation to which the computer may be transferred by the District;

ACRP LRD 41 21 photographs, video and audiovisual recordings, sound recordings, marks, logos, graphic designs, notes, websites, domain names, inventions, processes, formulas, matters and combinations thereof, and all forms of intellectual property originated and prepared by CONTRACTOR or its Subcontractors under this Contract (each a “Work Prod- uct”; collectively “Work Products”) shall be and remain the exclusive property of CITY for its use in any manner CITY deems appropriate. CONTRACTOR hereby assigns to CITY all goodwill, copyright, trademark, patent, trade secret and all other intellectual property rights worldwide in any Work Products originated and prepared under this Contract. CONTRACTOR further agrees to execute any documents necessary for CITY to perfect, memorialize, or record CITY’S ownership of rights provided herein. CONTRACTOR agrees that a monetary remedy for breach of this Contract may be inadequate, impracticable, or dif- ficult to prove and that a breach may cause CITY irrepa- rable harm. CITY may therefore enforce this requirement by seeking injunctive relief and specific performance, with- out any necessity of showing actual damage or irreparable harm. Seeking injunctive relief or specific performance does not preclude CITY from seeking or obtaining any other re- lief to which CITY may be entitled. For all Work Products delivered to CITY that are not origi- nated or prepared by CONTRACTOR or its Subcontractors under this Contract, CONTRACTOR shall secure a grant, at no cost to CITY, for a nonexclusive perpetual license to use such Work Products for any CITY purposes. CONTRACTOR shall not provide or disclose any Work Product to any third party without prior written consent of CITY. Any subcontract entered into by CONTRACTOR relating to this Contract shall include this provision to contractu- ally bind its Subcontractors performing work under this Contract such that CITY’S ownership and license rights of all Work Products are preserved and protected as intended herein.81 While these standard rights in data provisions are intended to provide broad coverage, the critical issue in many software agreements is to maintain control over and ensure the portabil- ity of the airport’s data. While the airport may have little interest in the code underlying a proprietary software solution, it is vital that the airport retains rights and controls access to such data. 81 City of Los Angeles, Standard Provisions for City Contracts, http://cao.lacity.org/risk/StandardProvisions.pdf (last visited Nov. 4, 2019). Minneapolis, for instance, follows a similar approach though with less specificity than Los Angeles. City of Minneapolis, Standard Contract Form, http://www.minneapolismn.gov/www/ groups/ public/@cped/documents/webcontent/wcmsp-206432.pdf (last visited Nov. 4, 2019). be used to enlarge or diminish the District’s or the Contrac- tor’s rights in that subcontractor data or computer software which is required for the District. (j) For all computer software furnished to the District with the rights specified in Section 42(e), the Contractor shall furnish to the District, a copy of the source code with such rights of the scope specified in Section 42(e) of this clause. For all computer software furnished to the District with the restricted rights specified in Section 42(f), the District, if the Contractor, either directly or through a successor or affiliate shall cease to provide the maintenance or warranty services provided the District under this contract or any paid-up maintenance agreement, or if Contractor should be declared bankrupt or insolvent by a court of competent jurisdiction, shall have the right to obtain, for its own and sole use only, a single copy of the then current version of the source code supplied under this contract, and a single copy of the documentation associated therewith, upon payment to the person in control of the source code the reasonable cost of making each copy. (k) The Contractor shall indemnify and save and hold harmless the District, its officers, agents and employees acting within the scope of their official duties against any liability, including costs and expenses, (i) for violation of proprietary rights, copyrights, or rights of privacy, arising out of the publication, translation, reproduction, delivery, performance, use or disposition of any data furnished under this contract, or (ii) based upon any data furnished under this contract, or based upon libelous or other unlaw- ful matter contained in such data. (l) Nothing contained in this clause shall imply a license to the District under any patent, or be construed as affecting the scope of any license or other right otherwise granted to the District under any patent. (m) Sections 42(f), 42(g), 42(h), 42(k) and 42(l) of this clause are not applicable to material furnished to the Con- tractor by the District and incorporated in the work fur- nished under contract, provided that such incorporated material is identified by the Contractor at the time of de- livery of such work. Alternately, in Los Angeles, the issue is addressed in much less detail as part of an overall rights in work product standard contract provision. Unless otherwise provided for herein, all finished and un- finished works, tangible or not, created under this Con- tract including, without limitation, documents, materials, data, reports, manuals, specifications, artwork, drawings, sketches, blueprints, studies, memoranda, computation sheets, computer programs and databases, schematics,

22 ACRP LRD 41 make general upgrades, modifications and fixes to the base soft- ware, these rights may need to be contractually distinguished from rights in customizations, integrations, and data. Often the issue of rights to customization depends on com- petitive issues and whether the customization is unique to the user or has other applications. While rights to customizations may be allocated to either the vendor or the user, it is important that the contract address and accurately allocate these rights Many SaaS implementations operate by integrating various software components through APIs. In certain cases, the user may have an interest in owning and controlling the integra- tion or at least requiring that the vendor treat the integration as confidential business information. Similar to customization, these services and the resulting work product may be allocated between the parties and the important issue is to determine the airport’s interests and negotiate them as part of the contract. Finally, the SaaS will likely generate information that the user will want to own and control. While most SaaS vendors understand this issue, they may ask to be provided rights in cer- tain aggregated data or performance data for various operating and development purposes. While this may or may not pose a competitive issue, airports should determine whether they are authorized to grant rights in that data to the SaaS vendor. Given the evolution