Construction Outlook May 2014 by Ucane

A publication of the Utility Contractors’ Association of New England, Inc.

MAY, 2014

Now is the Time to Rebuild Our Nation’s Infrastructure

• R aising the Grade in M assachusetts • Cost A djustment Clauses : A Sampling of L anguage by Awarding A uthorities for Water and Sewer P rojects • M assachusetts Workers’ Compensation R ate Change Effective 4/1/2014

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IN THIS ISSUE

OFFICERS President AL MORTEO FED. CORP. President Elect TONY BORRELLI Celco Construction Corp. Treasurer JOHN OUR Robert B. Our Co., Inc. Secretary PAUL SCENNA Albanese D&S, Inc.

BOARD OF DIRECTORS MARCELLA ALBANESE Albanese Bros., Inc. JEFF BARDELL Daniel O’Connell’s Sons, Inc. VINCENT BARLETTA Barletta Heavy Division NICK BIELLO J. D’Amico, Inc. KEVIN COLE J. F. White Contracting Co. STEVE COMOLETTI P. Caliacco Corp. STEPHEN J. CONNOLLY ATS Equipment, Inc. MAUREEN DAGLE Dagle Electrical Const., Corp. THOMAS DESCOTEAUX R. H. White Const. Co., Inc. ALEX DUNN Travelers JERRY GAGLIARDUCCI Gagliarducci Construction, Inc. MARCO GIOIOSO P. Gioioso & Sons, Inc. BILL IRWIN C.J.P. & Sons Const. Co., Inc. PHIL JASSET Honorary Board Member RICHARD PACELLA, JR. R. M. Pacella, Inc. BRIAN RAWSTON J. Cashman, Inc. KENNETH STEVENS A. H. Harris & Sons, Inc. DAVID ZOPPO R. Zoppo Corp.

KLAYMAN ANNE Executive Director

3 President’s Message:

The Message is Clear...But Will They Listen?

5 Legislative Update:

• House Considers Fiscal Year 2015 Budget • Governor Patrick Signs the Transportation Bond Bill • Senate Passes Legislation Governing Natural Gas Leaks; Conference Committee to Resolve Differences Now Set • Massachusetts Granted an Additional Year to Comply with Certain Affordable Care Act Provisions • Will New DEP Regulations Eventually Lead to Increased Water Rates?

15 Now is the Time to Rebuild Our National Infrastructure 22 Raising the Grade in Massachusetts 26 Cost Adjustment Clauses: A Sampling of Language by Awarding Authorities for Water and Sewer Projects 37 Environmental Viewpoint:

The American Iron and Steel Requirement

39 UCANE Interview:

Representative Paul A. Brodeur, (D-Melrose)

43 Save the Date...UCANE’s 35th Annual Golf Classic 45 Insurance Perspective:

Massachusetts Workers’ Compensation Rate Change Effective 4/1/2014

49 Supreme Court Upholds EPA Rule Limiting Cross-State Pollution 53 UCANE’s 2014-2015 Employee Safety Manuals Now Available 55 Financial Management:

• Liquid Alts Move Into the Mainstream • Mixing Annuities and IRAs • Making Expense Accounts Accountable

Editor: Anne Klayman, Associate Editor: Suzanne Savage, Graphic Designer: Sherri Klayman Construction Outlook Chairman: Al Morteo Editorial Board: Al Morteo, Tony Borrelli, John Our, and Paul Scenna CONSTRUCTION OUTLOOK published monthly by the Utility Contractors’ Association of New England, Inc., 300 Congress Street, Suite 101, Quincy, MA 02169; Tel: 617.471.9955; Fax: 617.471.8939; E-mail: aklayman@ucane.com; Website: www.ucane.com. Statements of fact and opinion are those of the authors alone and not necessarily those of UCANE and the Construction Outlook editorial board and staff. Subscriptions are included in dues payments for UCANE members. Presorted Standard postage paid at Abington, MA. POSTMASTER, please send form #3579 to Construction Outlook, Crown Colony Office Park, 300 Congress Street, Suite 101, Quincy, MA 02169.

