WTP Green Building and Sustainability Newsletter

Whiteford, Taylor & Preston’s Green Building and Sustainability Industry Group publishes a biweekly e-newsletter covering sustainability issues that impact a wide array of industries, including Real Estate, Construction, Government Contracts, Manufacturing, and Intellectual Property. The latest edition can be found here. It features articles by Tom Kimmitt on the new Virginia Green tourism initiative and Lisa Sparks on a just-released green certification system for the design and construction of highways and roads.

Security Clearances - Who Will Need Them and How to Get One

Most of the jobs coming to Maryland and surrounding areas as a result of BRAC will require a security clearance. Some vacancies will be created by federal employees leaving their jobs because they do not wish to relocate. Some job openings will be the result of contracting activities moving into the area and requiring additional contractor support. Still other job openings will come from new government programs concurrently arriving in the area such as the anticipated U.S. Cyber Command, which will assume responsibility for the defense of the military’s portion of cyberspace. The vast majority of these positions will require a clearance at the SECRET or higher level.

In general, people who work for any organization or government office that handles information designated as "classified" by the federal government will probably need a clearance. This includes military personnel, people working for defense contractors, and federal workers who handle "sensitive" information in medicine, telecommunications, education, and finance. Even people who do not handle "sensitive information" but who work in a secured facility where other people do, will probably need a security clearance. In addition, companies or non-profits that have federal contracts or grants, including think-tanks, research organizations, defense manufacturers, and software development companies may also require employees to hold security clearances.

A security clearance is the process of determining an applicant's trustworthiness and reliability before granting him or her access to national security information. Essentially, it is a license issued by a federal government agency and authorizes a worker to handle "classified" information--that is, information deemed "CONFIDENTIAL," "SECRET" or "TOP SECRET" by the U.S. government. Such "classified" information could damage national security if it were to fall into the wrong hands. Basically, anyone who requires access to classified information to perform his or her duties must have a clearance at least to the level of access. That is, if the job requires access to CONFIDENTIAL information, then the person requires a CONFIDENTIAL security clearance; if the job requires access to TOP SECRET information, then the person requires a TOP SECRET security clearance. Having a certain level of security clearance does not mean that one is authorized to view classified information. To have access to classified information, one must possess two necessary elements: a level of security clearance at least equal to the classification of the information AND an appropriate “need to know” the information in order to perform their duties. Just because someone has a SECRET clearance, would not give him or her access to all SECRET information. They would need to have a specific reason to know that information, before they could be granted access. Any person who is employed by an organization that is sending, receiving, or developing information that the government has deemed as important to National security will need to obtain a security clearance. Many people erroneously think that they can go to a company or agency and apply for their own security clearance. Not so. Only the federal government can grant someone a security clearance, and to get one the applicant must work for a government agency or contractor and conduct business that justifies granting him or her access to highly sensitive information. No company without a contract with the federal government can independently give or seek a security clearance, and no individual who is not working for the federal government or a contract organization can get a security clearance.

Getting a personnel security clearance is a long process and depends on the type of clearance a person needs to obtain. There are three main phases to receiving a security clearance:
The first phase is the application process. This involves verification of U.S. citizenship, fingerprinting, and completion of the Personnel Security Questionnaire (SF-86) and other supporting documents. Some of the information required on the application may include phone numbers and resident addresses of friends and family members who may serve as personal references, a list of travel outside of the U.S. within the last ten years, and a complete list of credit cards and loans. The applicant’s signature on the SF-86 documents will allow the agency to check their medical history, credit/financial history, military background, police record, and other areas of life.

The second phase involves the actual investigation of the applicant’s background. Most of the background check is conducted by the Defense Security Service (DSS). This may include interviews with co-workers, family, friends, associates, and others, a review of medical, credit, financial and other history, a background check to determine the use of illegal drugs, criminal record, and contact with foreign nationals and a check on many other areas of the applicant’s life. For some high level clearances, a polygraph test may be required.

The final phase is the adjudication phase. The results from the investigative phase are reviewed. The information that has been gathered is evaluated based on factors determined by the Department of Defense (DoD). Some examples of areas that may be considered are: allegiance to the United States, criminal and personal conduct, and substance abuse or mental disorders. Clearance is granted or denied following this evaluation process.

Once the applicant has turned in the documentation, the designated agency will begin the security clearance/investigation/adjudication proceedings, depending on backlog and priority. The amount of time it takes to receive a security clearance depends largely on backlog, need for more information, depth of the investigation/adjudication process and other factors. If the applicant has lived or worked in several geographic locations or overseas, or has relatives who have lived outside of the United States, the investigation may take longer. Additionally, the more international travel the applicant has had within the last ten years, the more complicated the security clearance process will be. In general, it can take the government from six months to one year to conduct the complete investigation of a lower-level clearance status. The highest-level clearances can take up to two years. Once a clearance has been granted, it generally has to be updated at least every five years.