of the SaaS market and IT services in general, there is often a reluctance by SaaS and other IT pro- viders to negotiate the terms of their standard form contracts. From a business perspective, this may be an issue only solv- able if airport’s purchase is significant enough for the transac- tion to be elevated to someone within the vendor authorized to change or negotiate the form contract. From a legal perspec- tive, provisions such as indemnification, confidentiality (to the extent it would be inconsistent with Freedom of Information Act (FOIA)), sourcing (such as Buy America or prohibitions on doing business with certain countries or other entities), and al- ternative dispute resolution, that would violate the contracting airport’s laws or regulations need to be analyzed and negotiated. One-way non-lawyers often deal with these issues is to “trade” the form contract for the adoption of the government entity’s standard contract provisions, which usually creates a number of conflicts and uninterpretable contract documents. Similar to the issues with indemnification provisions, airports should adopt policies and conduct training to avoid this occurrence. D. Termination for Convenience While not unheard of in other contracting areas, termination for convenience provisions are much more prevalent in public contracting and may be a foreign concept to contractors with- out much public contracting experience. Termination for con- venience allows one party to terminate a contract, even in the absence of breach, without the financial exposure of a breach of contract action.82 The concept developed during the Civil War as a means for exiting military contracts if technology changed or the war ended. The concept expanded into peacetime mili- 82 Handi-Van, Inc. v. Broward Cty, 116 So. 3d 530, 536 (Fla. Dist. Ct. App. 2013). Without specific rights to control and migrate the data an air- port risks becoming trapped in a relationship with a proprietary solution provider. The contract language creating the vendor’s migration obligations must be drafted to require the incumbent vendor to provide the data in a generally accepted data format. If the format is not specified, a vendor may, either in an effort to retain the business or in retaliation for losing the business, provide the data but in a format that does not support migra- tion which may render it essentially useless to a new solution provider or other airport users. The following language has been used to create and enforce these data control and migra- tion obligations: Vendor is the owner and developer of a software platform known as Software Platform (“Software Platform”) which software provides real time access to a full database of in- formation related to the roofs being managed by Vendor for Owner. Both parties understand and agree that Vendor shall be deemed the owner of Software Platform and Ven- dor shall retain the right to operate, maintain, upgrade and change Software Platform; provided, however, that the data assembled by Vendor regarding the roofs being managed by Vendor, including but not limited to, data related to the size, type and age of roofs, any plans, drawings, scopes of work and other attachments loaded into Software Platform (collectively, the “Roof Data”) shall be deemed the property of Owner and shall be considered a work for hire under ap- plicable law. At the conclusion of the Contract and regard- less of the reason for Contract termination, Vendor shall (i) provide Owner with a complete set of the Roof Data in computer readable form in a manner and format that is reasonably acceptable to Owner; and (ii) assist Owner in migrating the Roof Data to a new electronic location. Fur- ther, once the Roof Data has been transferred to Owner and Owner has accepted in writing that such transfer is complete, Vendor shall delete the Roof Data from the Soft- ware Platform system. 1. Software as a Service In many instances, technology is evolving more quickly than traditional government contract clauses and this discrep- ancy can create practical problems in the marketplace. In to- day’s market, many organizations are interested in purchasing a technology application that performs a function and it is the function (i.e., the service) that is important and not the actual underlying software code. Such services are available in the marketplace as a software as a service (SaaS) arrangement where the customer does not install any software on a computer. The software or applications are maintained by the vendor (or third- party data center) and the customer accesses it via the Internet. As the user obtains no copy of the software there is no need for a copyright license or other ownership issues related to the base software. The vendor provides, maintains, and hosts the software and provides application functionality to the customer, and in most instances to numerous other customers. While the vendor owns and will continue to own the base software and

ACRP LRD 41 23 ing subcontracts and supply agreements and other similar wind-up costs in a reasonable amount; (3) a fair and rea- sonable portion of the Contractor’s Fee attributable to the Work performed up to the time of termination. The Con- tractor shall not be entitled to recover its Fee or overhead or profit on unperformed portions of the Work. Section 1.4 Payment of such amounts shall be the Con- tractor’s sole remedy for termination for convenience. Section 1.5 The Contractor shall, promptly after termina- tion, submit a proposal for settlement of the amounts due to it as a result of the termination for convenience. The pro- posal shall be consistent with the requirements of Subpara- graphs 14.4.2 through 14.4.4, and shall be accompanied by such documentation of costs as the Airport may reasonably require. Such documentation may include cost and price data in accordance with the Airport’s Regulations. Section 1.6 Effect of Wrongful Termination. Any termina- tion for cause which is later determined to have been im- properly effected shall be deemed to have been a termina- tion for convenience pursuant to Paragraph 14.4 and shall be governed by that Paragraph. There are some limitations on the right to exercise a termi- nation for convenience provision. In certain instances courts have required a change in circumstances to justify a termina- tion for convenience,84 but the prevailing view, primarily based on federal procurement cases, is that absent bad faith, parties are free to exercise their termination for convenience rights.85 E. Business Inclusion Issues While the federal DBE and ACDBE rules apply to contracts subject to Grant Assurances, many jurisdictions have their own W/MBE programs. These programs take a number of forms and while each program has its method for determining eligibility and terminology for participating firms, this section will use the term certified business entity or CBE. These participation pro- grams range from obligations to make a certain level of effort in attracting CBEs to those that specifically measure participa- tion. While there has been significant litigation over the reach and scope of these programs in the wake of City of Richmond v. J.A. Croson Co.86 and Adarand Constructors, Inc. v. Pena,87 issues related to the constitutionality of such programs are beyond the scope of this digest. The focus here is on informing and obli- 84 RAM Eng’g & Const., Inc. v. Univ. of Louisville, 127 S.W.3d 579 (Ky. 2003) (holding that duty to perform contract in good faith required changed circumstance to justify termination). 