LEASE-LEASEBACK PROJECT DELIVERY: The Patient is Critical; Can She Be Saved? Timothy M. Truax L AW O...
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Transcript of LEASE-LEASEBACK PROJECT DELIVERY: The Patient is Critical; Can She Be Saved? Timothy M. Truax L AW O...
LEASE-LEASEBACK PROJECT DELIVERY:The Patient is Critical;
Can She Be Saved?
Timothy M. TruaxLAW OFFICES OF TIMOTHY M. TRUAX PC
AGC of California Building DivisionOmni Rancho Las Palmas
October 22, 2015
Davis v. Fresno USD Holdings:• LLB is a legal exception to competitive
bidding when there is a genuine lease arrangement
• The exception is not available when the LLB arrangement:• Is a disguised construction agreement;• Does not include contractor financing; and• Does not provide for district's use of facilities
"during the term of the lease."
2LAW OFFICES OF TIMOTHY M. TRUAX PC
Davis v. Fresno USD Holdings:
• Contractor's preconstruction services for the district may be a conflict of interest under §1090 of the Government Code because the contractor could be considered a district "employee" with a financial interest in the LLB contract
3LAW OFFICES OF TIMOTHY M. TRUAX PC
Davis v. Fresno USD History:• Decision issued June 6, 2015• Modification issued June 19, 2015• Petitions for review and depublication
denied August 26, 2015• Back to trial court for ruling on merits –
standing will be argued (see below)• Effect: LLBs coming to a halt and claims
for disgorgement are being pursued by taxpayers
4LAW OFFICES OF TIMOTHY M. TRUAX PC
Options Following Davis:• Court options• None left; case is “good law”• “Victory” for contractor in trial court has little
effect on other projects
• Legislative options• One bill introduced on disgorgement; did not
get hearing in committee
• Document options
5LAW OFFICES OF TIMOTHY M. TRUAX PC
Legislative Options:
• Revise LLB statutes• Clarify Government Code §1090• Prevent disgorgement• Expand other forms of procurement,
including best value (see below)
6LAW OFFICES OF TIMOTHY M. TRUAX PC
LLB Options:• Eliminate/clarify financing and “use during term”
requirements• Require contractor selection process (similar to
CM or design professional)• Additional requirements from Labor (effective
Jan. 2016, must use skilled workforce per AB 566)
• Require bidding of subcontracts• Set minimum contract value for use of LLB• Move to best value procurement (LAUSD bill)
7LAW OFFICES OF TIMOTHY M. TRUAX PC
Conflict of Interest Options:• Clarify that companies hired to perform pre-
construction services are not "employees" under Government Code §1090
• See Public Contract Code §10365.5 – applicable to State contracts
• Confirm no taxpayer standing - see San Bernardino County v. Superior Court (4th Dist., August 17, 2015)
8LAW OFFICES OF TIMOTHY M. TRUAX PC
Disgorgement Options:
• Amend Public Contract Code §5110 so it applies to LLB contracts and not just competitively bid contracts
• Permit recovery of profit?• Retroactive effect? (pending bill applies
only to contracts executed prior to July 1, 2015)
9LAW OFFICES OF TIMOTHY M. TRUAX PC
Document Options:
• Fixed monthly payments• Payments after completion• Occupancy by district during lease term• Require bidding of subcontracts
10LAW OFFICES OF TIMOTHY M. TRUAX PC
Group Discussion
• What should we do?• Will LLB survive?• Political issues influencing legislators• What can you do?
11LAW OFFICES OF TIMOTHY M. TRUAX PC