- Jeff Maynard

Proposed Senate Bill S.2989 Would Require Agencies to Reconsider Bundled Requirements and Remove Obstacles to Small Business Contracting Opportunities

Many small business contractors in the area looking to break into government contracting, particularly with the opportunities presented by BRAC, experience a series of difficult obstacles to entering the government market. It is often a real challenge for small businesses to secure their first contract, or their next contract, and although BRAC brings new business opportunities to local contractors, too often the opportunities exclusively benefit larger businesses.

On March 4, 2010, the U.S. Senate Small Business and Entrepreneurship Committee unanimously passed the Small Business Contracting Revitalization Act (S. 2989) (the “Act”), and the bill is now headed for a full Senate vote. Click the link below to read the bill in its entirety:

http://thomas.loc.gov/cgi-bin/query/z?c111:S.2989.IS:

The Act aims to address four key hurdles that prevent small businesses from fairly competing for BRAC-related and other contracting opportunities: contract bundling, subcontracting, acquisition, and small business size and status integrity.

One reason small businesses are unable to pursue many contracting opportunities is the prevalence of bundling in government contracting, which unquestionably favors large businesses in the procurement process. “Contract bundling” refers to the practice of consolidating two or more contract requirements that were previously separate, smaller contracts into a single, larger contract. Government agencies tend to favor bundling requirements into larger, more comprehensive contracts because they save money and resources. At the same time, however, small businesses are often unable to compete for bundled contracts because they are too large, with diverse performance requirements that many small businesses simply do not have the capacity to cover. The Act will minimize contracting agencies’ use of contract bundling and will require agencies to consider small businesses when placing orders on large contracts. The Act also contains a provision requiring acquisition officials to review contracts worth more than $2 million to determine if they could be broken into smaller pieces so that small businesses would have a chance to compete for the work. Contracting officers must certify that bundled contracts in excess of $2 million are not suitable for small business participation, although the certification requirement does not apply to Department of Defense contracts.

The foregoing requirements would have the greatest potential impact on multiple award contracts, GSA Schedule contracts among them, since agencies would now be required to set aside orders on multiple award contracts, and would also be required to set aside at least one contract for small businesses.
Subcontracting practices are another target. The Act increases oversight of large business prime contractors to ensure they are actually using the small businesses that they proposed in their RFP responses and that they are actually meeting their small business subcontracting requirements. This provision is intended to assist small businesses that spend time and money preparing bid proposals with a large prime contractor and then never receive any part of the work once the contract is won. Once a small business is awarded a subcontract by a prime, the Act imposes strict oversight requirements to ensure that subcontractors receive payment within 90 days after the subcontractor completes work.
The Act also closes other loopholes that favor large businesses – for example, the current small business recertification requirements. Right now, small businesses are only required to recertify their size under certain circumstances, namely, after an acquisition or merger, at the end of the fifth year in a long term contract, or when options are exercised thereafter, or at the contracting officer’s request. The lax nature of small business recertification can allow businesses that are no longer small to qualify for small business set aside contracts. The Act closes this loophole. Under the Act, contractors will be required to annually recertify their size status. In addition, the Act establishes a presumption of loss to the government if a large business performs a contract set aside for the benefit of small business.

The Act also requires a GAO study to determine whether the current SBA mentor-protégé program is effectively supporting the goal of increasing participation of small businesses in government contracting and not, as many complain, simply serving the interests of large businesses which can pursue small business set aside contracts if they do so as a mentor-protégé team.

Finally, the Act relaxes regulations concerning joint ventures and teaming arrangements to encourage small businesses to partner together so that they can land larger contracts. SBA will set up a new

The Act, which has strong bipartisan support, will become part of the next jobs bill the Senate brings to the floor this spring and is expected to pass as part of that legislation.

- Heather James

Update on the Government and Technology Enterprise Park (GATE) Project Near Aberdeen Proving Ground

While much of Maryland continues to be mired in a commercial real estate slow down of epic proportions, BRAC is helping to initiate a much needed boost to Maryland’s economy. Evidence of this can be found at the St. John’s Properties project in Aberdeen where construction is currently underway on two separate commercial office buildings leased by L-3 Communications and Raytheon Company which will occupy a total of 75,000 square feet of space each at “The Government and Technology Enterprise” (GATE) project, a 416 acre parcel, 2-3 million square foot business community located within Aberdeen Proving Ground in Harford County. The GATE is being developed to meet anti-terrorism and force-protection standards and will house both defense contractors and military and federal agencies. L-3 Communications’ Command and Control Systems and Software unit plans to relocate 400 employees to a 3-story, Class A, LEED silver-certified building. Raytheon Company is expected to employ 300 workers at a separate 75,000 square foot 3-story, Class A, LEED silver-certified building. Both buildings are expected to be finished this summer.