85 Handi-Van, Inc. v. Broward Cty., 116 So. 3d 530 (Fla. Dist. Ct. App. 2013). 86 City of Richmond v. J.A. Croson Co., 488 U.S. 469, 476 (1989). 87 Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 115 S. Ct. 2097, 132 L. Ed. 2d 158 (1995). tary contracts and then into other government procurement with termination for convenience clauses now included, either impliedly or expressly, in all federal fixed-price and service con- tracts. Following the federal government, termination for con- venience clauses are now typical in state and local procurement contracts.83 In addition to language providing the right to terminate for convenience, well drafted documents also include provisions setting forth what contractors must do once a contract is ter- minated, how termination costs will be administered and what costs the terminated contractor is entitled to. Further, in order to mitigate breach of contract claims, it is also advantageous to include language that converts any defective termination for cause into a termination for convenience. Sample termination for convenience language includes: Section 1 Termination for Convenience Section 1.1 The Airport may, upon seven (7) days written notice to the Contractor, terminate the Contract in whole or specified part, for its convenience, whether the Contractor is in breach of Contract or not. The notice of termination shall state the effective date of termination, the extent of the termination, and any specific instructions. Section 1.2 After receiving notice of termination for conve- nience, the Contractor shall (1) stop Work as of the effective date of the termination and stop placing sub contracts or supply agreements thereunder; (2) consult with the Air- port regarding the disposition of existing orders and sub- contracts, and use its best efforts to terminate them on terms favorable to the Airport; (3) consult with the Airport to decide what actions should be taken to protect Work in place and take such actions as may be agreed upon or, ab- sent agreement, as may be reasonable to protect Work in place; (4) take necessary or directed action to protect and preserve property in the Contractor’s possession in which the Airport has or may acquire an interest and, as directed by the termination notice or other order from the Airport, deliver the property to the Airport; and (5) promptly deliver to the Airport all computer files it has prepared under the Contract. The Contractor shall also promptly notify the Airport, in writing, of any legal proceeding arising from any subcontract or supply agreement related to the termination, and, in consultation with the Airport, settle outstanding liabilities arising out of the termination on the best terms reasonably possible. Section 1.3 The Contractor shall be entitled to receive only the following with respect to the terminated portion of the Project: (1) Cost of Work performed up to the date of termination; (2) reasonable costs of terminating outstand- 83 Aaron P. Silberman, How State and Local Public Agencies May (or May Not) Terminate Construction Contracts, Constr. Law., Spring 2016 at 16.

24 ACRP LRD 41 price negotiation occurs, e.g., the Airport requests a best and final offer, the offeror shall submit a revised Contract Participation Form and Letters of Intent with its revised offer. The offeror is not required to renegotiate prices with any CBEs identified on the initial Contract Participation Form; consequently, the revised Contract Participation Form submitted after negotiations between the Airport and the offeror is not required to show any change to the original price agreed to by the CBE. While measuring CBE participation at the completion of the contract may meet the requirements of the CBE program, doing so provides the airport with little opportunity to address issues with the operation of a CBE program at a point in time that it can materially impact a contractor’s performance. It may be helpful to require contractors to periodically report on the prog- ress of and success in meeting the CBE obligations Section 1.1 The Contractor shall maintain detailed records relating to its subcontract costs and which sub- contract costs have been paid to CBE subcontractors. The Contractor shall provide with its Application for Payment under Section 9, its subcontracting costs or other appropri- ate documentation of the amount paid to CBE subcontrac- tors in total and as a percentage of Project spending suffi- cient to determine whether the Contractor is in compliance with and is likely to meet its CBE obligations. 3. Enforcement In addition to penalties or other enforcement mechanisms contained in the CBE program, CBE compliance may also be enforced through the contract. This can be accomplished by using language regarding the ability to review or audit the docu- ments related to the CBE subcontractor participation. Section 1.1 The Airport may conduct post-award compliance reviews to ensure that the named CBEs on the original or, as a result of contract modification, amended Contract Participation Form, submitted to and accepted by the Airport, perform the work as assigned, and at least at the agreed price that was identified on the Contract Partici- pation Form. Specifically, compliance reviews verify: (1) the participation of those CBE subcontractors identified by the Contractor; (2) the scope of work for each CBE listed on the Contract Participation Form; and, (3) at least at the agreed price identified for each CBE listed on the Contract Par- ticipation Form. The Airport may use a web-based compli- ance system, the Invoice Attachment Form and any other appropriate information, to verify the participation of the CBE subcontractor identified on the Contract Participa- tion Form, as submitted by the Contractor. Delineated on these forms will be the activities of all first-tier subcontrac- tors (and second- or third-tier subcontractors, if required), including contract amount and reported payment, for the purpose of monitoring the progress of all phases of the contract. gating contractors with respect to compliance with the existing program. Although these programs exist on a continuum, there are certain contractual provisions that are important to notifying contractors of their CBE obligations, imposing a requirement for reporting consistent with the underlying CBE program, and establishing enforcement provisions. Since the use of CBE status in the selection process is a procurement rather than a contracting issue, this section focuses on contractual language to establish monitor and enforce provisions requiring the use of CBE subcontractors. The following contract language has been developed to both inform contractors of these obligations and create contract structures to promote, monitor and enforce compliance. 