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The Message is Clear...But Will They Listen? I can’t say exactly when it all started but polling of every type has now become the norm. Before polls, decisions were made based upon one’s upbringing, education, life experiences, and whether it was a good or a bad idea. Most times we would ask a trusted friend for their opinion, or in other words “run it by them” to find out if there were factors, not previously known, that should be considered.

oday, every decision has come down to a poll. Let’s find out what the masses believe before making a decision and see if the majority agrees with the decision before it’s made. However, what is happening is that most polls are biased, and depend heavily on the beliefs of the select group of people being questioned. It seems to me that people are responding to polls based on how it affects them personally. Doing something for the “good of the country” or our fellow citizens or for future generations, doesn’t seem to be as important now as it once was. Some people being polled, who are afraid to take a stand or make a choice, are categorized as having no opinion or as being undecided. This UNDECIDED group is usually the majority of those being polled and thereby makes the poll results questionable. However there is a poll, that has not been taken, but one that should be taken, if that’s the best way to get our country’s leaders and elected officials to act. This poll would focus attention on what I believe is absolutely one of the most critical issues of our time. The poll would include a question on the condition of our country’s infrastructure and whether the federal government needs to begin a “War on Our Nation’s Crumbling Infrastructure.” I also believe that poll would garner 99.9% of the votes in favor of a massive public works program to bring our country’s infrastructure into the twenty-first century. There are literally hundreds of reports on the local, state, and federal levels, which I could reference on the condition of our country’s infrastructure. Each would cite examples of horrendous problems, from dams waiting to rupture which would flood vast populations; bridges corroding and ready to collapse; roads and highways, on the local, state, and national level, becoming like those of a third world country; clean drinking water and wastewater pipeline distribution systems and treatment plants that are not being built quickly enough to keep up with our ever increasing population, and the increased economic growth

MAY, 2014

our country needs to improve our citizens’ standard of living. Exacerbating the situation even further is the fact that a large percentage of our infrastructure, originally built in the 1950s and 1960s, is fast reaching their 50-75 year life cycle and is in dire need of being replaced. There are many organizations and people who are sounding an alarm. Two are being printed in this issue. The first is a recent Boston Globe opinion piece, written by Lawrence Summers, president emeritus of the Charles W. Eliot School at Harvard University entitled, “Now is the Time to Rebuild our National Infrastructure” (see page 15). The second is by the Boston Society section of the American Society of Civil Engineers (ASCE). They have issued their 2014 (Infrastructure) Progress Report, entitled “Raising the Grade in Massachusetts” where they developed six action steps to begin to address the problem facing this state (see page 22). Both are must read articles. But, will their messages be heard? Will their warnings be heeded?

Our country’s infrastructure problems are not insurmountable. However, correcting the problems, or at least starting to correct the problems, will require a commitment of both manpower and money, that is unprecedented in our country’s history. While the costs will be huge, so will the benefits to our country through good paying jobs that will generate a tax windfall. Higher tax revenue will fund new programs, covering every facet of American life. This country’s economy will be humming with full employment as it has in the past. History has proven that a committed national infrastructure building and modernization program will raise all Americans’ standard of living. We all know it’s the right thing to do, and we SHOULD NOT need a poll to confirm this. n

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House Considers Fiscal Year 2015 Budget

he House Committee on Ways and Means filed its fiscal year 2015 budget proposal with direct appropriations totaling $36.182 billion. Driven by increases in non-discretionary obligations such as debt services, health care, and rate increases for human service providers, coupled with the need to make targeted investments, the House budget proposal increases spending 5 percent over fiscal year 2014. To support this spending, the House Ways and Means budget proposal uses the fiscal year 2015 Consensus Revenue Estimate of $24.336 billion as a base, representing tax revenue growth of $1.137 billion (4.9 percent) above projected fiscal year 2014 collections. The Committee’s budget recommendation also relies on $14.995 billion of departmental revenues, federal reimbursements and operating transfers in addition to tax revenue. For fiscal year 2015, the budget proposes to draw only $140 million from the stabilization fund, marking the lowest draw in four years. The budget also relies on $260 million in one-time revenue solutions, $378 million lower than the amount of onetime solutions included in fiscal year 2014. Finally, the budget includes a $1.793 billion contribution to the Commonwealth’s unfunded pension liability, an increase of $163 million (10 percent) over fiscal year 2014, and a commitment to fully fund the pension liability by 2036, four years earlier than previously planned. The House budget, while increasing spending by 5 percent, cut $191 million from the Governor’s budget recommendations. Of particular interest to UCANE members, the House included the following: • Rate Relief. Despite the Governor cutting the Rate Relief line-item altogether, the MAY, 2014