Ever since St. John Properties was assigned the exclusive development rights for GATE in the summer 2009 from Opus East, LLC, there has been significant real estate activity at GATE, including:

In October 2009, the company acquired an existing 60,000 square foot single-story building fully leased to CACI International, Inc., a national security and defense company. CACI is subleasing 45,000 square feet to the U.S. Army Joint Satellite Command.

The main entrance into Aberdeen Proving Ground, known as Maryland Boulevard, was upgraded by $23 million to improve access to the fort.

A new 2.4 million square foot facility for the U.S. Army Command, Control, Computer, Communication, Intelligence, Surveillance and Reconnaissance operations (known as C4ISR) is anticipated to be delivered in 2010 and in 2011 will be the workplace for up to 10,000 workers who are expected to relocate from among other places, Fort Monmouth, New Jersey.


The tangible examples of BRAC’s ability to spur commercial real estate development as evidenced by GATE are encouraging to the 2010 Maryland economic forecast.


Tami Daniel

Funding BRAC Infrastructure Through Tax Increment Financing

Alabama will become the latest BRAC jurisdiction to use tax increment financing (often referred to as “TIF” for short) to support the infrastructure and commercial development related to BRAC issues. Its legislature recently approved the use of such financing to cover the cost of infrastructure improvements for a new office park outside the main gate of the Redstone Arsenal in Huntsville.

The specifics of tax increment financing often vary from jurisdiction to jurisdiction, but the basic concept is the same -- governments and developers seek to leverage the increased tax revenue generated by contemplated development to facilitate lending to build such development. Local or state governments typically issue bonds backed in some manner by the increased tax revenue, and lend the proceeds to developers to fund the improvement or reimburse the developer for expenditures already made. In some cases, these governments contract for themselves for infrastructure improvements underwritten by TIF bonds.

The Anne Arundel County (Md.) Council is in the process of approving the use of tax increment financing for an expansion of the National Business Park, a commercial office park just outside the borders of Fort Meade whose tenants are mainly government contractors and subcontractors in the defense and national security fields. And tax increment financing has underwritten revitalization efforts following the closure of military bases in Denver and in Glenview, Illinois, among others. Because credit has recently been increasingly difficult for developers to obtain, tax increment financing, developers who had not utilized TIF bonds in the past have started actively seeking such financing from local governments.

Maryland’s BRAC Revitalization and Innovation Zones (“BRAC Zones,” for short) contemplate the use of tax increment financing for improvements within such zones, intended to be in areas in which BRAC commercial and residential growth will be channeled. Counties and cities with BRAC Zones get a bonus: the State will pay over to eligible counties or cities with BRAC Zones an amount equal to the increased State property tax resulting from the new development and one-half the increased county or city property tax resulting from the new development. This money can then be used by the county or city to repay TIF Bonds or to fund additional infrastructure improvements relating to BRAC. Notably, the Westport Waterfront project in Baltimore City lies in a BRAC Zone, and its improvements are being financed with tax increment financing.

Because tax increment financing necessarily involves one or more government entities, the money may come with conditions intended to further particular socioeconomic goals of the government, or it may end up being considered a subspecies of government procurement -- even if the improvements are developed by a private developer.

To the construction contractor, the most relevant of these concerns is the potential application of prevailing wage legislation. In the District of Columbia, for example, projects funded by tax increment financing are subject to the wage standards of the Davis-Bacon Act, the federal government’s prevailing wage law. In Pennsylvania, state courts have broadly construed Pennsylvania’s prevailing wage law to include TIF projects built by private developers.

Additionally, tax increment financing projects built by private parties may be subject to subcontracting goals for minority business enterprise and/or women-owned business enterprise participation, as is the case in the District of Columbia and Kansas City, Missouri, among others.

Where the infrastructure improvements are actually being built through the public entity’s procurement regime, of course, whatever prevailing wage requirements and MBE/WBE programs that public entity has in place will govern.