1. Creating the Obligation As a threshold matter, the contract should obligate the con- tractor to comply with the requirements of the applicable CBE program. Sample communication language includes: Section 1.1 Thirty-five percent (35%) of the Contract Work must be awarded to entities that are certified as CBEs by the [certifying entity]. The CBE certification shall be as of the effective date of the subcontract. Supply agreements with material suppliers shall be counted toward meeting this goal. 2. Monitoring Depending on the regulations or procedures, bidders may be required to submit a CBE subcontracting plan to demonstrate its ability to meet the subcontracting requirements for a particu- lar contract. These may take the form of a subcontracting plan to achieve a CBE subcontracting percentage target or goal for open market solicitations or an obligation to only subcontract to W/MBEs in sheltered market solicitations. Requirements typically vary from an obligation to submit and follow a general plan for meeting the CBE obligations to identification and approval of specific CBE firms. Under the rules governing the contract that generated the sample language below, bidders were required to document the subcontractors identified to meet the requirement and then upon award pro- duce letters of intent from the identified subcontractors. The apparent successful offeror shall submit original signed Letters of Intent from each of the CBE, if any, identified on the Contract Participation Form as those firms which will be used to meet the CBE requirement of this solicita- tion. These Letters of Intent must be submitted by contract award date and shall be completely filled out and signed by the CBE and co-signed by the offeror. A detailed description of the CBE’s scope of work must be provided. In an RFP process, the signed Letter of Intent represents an intent by the CBE to perform the subcontract at the price stated on the Contract Participation Form, if the offer is accepted by the Airport without negotiation. However, if

ACRP LRD 41 25 tial divergence among states as to whether such programs vio- late competitive bidding requirements and are thus enforceable, narrowly tailored programs have been upheld in a number of instances.88 Even if such local hiring preference programs have been upheld, they may not be imposed in connection with con- tracts that rely on federal funding. In City of Cleveland v. Ohio,89 the Federal Highway Administration (FHWA) removed federal funding from a project executed by the city of Cleveland under a contract that included the city’s local preference language.90 While the Sixth Circuit concluded that Cleveland’s program itself did not violate federal law, the court deferred to FHWA’s decisions to withdraw project funding. Ultimately, the court based its decision on the fact that Cleveland had removed the local hiring preference provisions from the bid documents but had re-inserted them into the executed contract thus violating an FHWA requirement prohibiting contract requirements not expressly set forth in the bid documents. The court did not, however, find that the local hiring preference program should be considered to render the award non-competitive in violation of FHWA regulations. This case demonstrates the complexity of trying to implement local hiring preference programs in con- tracts with federal funding and suggests that obtaining guidance from federal partners or removing such requirements from fed- erally funded contracts may be the most prudent path. In addition to local hiring programs, a number of jurisdic- tions have adopted so-called first source programs requiring government contractors (and others receiving a benefit from a government agency) to seek to fill newly created positions or job openings with local residents. These programs may either be implemented by a local law or ordinance, by contract on an individual basis or both. As with CBE issues, airport should consider contract lan- guage notifying contractors of their local hiring obligations, im- posing a requirement for reporting consistent with the underly- ing program, and establishing enforcement provisions. Section 1.1 The Contractor shall ensure that at least [applicable percent] of the Contractor’s and every sub- consultant’s and subcontractor’s employees hired after the effective date of the Contract, or after such subconsultant or subcontractor enters into a contract with the Contractor, to work on the Project shall be residents of the [applicable jurisdiction]. This percentage shall be applied in the aggre- gate, and not trade by trade. Section 1.2 In addition to the new employee hiring obligations under Section 1.1, the Contractor shall use 88 Enforceability of Local Hire Preference Programs, (Airport Cooperative Research Program Report 59, 2013). http://www. trb.org/Publications/Blurbs/168864.aspx. 89 City of Cleveland v. Ohio, 508 F.3d 827 (6th Cir. 2007). 90 In September 2019, the Ohio Supreme Court upheld a state law prohibiting state-wide local hiring preference programs like the one adopted by Cleveland. City of Cleveland v. State, 136 N.E.3d 466, reconsideration denied sub nom. Cleveland v. State, 136 N.E.3d 526 (Ohio 2019). Also, provided there is authority in the applicable CBE program, requiring approval for the substitution of CBE sub- contractors may be effective in ensuring that a contractor fulfills its commitments. Sample monitoring language includes: Section 1.1 Neither the Contractor nor a subcontractor may remove a subcontractor or tier-sub contractor if such subcontractor or tier-subcontractor is certified as a CBE company unless the Airport approves of such removal. The Airport may condition its approval upon the Contractor developing a plan that is, in the Airport’s sole and absolute judgment, adequate to maintain the level of CBE participa- tion on the Project. As additional incentive for contractors to comply with the CBE obligations, progress payments may be withheld for failure to report on or comply with these obligations. Section 1.1 The Airport will notify the Contractor within fifteen (15) days after receiving any Application for Payment of any defect in the Application for Payment or the Contractor’s performance which may result in the Air- port’s declining to pay all or a part of the requested amount. The Airport may withhold payment from the Contractor, in whole or part, as appropriate, if the Contractor is other- wise in substantial breach of this Contract including, with- out limitation, failure to comply with CBE Utilization re- quirements hereunder. 