House came in with an appropriation of $1.1 million. Last year, the final appropriation settled at $1 million. (Line-item 1231-1000). • WPAT Contract Assistance. The House matched the Governor’s recommendation of $63,143,440 for line-item 15990093. Last year, the final appropriation was a bit lower at $62,830,731. • DEP Administration. The House came in a dollar higher than the Governor’s recommendation for 2200-0100 with $28,498,668. • Safe Drinking Water Act. The House again matched the Governor’s recommendation with $1,504,682 for 2250-2000. This would result in an increase of over $14,000 to the line-item. • Watershed Management Program. The House matched the Governor’s recommendation by appropriating $1.02 million to DCR’s watershed management program line-item 2800-0101. • Stormwater Management. The House came in slightly below the Governor on lineitem 2800-0401 with an appropriation of $408,594. (The Governor recommended $418,000). The House began deliberations on the over 1,000 plus amendments at the time this article went to press. Accordingly, some of the aforementioned items may increase or decrease depending on the relevant amendments. For the results of the House budget deliberations, please visit www.malegislature.gov/Budget/FY2015/House/ ChamberActions. continued on page 7

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MAY, 2014

Legislative Update continued from page 5

Governor Patrick Signs the Transportation Bond Bill

overnor Deval Patrick recently signed a $12.766 billion transportation finance bill to bolster the state’s transportation systems, improve existing infrastructure and assist Massachusetts’ communities in funding local projects. According to a press release from the Speaker of the House and Senate President, the bond bill authorizes $300 million in Chapter 90 funding to help municipalities complete road, bridge, and infrastructure improvement projects, and requires earlier notification of funding levels so cities and towns can prepare appropriately. This marks the eighth consecutive year that the Legislature has either raised or level-funded Chapter 90. In addition to allowing state agencies to determine whether they want to keep retainage on projects, the legislation will improve and modernize the state’s infrastructure system and includes: • $2.97 billion for state-wide non-federally aided road and bridge projects • $1.9 billion for interstate/non-interstate federal highways • $125 million for the Department of Conservation and Recreation for repairs, improvements, construction of parkways, and related equipment • $24 million for the mobility assistance program and regional intercity bus and intermodal services • $350 million in investments for Regional Transit Authority improvements as well as other state-wide enhancements to rail service and new regional transit authority facilities • $2 million for the North-South Rail Link • $2.5 billion for MBTA rail improvements including new Red and Orange Line cars, $1.33 billion to extend the Green Line • $80 million for the statewide rail access program • $325 million for an expansion of South Station, to be re-named the Governor Michael S. Dukakis Transportation Center at South Station • $2.3 billion for South Coast rail improvements, creating a South Coast rail mitigation program to assist communities impacted by the South Coast rail project • $50 million to support a complete streets certification program to encourage cities and

MAY, 2014

towns to implement design elements and infrastructure to accommodate users of all transportation modes, including walking, cycling, and public transportation • $63 million for Registry of Motor Vehicles modernization and improvements The bill also includes numerous provisions designed to result in savings and efficiency improvements, such as the creation of a special Commission to study metropolitan planning organizations and advise on potential ways to simplify and streamline the federally-mandated project selection process. As well, the legislation includes language necessary for cities and towns to authorize contracts for the amount in their provisional fiscal year 2015 Chapter 90 authorization letter. Finally, the legislation included a mandate that MassDOT provide “preliminary notice” of the Chapter 90 authorizations to cities and towns by March 1 of each year. continued on page 9