-- Will Pearce, LEED AP BD+C

Public/Private Construction Projects - Part III

For the 2010 ABA Forum on the Construction Industry MidWinter Meeting, held January 27-29, 2010 in San Francisco, Guest-bloggers Bob Carney and Lisa Sparks prepared a paper on hybrid public/private construction projects. The paper, Is It Public or Not? was presented by Bob Carney at the MidWinter Meeting on Thursday, January 28. Over the course of three posts, the two of them are guest-blogging here on the BRAC Blog, reviewing the hybrid public/private projects covered in their paper and discussing the relevance of such hybrids to BRAC initiatives.

The remedies available to the unpaid contractor or subcontractor on a hybrid project and the procedures by which those remedies can be enforced unfortunately remain unclear and unsettled. In many situations, it is uncertain whether mechanic’s liens, prompt payment acts, or construction trust laws will apply to hybrid projects. Payment bonds on a federal hybrid project may be governed by the Miller Act, but they might instead be treated as private project bonds, governed by applicable state law, and there is no bright line test for making this determination. Presumably, as hybrids grow more prevalent, court decisions providing clarity will be handed down. Until then, it is imperative that construction contractors proceed with caution and ensure compliance with all potentially applicable notice and claims bar dates.

Mechanic’s Liens

Whether a contractor can get a mechanic’s lien on a hybrid project remains murky and will likely vary from case to case, depending on the specific nature of the project and, where the project is on a federal installation, whether and how the state in which the property lies consented to the purchase of such property by the federal government. The mechanic’s lien is an important asset in the arsenal of a construction contractor who wants to get paid, making the real property underlying the project security for the debt owed to the contractor for his work on the property. The government’s interest in real property is generally not lienable. However, where a contactor performs work on a project lying on land leased from the federal government (as in an Enhanced Use Leasing (“EUL”) project), the contractor conceivably could obtain a lien on the leasehold held by the developer/lessee; most states permit such liens where the work is performed pursuant to a contract with a lessee.

But state mechanic’s lien laws may not apply on federal enclaves. The application of state laws on federal enclaves within a given state is a complex issue. What follows is an oversimplification for present purposes. Article I, Section 8, Clause 17 of the U.S. Constitution provides that federal law exclusively applies on land held by the federal government for military installations “and other needful buildings” where the state legislature has consented to the purchase of such lands. Without the consent of the state legislature, in contrast, all state laws apply, provided such state laws do not intrude upon the federal government’s sovereignty. States are permitted to condition their consent to the federal purchase of land, and they often do, seeking concurrent jurisdiction over the property. The states’ conditions are far from uniform, and the conditions imposed by a state typically change over time (Maryland has enacted at least four different consent statutes over the last century or so, each with differing terms; the consent in effect at the time of the purchase is determinative as to application of state laws on the purchased land), so the applicability of state law on a federal installation is generally dependent upon where and when the federal government acquires the land. The bottom line is that a contractor on a hybrid project on a federal installation cannot be sure it has any mechanic’s lien rights.

The contractor on a project not lying on federally owned land that will be leased to the government may have slightly better lien rights, though it can lien only the reversionary interest held by the fee simple owner; the government’s leasehold cannot be liened. Moreover, where disputes arise, the subcontractor seeking to claim a lien will likely be dragged into the federal claims process under the Contract Disputes Act before it can obtain a final lien.

Contract Disputes Act

The federal Contract Disputes Act (“CDA”) channels federal procurement claims through contracting officers and boards of contract appeals or the Court of Federal Claims, rather than through federal district or state courts of general jursidiction. Its procedures are mandatory and apply to all claims by the contractor – meaning the person with a direct contract with the federal government -- on federal construction and lease contracts entered into by executive agencies. Most states have claims procedures on government contracts that bear some similarity to the CDA. Subcontracts on such governmental projects typically require the subcontractor to assist in preparation by the contractor of any claim to the government where the government is responsible for the basis of the claim, and often mandate that any other dispute resolution not be undertaken until the claim to the government is complete. This effectively drags the subcontractors into governmental dispute resolution scheme.

While the CDA could conceivably apply to the in-kind goods and services provided by a developer of an EUL project, the CDA will not typically apply to the EUL construction project itself, as that project will be undertaken pursuant to private contracts between the developer and contractors. The CDA will apply to those projects where new projects are constructed through governmental lease of real property, whether the contract is characterized as a lease of real property or as a construction contract.

Payment Bonds

Due to the cost and complexity involved, most hybrid projects will require payment and performance bonds of the construction contractor. It is not clear, however, whether such bonds will be treated as public works bonds (under the federal Miller Act or the applicable state Little Miller Act) or as private bonds. This will likely vary, depending on the specific facts involved in a given project. Whether a bond is a public works bond or a private bond determines when and how a claimant must give notice to the surety, the limitations period for a suit on the bond, what sort of damages the claimant may recover, how many tiers of subcontractors are protected by the payment bond, and in which court the suit must be brought.