4. Commercially Useful Function One of the concerns raised by CBE programs is whether the CBE entity is merely serving as a conduit and marking-up the work of others. To address this concern, many CBE programs have regulations or rules requiring that CBE subcontractors perform a commercially useful function. For those programs that include this concept, language similar to the example below is helpful to put contractors on notice and even if the concept is not included in the program, that language may be helpful obtaining meaningful participation. Section 1.1 If a CBE listed on the Contract Participa- tion Form is determined not to be performing a commer- cially useful function and it is determined by the Airport that a misrepresentation was made by the CBE, the firm’s CBE certification with the Airport may be revoked. In such cases, the Contractor will be required to replace the CBE subcontractor found to be ineligible with another eligible, certifiable CBE approved by the Airport, that will perform a commercially useful function. F. Hiring Preferences Several states and many local jurisdictions have adopted local hiring preference programs. These programs are intended to deliver the benefits of local government contract spending to local residents and to the local economy. While there is substan-

26 ACRP LRD 41 economically distressed areas.92 Economically distressed areas include zip codes in Seattle and King County where there is “a high concentration of individuals; (1) living at or below 200% of the Federal Poverty Level, (2) unemployed, and or (3) without a college degree, compared to other zip codes.”93 Also, similar to Los Angeles, this program is recognized and promoted through a “Community Workforce Agreement” between Seattle and the Seattle-King County Building and Construction Trades Council and the Northwest Construction Alliance II.94 Frequently, in connection with development projects, devel- opers or prime contractors will be required to hire a percentage of workers from an area surrounding or impacted by the devel- opment as part of a community benefits package. G. Social Policies Most states and many cities and counties have purchasing and contract requirements, in addition to the local business and hir- ing provisions described above, designed to promote social goals. Early on these took the form of prohibitions on contracting with South African firms and have more recently focused on environ- mental issues in the form of “green procurement.” These pro- grams began at the federal level mandating purchase of energy efficient products and have expanded to a whole host of products and services that are required to be environmentally friendly. Though on a certain level not fundamentally different from other policies promoting social goals, these requirements pose several challenges for government entities. The first is that they tend to evolve faster than other contracting requirements, which re- quires government contracting documents to be updated as new rules and regulations are adopted. Second, such policies are often written in such a technical manner that the end-user (i.e., the airport) may not truly understand the requirement. H. Project Labor Agreements and Labor Peace Agreements In addition to hiring preference programs, airport man- agers may be asked to consider entering into Project Labor Agreements and Labor Peace Agreements.95 In its purest form, a Project Labor Agreement (PLA) is essentially an agreement which requires that all of the trade subcontractors working on a construction project be union companies. Typically, this is ac- complished by requiring the trade subcontractors to agree to be bound by the terms of the collective bargaining agreement for the relevant craft (plumbers, electricians, etc.). A Labor Peace 92 Seattle, Wash., Mun. Code § 20.37. 93 Id. at § 20.37.010. 94 Community Workforce Agreement, City of Seattle, (Apr. 8, 2015). https://www.seattle.gov/Documents/Departments/FAS/ Purchasing AndContracting/Labor/Seattle_CWA_final.pdf (last visited Mar. 13, 2020). See also, Hugh Baran, In Croson’s Wake: Affirmative Action, Local Hiring, and the Ongoing Struggle to Diversify America’s Building & Construction Trades, 39 Berkeley J. Emp. & Lab. L. 299 (2018). 95 Preemption of Worker-Retention and Labor-Peace Agreements at Airports, (Airport Cooperative Research Program Report 31, 2017). http://www.trb.org/Publications/Blurbs/175654.aspx. commercially reasonable best efforts to comply with the workforce percentage goals established by [applicable local hiring requirement program], including, but not limited to the following requirements: (i) At least 20% of journey worker hours by trade shall be performed by [local] residents; (ii) At least 50% of the skilled laborer hours by trade shall be performed by [local] residents; and (iii) At least 70% of common laborer hours shall be per- formed by [local] residents. Section 1.3 The Contractor shall maintain detailed records relating to the general hiring and hours worked by [local] residents. The Contractor shall provide with its Application for Payment, certified payrolls or other appro- priate documentation of the hiring and hours worked by [local] residents from the Contractor and all subcontrac- tors and subconsultants sufficient to determine whether the Contractor is in compliance with its hiring and workforce utilization obligations and goals. Section 1.4 The Contractor shall be responsible for: (i) including the provisions of this section in all sub contracts; (ii) collecting the information required in this section from its subcontractors and subconsultants; and (iii) providing the information collected from its sub contractors and sub- consultants in the reports required to be submitted by the Contractor. In addition to hiring programs focusing on local residents, jurisdictions have begun to implement contract hiring pro- grams that target certain under-employed or difficult to employ populations, such as veterans, formerly incarcerated, home- less or residents of areas with high poverty rates or persistent un employment. For instance, the Los Angeles Department of Public Works through a project labor agreement with the Los Angeles/Orange Counties Building Trades Council requires that 30% of contractor employee hours be worked by residents of zip codes that that have least one census tract (or portion thereof) where the median household income is less than the County of Los Angeles’ median annual household income and/ or where the unemployment rate exceeds 100% of the County of Los Angeles’ unemployment rate. In addition, 10% of the hours must be worked by Transitional Employees, which includes veterans, those with histories of involvement with the criminal justice system, homeless and others who have experienced other barriers to employment.91 Similarly, in Seattle, for projects in excess of $5 million, a certain number of hours (beginning at 20% in 2016 and aiming for 40% by 2025) must be worked by individuals who reside in 91 City of Los Angeles, Department of Public Works, Project Labor Agreement, (2015-2020) https://bca.lacity.org/Uploads/ hiring/ Project%20Labor%20Agreement%202015-2020.pdf (last visited Mar. 10, 2020).