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Senate Passes Legislation Governing Natural Gas Leaks; Conference Committee to Resolve Differences Now Set

n early April, the Massachusetts Senate passed legislation establishing natural gas leak classification standards, requiring gas companies to repair the most dangerous leaks immediately, and align civil penalties for pipeline facility and gas transportation safety violations with federal law. Similar to the House legislation passed previously, the bill identifies a three-tiered classification system to identify natural gas leaks in the Commonwealth, ranging from a Grade 1 hazardous leak that requires immediate repair to a Grade 3 non-hazardous leak that must be reevaluated during the next scheduled survey or within one year. Grade 2 leaks represent a probable future hazard and must be repaired within one year. In addition, gas leaks that are identified within a school zone must be prioritized under this bill and require the Department of Public Utilities (DPU) to authorize the use of explosives within 500 yards of a natural gas pipeline. Each gas company is also required to report the locations, classification date, and repair schedule of all leaks and include details on the reclassification of previously identified leaks. To ensure the safety of each community, gas companies must be notified of any significant projects for public ways that exposes natural gas infrastructure and the project area must be surveyed for the presence of gas leaks. If a gas company or public safety official determines that a gas leak caused an explosion, DPU is required to issue findings on whether

further investigation is necessary to determine the cause of the explosion. According to various Senate press releases on the same matter, the bill allows gas companies to propose plans to address aging or leaking natural gas infrastructure with priority given to the most immediate needs. Gas companies are also authorized to create programs to increase natural gas service for new customers with the goal of assisting lowincome customers currently eligible for the Low Income Home Energy Assistance Program (LIHEAP), and DPU is required to exempt LIHEAP program participants from any surcharges that result from the expansion of natural gas service. Under the Senate legislation, the DPU will determine if winter surveillance and cast iron gas pipeline patrol is necessary. The Senate legislation also requires the Executive Office of Public Safety and Security to issue a report on the adequacy of utility transformer vault safety standards. In an effort to send the legislation to the Governor before the end of the session, the Senate and House have appointed a conference committee to reconcile differences in the legislation. Conference committee members are Representative John Keenan and Senator Benjamin Downing, both of whom will chair the group, respectively, and Representative Mark Cusack, Senator Barry Finegold, Representative Len Mirra, and Senator Don Humason. continued on page 11

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Legislative Update continued from page 9

Massachusetts Granted an Additional Year to Comply with Certain Affordable Care Act Provisions

n April, departing United States Health and Human Services (HHS) Secretary Kathleen Sebelius informed Governor Patrick that the Commonwealth has been granted an additional year to transition into full compliance with the Affordable Care Act. HHS has added another year to the period during which the state’s health insurers may use “rating factors” such as group size or industry to create insurance rates for the small group market. The Commonwealth now has until 2017 to fully transition into the ACA’s requirements. Under the Affordable Care Act, all but four of the rating factors used to establish health insurance premiums in Massachusetts were eliminated. The allowed rating factors under the Affordable Care Act are age, geography, family size, and tobacco status. Disallowed rating factors that health insurance carriers will be allowed to use in calculating premiums include: industry, group size, participation rate, use of intermediary, and membership in a group purchas-

ing cooperative. With the HHS extension, the Commonwealth will have an additional year to phase out those disallowed rating factors, easing the transition for small businesses and consumers across the state. Massachusetts was initially granted a threeyear transition period in September 2013 following a request by Governor Patrick. continued on page 13

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Legislative Update continued from page 11

Will New DEP Regulations Eventually Lead to Increased Water Rates?

he Boston Business Journal recently reported on a “battle brewing over water management in Massachusetts, one that could pit many of the state’s municipal water departments and for-profit water suppliers against conservation groups”. At issue appears to be the Massachusetts Department of Environmental Protection new mitigation requirements for water suppliers who increase the amount of water withdrawn from a watershed. Environmentalists seeking to conserve natural water resources have fought for water withdrawal restrictions or penalties for many years. Water suppliers, both public and private, have countered that the Commonwealth’s water sources are plentiful and, most importantly, consistently refreshed through advances in watershed recharge and significant improvements in efficient water use. According to opponents of the new DEP rules, the new rules may in fact drive rate increases to im-