The cases are not consistent as to whether a hybrid project involving the federal government is governed by the Miller Act. The Miller Act mandates the provision of payment and performance bonds “before any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government.” Some cases, including this one decided last year by a Georgia federal court, hold that the United States must be a party to the construction contract to bring bonds issued therewith within the Miller Act. Others focus on whether the end use of the project constitutes a “public work.” There is a line of cases, for example, holding that military housing projects built by contractors under construction contracts with private developers funded by private financing are nonetheless “public works” because they are intended to house American soldiers. The second approach is more likely to result in Miller Act coverage.

Prompt Payment Acts and Construction Trust Fund Statutes

For the reasons discussed in the applicability of mechanic’s liens section, above, prompt payment acts and construction trust laws may or may not apply to a hybrid project. Courts are increasingly comfortable applying state prompt payment act statutes to subcontracts on a traditional federal construction project; such subcontractors have been permitted relief under the Louisiana, California, and Pennsylvania prompt payment acts, for instance. However, state remedial acts vary in scope and state legislatures may not have intended them to apply to projects on federal enclaves. A Maryland federal court, for example, has ruled that Maryland’s General Assembly did not intend that its construction trust law apply to traditional federal projects on federal land.

- Bob Carney and Lisa Sparks

Public/Private Construction Projects - Part II

For the 2010 ABA Forum on the Construction Industry MidWinter Meeting, held January 27-29, 2010 in San Francisco, Guest-bloggers Bob Carney and Lisa Sparks prepared a paper on hybrid public/private construction projects. The paper, Is It Public or Not? was presented by Bob Carney at the MidWinter Meeting on Thursday, January 28. Over the course of three posts, the two of them are guest-blogging here on the BRAC Blog, reviewing the hybrid public/private projects covered in their paper and discussing the relevance of such hybrids to BRAC initiatives.

Part II

The hybrid project categories most relevant to BRAC are the Enhanced Use Leasing (“EUL”) program and the use of governmental lease of real property as a vehicle for new construction. EUL projects permit private developers to lease military base property, and are being utilized for commercial office space and hotel and retail projects at major BRAC installations such as Aberdeen Proving Ground and Fort Meade in Maryland, Redstone Arsenal in Alabama, and Fort Bliss in Texas. In the D.C. area especially, governments are also using the lease of real property from private entities as a means of funding and completing new construction projects.

Enhanced Use Leasing

Military agencies can lease property owned by the federal government to private developers under the EUL program. Under the program, an agency may lease out property on its installations and keep for itself half of the monetary rent revenues; the other half must be paid into the federal government’s general fund. But in-kind consideration – including but not limited to maintenance, repair, or improvement to other property or facilities owned by the agency -- may be provided by a developer in lieu of cash rent, and the leasing agency may keep 100% of such in-kind consideration. No matter what form the consideration takes, the property may not be leased at less than fair market value, and discounted leasebacks of EUL property to the agency are expressly forbidden under federal law.

The EUL program is being utilized to further BRAC realignment at a number of federal installations. At Fort Meade, for example, the lessee under the enhanced use lease will provide in kind consideration in the form of the construction of a new golf course, in return for its lease of the land on which the old golf course site, on which commercial office facilities for federal contractors are being built.

Governmental Lease of Real Property as a Vehicle for New Construction

Governmental units increasingly acquire newly constructed buildings, built to their specifications, through a lease for years rather than by public construction. Where the new construction is to be leased, a private entity undertakes the responsibility for financing, constructing, operating, and/or maintaining a building to be occupied by a governmental agency under a lease for years. This has the effect of shifting expenditures from a capital improvements budget to an operating expenses budget.

For example, the NIH chose to have a new biomedical research center built at the Johns Hopkins Bayview Medical Campus in Baltimore by signing a long-term lease with the private company that owned the land underlying the project. That company in turn made the arrangements for the construction of the project. However, the NIH remained actively involved in reviewing the project’s progress and changes in design. Remarkably, the private construction contract appears to make the NIH a third party beneficiary, entitled to liquidated delay damages from the construction contractor, with whom the NIH is not otherwise in privity.

Often, the underlying land is governmental property, transferred to the developer by lease or sale, with an agreement to lease back part or all of the finished building to the governmental unit. Such lease-back arrangements have at times been held to be construction procurement rather than real estate procurement for purposes of procurement law, but the cases are not entirely consistent. Recently, a Georgia federal district court found that a leaseback arrangement for new construction on the grounds of Fort Stewart, an Army installation, was not a federal construction contract and thus was not subject to the Miller Act.