ACRP LRD 41 27 specified salary. Typically, the wage rate approximates the union wage rate; however, there may be minor variations between the union wage and the prevailing wage. The federal prevailing wage statute is referred to as the Davis-Bacon Act and may be im- posed upon an airport if federal funds are supporting a contract action. State prevailing wage statutes operate similar to the fed- eral Davis-Bacon Act requirement and essentially set wage rates for public projects at the prevailing union wages. While there have been a number of challenges to these laws, courts have generally upheld them and the Supreme Court, in California Div. of Labor Standards Enf ’t v. Dillingham Const., N.A., Inc.,98 determined that such state and local laws are not preempted by ERISA. Successful challenges have been based on the inapplica- bility of the prevailing wage program to the particular project.99 J. Living Wage Statutes More than half of the states have minimum wage laws.100 When state minimum wages exceed the federal requirements employees are entitled to the higher wage.101 In addition, over the last several years municipalities and other governmental en- tities have established so-called living wage requirements that exceed state minimum wages.102 While compliance with these laws may ultimately be an obligation of the contractor, when new living wage regimes provide for employees of government contractors to receive wages at higher rates than other employ- ees, it is important that the government entity point out the ap- plicable wage requirement in both solicitation documents and contracts to ensure that contractors have both contemplated living wage in their pricing and are complying with the living wage requirements. 103 K. Dispute Resolution Government vendors may request or include as part of their standard form contracts language requiring contract disputes to be resolved via alternative dispute measures such as arbitration. Traditionally, arbitration clauses were disfavored and prohib- ited in certain instances. The Federal Arbitration Act, passed in 98 California Div. of Labor Standards Enf ’t v. Dillingham Const., N.A., Inc., 519 U.S. 316 (1997). 99 State ex rel. Gardner v. City of Salem, 219 P.3d 32 (2009); State Bldg. & Constr. Trades Council of California v. City of Vista, 279 P.3d 1022 (2012). 100 Paycor, Minimum Wage by State and 2020 Increases, https://www. paycor.com/resource-center/minimum-wage-by-state (last visited Dec. 7, 2019). 101 U.S. Department of Labor, Minimum Wage, https://www.dol. gov/general/topic/wages/minimumwage (last visited Dec. 7, 2019). 102 UC Berkeley Labor Center, Inventory of US City and County Minimum Wage Ordinances, http://laborcenter.berkeley.edu/ minimum- wage-living-wage-resources/inventory-of-us-city-and-county- minimum-wage-ordinances/ (last visited Dec. 7, 2019). 103 See, http://www.westerncity.com/article/living-wage-ordinances https://www.cincinnati-oh.gov/inclusion/assets/File/Forms%20Page/ Living%20Wage%20Affidavit%20of%20Compliance.pdf https://www.jimersonfirm.com/blog/2018/05/living-wage- ordinances/. Agreement is similar in nature but applies to the hotel and ser- vice industries. In the landmark “Boston Harbor” case, Building & Construction Trades Council v. Associated Builders & Con- tractors of Massachusetts/Rhode Island, Inc.,96 the U.S. Supreme Court upheld project labor agreements under federal labor law, but left open the question whether such agreements were in- valid under state and local laws. In a number of cases, non-union contractors have challenged the legitimacy of such agreements on the grounds that they ef- fectively exclude non-union contractors from the procurement process. Although the case law is mixed, the courts have tended to support enforcing the agreements. For instance, in Associated Builders & Contractors, Inc. v. San Francisco Airports Com.,97 the court considered a PLA between the San Francisco Airports Commission and the AFL-CIO in connection with a $2.4 billion airport construction program. The California Supreme Court upheld the PLA observing that the PLA was consistent with the general principles underlying the competitive bidding law as all contractors were subject to the same agreement and there was substantial evidence supporting the commission’s authority to enter into the PLA. Whether such agreements are in an airport’s best interest im- plicate many considerations. The classic reason for entering into such agreements is to prevent labor disruptions (i.e., strikes and walk-outs) that could arise if non-union labor is used and to insure a ready supply of workers. In a heavily unionized market, these considerations may well be compelling. In less unionized settings, these considerations may not be as compelling, but there may be political or policy issues in play that require such agreements. In markets that are less heavily unionized, consid- eration should be given to how such agreements will impact competition (and thus pricing) as well as minority- or women- owned business enterprise contractors, which in certain areas tend to be non-union. In such instances, the adoption of a PLA may impact the ability for a prime contractor to engage such subcontractors and should be carefully considered by airport managers. The authors have had some success managing these risks by including in Project Labor Agreements clauses that ex- empt (i) certain elements of the work from the PLA when less than three trade subcontractors are willing to bid on a trade package under the PLA and (ii) as may be necessary to meet W/MBE requirements. Negotiation over such clauses is likely to be complex and would normally require a detailed knowledge of market capacities and bargaining leverage between the respec- tive parties. I. Prevailing Wage Laws Many governmental entities are subject to prevailing wage statutes. Such statutes require that construction contractors and subcontractors pay their workers an amount that exceeds a 96 Building & Construction Trades Council v. Associated Builders & Contractors of Massachusetts/Rhode Island, Inc., 507 U.S. 218 (1993). 97 Associated Builders & Contractors, Inc. v. San Francisco Airports Com., 21 Cal. 4th 352, 981 P.2d 499 (1999).