plement mitigation in affected communities instead of investment in their water infrastructure. Resulting from the DEP’s Sustainable Water Management Initiative, the regulations essentially govern withdrawals that exceed a certain baseline. In the event of “excessive withdrawals over the established baseline”, a permit holder will need to undertake mitigation activities to make up the difference. While communities who are members of the Massachusetts Water Resources Authority will not likely be impacted, approximately 180 permits holders may be. For information on the DEP’s initiative, please visit: http://www.mass.gov/eea/waste-mgnt-recycling/waterresources/preserving-water-resources/sustainablewater-management/. For an informational PowerPoint on the SWMI in general, please visit: http://www.mwra. state.ma.us/monthly/wscac/documentsofnote/120513swmi.pdf. continued on page 15

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Now is the Time to Rebuild Our National Infrastructure Rebuilding the nation’s airports, highways, and bridges will boost the economy and jobs Written by Lawrence H. Summers. This article first appeared in the Boston Globe.

re you proud of New York’s John F. Kennedy Airport? It’s a question I ask nearly every audience I speak to these days. JFK, after all, is the largest entry point for foreign visitors arriving in what sees itself as the greatest city on earth. To a person, I’ve never heard anyone answer, “Yes.” Vice President Joe Biden took it one step further in a speech earlier this year, likening the airport down the road, New York’s LaGuardia, to being in “some third-world country.” Yet the unemployment rate for construction workers in the United States is in the double digits. And the government can borrow — in the currency we print — at long-term rates of less than 3 percent. If now is not the moment to rebuild these airports, when will that moment ever come? The American economy is not performing to the satisfaction of the American people. Total incomes are about $1.5 trillion less today — or $5,000 per person — than was anticipated in 2007 before the financial crisis began. The share of American adults working has increased only slightly since the recesssion’s trough, and more than 5 million fewer people are working than when employment was at peak levels in the mid-2000s. Median family incomes and hourly wages have remained essentially stagnant for more than a generation. The single most important step the US government can take to reverse these discouraging trends is to mount a concerted, large-scale program directed at renewing our national infrastructure. At a time of unprecedented low interest rates and long- term unemployment, such a program is good economics but, more fundamentally, it is common sense. FEW AMERICANS ARE IMPERVIOUS TO the crumbling infrastructure in their everyday lives. The country that brought the world the Internet and continues to lead the globe in information technology has an air traffic control system that relies

MAY, 2014

on vacuum tubes and where sticky pieces of paper are moved around on bulletin boards to track flights. Even leaving aside the safety risks, the costs in extra fuel consumption and unneeded delays are measured well into the tens of billions of dollars. Can it possibly make sense to wait until every repair person capable of working with vacuum tubes has died off to complete the renovation of this antiquated system? I travel constantly. Calls to my office on my iPhone are less likely to drop driving from Beijing to its airport or from Almaty in Kazakhstan to its airport than driving from the airport into Boston, New York, or Washington. I know I’m not alone in experiencing such problems. Surely, at a time when US companies are holding close to $2 trillion in cash, earning next to nothing for balance sheets, we should be investing in improving this frustrating deficiency. continued on page 17