28 ACRP LRD 41 sure and also offers some protection for contractor proprietary information.108 These provisions do not, however, protect from dis closure the final contract including in nearly all cases the contract price (trade secrets and commercial or financial infor- mation about the contractor unrelated to pricing is redactable). While the total contract price is rarely exempt from disclosure, contract unit pricing may be exempt if disclosing it would “cause substantial harm to [the contractor’s] competitive position.”109 The extent to which these concepts or other contract dis- closure concepts exist at the state and municipal level varies widely. For instance, in Texas while there is no standalone authority on proprietary contractor data, the Texas Public Information Act does include an exemption from disclosure for “information that, if released, would give advantage to a competitor or bidder.”110 In North Carolina, the procurement statute provides that “all contract information shall be made a matter of public record after the award of contract. Provided, that trade secrets, test data and similar proprietary information may remain confidential.”111 In addition, North Carolina’s public disclosure statute more broadly protects information that “is disclosed or furnished to the public agency in connection with the owner’s performance of a public contract or in connection with a bid, application, proposal, industrial development project, or in compliance with laws, regulations, rules, or ordinances of the United States, the State, or political subdivisions of the State.”112 Conversely, in Alabama neither the procurement statutes, regulations or guidance provides direction on the treatment of contract or contractor information. The state open records law states that “ that “[e]very citizen has a right to inspect and take a copy of any public writing of this state, except as otherwise expressly provided by statute.”113 The Alabama Supreme Court noted in Water Works & Sewer Bd. of City of Talladega v. Consol. Pub., Inc.,114 that the legislature had not provided, as some states have, the limitations or exclusions from the general disclosure rule. In the absence of such legislative direction, the court de- termined that “information received by a public officer in confi- dence, sensitive personnel records, pending criminal investiga- 108 5 U.S.C. § 552(b)(5). This section exempts from disclosure “inter-agency or intra-agency memorandums or letters that would not be available by law to a party other than an agency in litigation with the agency, provided that the deliberative process privilege shall not apply to records created 25 years or more before the date on which the records were requested.” 109 Northrop Grumman Sys. Corp. v. Nat’l Aeronautics & Space Admin., 346 F. Supp. 3d 109, 117 (D.D.C. 2018), appeal dismissed, No. 18-5337, 2019 WL 2147754 (D.C. Cir. Apr. 29, 2019). 110 Tex. Gov’t Code § 552.104. 111 N.C. Gen. Stat. § 143-52. 112 Id. at § 132-1.2. But see, Wilmington Star-News, Inc. v. New Hanover Reg’l Med. Ctr., Inc., 480 S.E.2d 53 (1997) (holding that while price list may be protected, price lists contained in public hospital’s agreement with private health maintenance organization were subject to disclosure). 113 Ala. Code § 36-12-40. 114 Water Works & Sewer Bd. of City of Talladega v. Consol. Pub., Inc., 892 So. 2d 859 (Ala. 2004). 1925, essentially preempts most state law on this issue and ren- ders most arbitration clauses enforceable. This does not mean, however, that a governmental entity can be compelled to enter into an arbitration clause. A governmental entity, such as an air- port, retains the right not to consent to an arbitration clause. While there may or may not be commercial advantages to such an alternative dispute resolution process, airports must have the authority to do so before agreeing to such language.104 Many government contracting and procurement regimes have contract dispute requirements, including notice of claim, nego- tiation or mediation, and submission of claims to a quasi-judi- cial body like a board of contract appeals. Whether these pro- curement requirements allow or prohibit contractual alternative dispute resolution procedures varies among jurisdictions.105 In general, government agencies subject to traditional procure- ment systems are less likely to have the flexibility to choose dispute procedures whereas special purpose entities and quasi- government agencies tend to have more flexible contracting authority and are more likely to be authorized to agree to con- tractual alternative dispute resolution procedures. On a practi- cal level, if an airport’s governing procurement authority does not specifically authorize contractual alternative dispute proce- dures, this issue should be approached similar to the indemnifi- cation issue by simply informing vendors that the airport lacks the authority to enter into such provisions. L. Freedom of Information and Sunshine Law Issues Many businesses that have not had substantial participation with government contracts may be surprised that their con- tracts and substantial portions of their bids may become public records. While there are substantial regulations, guidance and case law related to what is subject to and exempt from disclosure under the federal FOIA, there is much less certainty at the state and local level. Accordingly, it is important to both understand the laws applicable to a jurisdiction and its procurement infor- mation and contracts and to alert contractors to these issues in contracts and procurement documents. Under the federal rules, contractor proprietary informa- tion is one of the numerated exemptions from disclosure under the FOIA and its protected by the Trade Secrets Act and the Procurement Integrity Act.106 FOIA excludes from disclosure “trade secrets and commercial or financial” that is privileged or confidential.107 Additionally, federal FOIA exempts from dis- closure so-called deliberative process materials, which largely exempts the decision making and selection process from disclo- 104 See, Bank of Am., N.A. v. D.C., 80 A.3d 650 (D.C. 2013); W.M. Schlosser Co. v. Sch. Bd. of Fairfax Cty., Va., 980 F.2d 253 (4th Cir. 1992); Chattanooga Area Reg’l Transp. Auth. v. T.U. Parks Const. Co., 1999 WL 76074 (Tenn. Ct. App. Jan. 28, 1999). 105 City & Cty. of Denver v. Dist. Court In & For City & Cty. of Denver, 939 P.2d 1353 (Colo. 1997); Bank of Am., N.A. v. D.C., 80 A.3d 650 (D.C. 2013); My Baps Constr. Corp. v. City of Chicago, 87 N.E.3d 987 (2017). 106 5 U.S.C. § 552; 18 U.S.C. § 1905; 41 U.S.C. § 2102. 107 5 U.S.C. § 552(b)(4).