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Opinion continued from page 15 As secretary of the Treasury during the Clinton administration, I used to visit a public school every time I went to a city outside Washington. I’ll never forget an occasion at an Oakland high school when I gave a speech extolling the importance of education. A young teacher came up to me and said, “Secretary Summers, that was a fine speech, and I agree with all of it. Just one thing — why should any of the students believe you when there is paint chipping off the walls of their classroom and when the first lunch period has to begin at 9:45 a.m. because this school is so overcrowded? There is no chipping paint at any bank. Maybe we think that is the most important thing.” She had a point I’ve never forgotten. After 40 years of dangerous energy dependence, it is possible that within this decade the United THE DRISCOLL DIFFERENCE: States will become a major oil and natural gas exporter. Already, we produce more oil than Saudi Arabia. And there’s no denying that having America as the ultimate balancer in the world’s oil market will make it safer and more stable than the one we live in now. But that will not happen if we, as a nation, keep underinvesting in infrastructure to the point where trains and trucks — rather than pipelines — must play the primary role in moving energy resources around our country. fter serving major contractors for more than 50 years, the Driscoll Agency truly The terrible winter we’ve just understands the unique risks, insurance requirements and surety demands of the construction suffered has no doubt left behind industry. a legacy of potholes. The AmeriManaging risk can be very difficult. Which is why it’s critical to obtain adequate and proper insurance can Society of Civil Engineers esticoverages. Our underwriting specialists will work mates that driving on roads in need with your best interests in mind when proposing solutions to your insurance needs. of repair costs the average MassaWhen it’s time to navigate through the comchusetts motorist $313 annually. plexities of surety bonding, you can rely on our This is the equivalent of more than expertise and connections to get you aggressive representation and unbeatable access to 50 cents a gallon. And yet gasoindustry decision-makers. line taxes have not been raised in two decades, and as a country, we do not invest enough to maintain a transportation infrastructure, let alone to improve it. There are many more examples. But beyond the power of examples, there is the reality that a substantial step-up in infrastructure investment would serve all of our major economic objectives. It is as close to a free lunch as economics will ever produce.

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Opinion continued from page 17 There is increasing concern that we may be in an era of secular stagnation in which there is insufficient investment demand to absorb all the financial savings done by households and corporations, even with interest rates so low as to risk financial bubbles. Raising demand through greater infrastructure investment is an antidote for such malaise as well as a source of better employment and economic growth. Why? Investing in infrastructure offers the prospect of expanded economic capacity. With interest rates already near zero, incremental private outlays brought on by easier financial conditions are unlikely to have a very high return. On the other hand, the available evidence from the historical experience of the United States, in addition to cross-country comparisons and comparisons across US states, is that the social return to public infrastructure investment is very high. We live in an ever more interdependent and competitive world. Savings can flow into any country. The fruits of research and development flow globally. Many iconic American companies now earn less than half their profits in the United States. But one thing that is inherently immobile is our infrastructure. When we put money into strengthening our infrastructure, essentially all of what we spend

stays in the United States. Once in place, all the benefits of the infrastructure go to Americans. As an economic strategy, infrastructure investment also promotes fairness. The group in our society that has suffered most heavily from all of the structural change of the last generation is men with limited education. These men disproportionately work in construction, the core of infrastructure, and thus become the main beneficiaries of increased funding. Moreover, it is the majority of Americans, not the super-fortunate minority, who primarily benefit from improving public schools or airports or reducing potholes. Finally, infrastructure investment is important for generational fairness. We live in a period when a — if not the — focus of economic policy has been on reducing government deficits and debts. These are important concerns, but they have been viewed too narrowly. Infrastructure investments, even if not immediately paid for with new revenue sources, can easily contribute to reductions in long-term debt-to-income ratios because they spur economic growth, raise long-run capacity, and reduce the obligations of future generations. It is an accounting convention, not an economic reality, that borrowing money shows up as a debt, but deferring maintenance that will inevitably have to be done at some point does not. When maintenance or continued on page 21

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Opinion continued from page 19 necessary investment is deferred, the bills climb much more quickly than the cost of federal borrowing at an average interest rate below 2 percent. WHERE DO WE go from here? This should not be a partisan issue. Democrats are correct that we need to commit more government money to measures like repairing highways and modernizing schools where there is no immediate cost recovery available. They are also right in their emphasis that a great nation cannot endure with its government operating on a shoestring. Even if we assume that entitlements are reformed, the rising share of the elderly in the population, health care costs that grow faster than the rest of the economy, and American international obligations mean that revenue increases are required if the United States is to invest adequately in its future. Republicans are right that regulatory barriers hold back infrastructure investment. We need protections, but we need them to be administered more predictably and more rapidly. In 1903, it took Harvard less than 18 months to build Soldiers Field. Less than 18 months from when the stadium was conceived to when the first game was played — even without the benefit of modern construction equipment. It would take a decade today. In San Francisco, repairs to the