ACRP LRD 41 29 Airport shall promptly, and in any event, within the time limits mandated under the FOIA, assert such exemption from disclosure and decline to provide such information. If, following receipt of Contractor’s objection to the release of the Requested Information, or not less than ten (10) days following receipt of the Request, the Airport reasonably de- termines that the information sought by the Request is not exempt from disclosure pursuant to the FOIA or other ap- plicable law, the Airport shall promptly notify Contractor of such determination, and shall refrain from making such disclosure for not less than five (5) days following notice to Contractor in order to afford Contractor an opportunity to seek an injunction or other appropriate remedy if Contrac- tor believes that the Airport’s determination is erroneous.  1.3. Notice. Contractor shall endeavor to clearly mark each page of all documents which Contractor wishes to designate as Confidential Information “Confidential Trade Secret Information, Contact Contractor Before Any Dis- closure” and shall also include a reference to this Agree- ment; provided, however, that Contractor’s failure to mark any document shall not foreclose Contractor from assert- ing that a document should be designated as Confidential Information. 1.4. Certain Required Disclosures. Nothing in this Agreement shall limit or restrict the Airport from disclos- ing, to the extent required by applicable law, any informa- tion, communication, or record to the [Entities to which Airport is generally obligated to provide documents]; pro- vided that the Airport shall use all reasonable measures to prevent further dissemination of such information to the extent such information is Confidential Information. M. Standard Contract Provisions Many governmental entities, including many airports, have a standard set of standard contract provisions that address many of the issues outlined above. It is not uncommon (and may well be the norm) that these standard contract provisions will be at- tached to the vendor’s proposal, the airport’s RFP or IFB along with the notice of award, and the resulting document (i.e., RFP + proposal + standard contract provisions + award) becomes the contract. This approach, while efficient, can result in significant misunderstandings between the airport and the vendor as often the vendor’s proposal will purport to negate or alter provisions in the other documents. Typically, the airport’s documents (i.e., the RFP and the standard contract provisions) will provide that they are to prevail over any inconsistent provision in the ven- dor’s proposal. While such a clause may be enforceable, the ven- dor is unlikely to agree with this provision and problems can occur when the parties do not share a common understanding. As such, airports should carefully review proposals and iden- tify terms that are inconsistent with required business terms. While appreciative of the procurement process and issues that can arise, the authors strongly believe that the airport will be tions, and records the disclosure of which would be detrimental to the best interests of the public are some of the areas which may not be subject to public disclosure.”115 There is no caselaw, however, discussing how contract or contractor information is to be treated under the public disclosure statute. In many jurisdictions, contractors may be permitted to op- pose the disclosure of information and contract language that provides the contractor with notice that information or data related to it, the contractor or procurement has been requested under the applicable disclosure law may give contractors addi- tional comfort in connection with operation under these statu- tory regimes. Sample language includes: 1. Confidentiality. The following provisions are appli- cable to requests filed under the [Applicable Public Dis- closure Law] (“FOIA”) or any similar applicable law for information regarding this Agreement or any communica- tions, documents, agreements, information or records with respect to this Agreement: 1.1. Non-Disclosure. Communications, documents, agree ments, information and records that qualify as “Con- fidential Information” under FOIA or other applicable law provided to the Airport by Contractor under or pursuant to this Agreement shall be maintained by the Airport as con- fidential, and the Airport shall not disclose such informa- tion to any persons other than the appropriate attorneys, accountants, consultants, auditors and employees of the Airport. 1.2. Acknowledgment; Requests for Disclosure. As required by the terms of this Agreement, Contractor shall provide to the Airport certain documentation and infor- mation, the disclosure thereof could cause substantial harm to the competitive position of Contractor. The Airport ac- knowledges and agrees that Contractor will be considered as the “submitter” of such documentation and information for purposes of the FOIA. Accordingly, if a person files a re- quest under the FOIA or any similar applicable law for any such documentation or information (a “Request”), the Air- port shall promptly, and in any event not more than five (5) days following the receipt of the Request, notify Contractor of the Request and allow Contractor a sufficient, and not less than a reasonable, period of time (and, in any event, prior to the disclosure of any documentation or informa- tion (“Requested Information”) that would be disclosed pursuant to the Request) within which to object to the Airport, and any other relevant judicial or administrative body, to the disclosure of any of the Requested Information. If, following receipt of Contractor’s objection to the release of the Requested Information, or not less than ten (10) days following receipt of the Request, the Airport reasonably de- termines that the Requested Information is exempt from disclosure pursuant to the FOIA or other applicable law, the 115 Id. at 865.

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Legal Issues Relating to Airport Commercial Contracts Get This Book
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Airport attorneys spend considerable time drafting and negotiating airport contracts that involve specialized legal and business issues. Some are general commercial issues, while others are unique to airports. As governmental entities, airports are subject to a variety of governmental law principles that can affect their contracts for commercial services.

The TRB Airport Cooperative Research Program's ACRP Legal Research Digest 41: Legal Issues Relating to Airport Commercial Contracts complements other ACRP publications that deal with other legal aspects of airport operations and provides a general overview of the types of agreements airports use and includes other government law principles that also can affect government contracts for commercial services.

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