Bay Bridge recently took nearly four times as long as building the original bridge in the 1930s. And then there are the points that everyone should be able to agree on. Government needs to operate more efficiently. The Anderson Bridge connecting Cambridge and Boston has been under repair for nearly two years. I suspect that, with the right incentives, what was necessary could have been done in a matter of weeks rather than years. No doubt an important part of operating more efficiently will involve greater reliance on the private sector, but this must be done in a way that carefully protects taxpayer interests. For all our problems, I would far prefer to play the economic hand of the United States than that of any other major country. And while much more could be said with respect to tactics, I am confident that we as a nation will get them right if we can get behind the right basic principle: From the intercontinental railway to the interstate highway system to the Internet, American economic progress has depended on fundamental infrastructure investments. Our generation has not been doing its part. It is time for us to step up. Lawrence H. Summers is a university professor and president emeritus at Harvard. He served as the secretary of the Treasury for President Clinton and the director of the National Economic Council for President Obama. n

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Raising the Grade in

2014 PROGRESS REPORT

Massachusetts

In March of 2013, the American Society of Civil Engineers (ASCE) issued its 2013 Report Card for America’s Infrastructure. The Report Card depicts the condition and performance of the nation’s infrastructure in the familiar form of a school report card; assigning letter grades based on physical condition and needed fiscal investments for improvement. Since ASCE’s last Report Card in 2009, the overall cumulative grade for the nation’s infrastructure improved, but only from a D to a D+, which is still unacceptable. The 2013 Report Card shows that where infrastructure investments were made in both the public and private sectors, grades improved. The Report Card highlights several of these success stories. The Report Card also contains a detailed breakdown of infrastructure needs for each state. To see the 2013 ASCE Report Card or to download the new app, visit www.infrastructurereportcard.org.

ASCE has determined that a $3.6 trillion investment is needed by 2020 to bring the nation’s infrastructure to an acceptable level. Currently, only about $2 trillion in infrastructure spending is projected during this timeframe, leaving an estimated shortfall of approximately $1.6 trillion. In response to ASCE’s assessment, the Boston Society of Civil Engineers Section of ASCE (BSCES) developed six Action Steps to Raise the Grade in Massachusetts. Positive steps to improve infrastructure in Massachusetts have been taken by state agencies, regional authorities, municipalities and the legislature, but there is still much more that needs to be done. Investing in the Commonwealth’s infrastructure will create new jobs, ensure our economic prosperity, protect the environment and, most importantly, protect the health and safety of our citizens.

The following is a Progress Report on the BSCES Action Steps that were developed in 2012: Infrastructure Maintenance and Sustainability

MINIMAL

FAIR

/ GOOD

VERY GOOD

EXCELLENT

Recently, MassDOT has launched the GreenDOT program, a comprehensive environmental and sustainability initiative that seeks to make MassDOT a national leader in promoting sustainability in the transportation sector. Also, the Governor’s Executive Order No. 484 created the Massachusetts “Clean Energy and Efficient Buildings” program that requires new buildings to be constructed in a manner that uses less energy and has less impact on the environment. While these are positive steps, the Commonwealth continues to build infrastructure using a process that focuses mostly on capital cost. A new approach is needed that focuses more on the life cycle cost and resiliency of infrastructure to ensure that dedicated funding for future maintenance and operations is provided. To be truly sustainable, we need to consider the “triple bottom line”—that is economic, social and environmental factors —as well as resiliency in future development. State agencies should consider the adoption of the EnvisionTM sustainable infrastructure rating system as a framework to plan, design, construct and operate infrastructure projects. Through this process, planners and engineers would be encouraged to obtain ENV SP credentials from the Institute for Sustainable Infrastructure (ISI).

Dams

MINIMAL

FAIR

/ GOOD

VERY GOOD

EXCELLENT

Following the enactment of the Act Further Regulating Dam Safety, Repair and Removal in 2013, the Executive Office of Energy and Environmental Affairs created the Dam and Seawall Repair and Removal Fund and awarded approximately $12 million worth of loans to 17 communities for much needed work. This action taken by the legislature is a positive step towards reducing the risk of a dam or seawall failure in the Commonwealth. However, the need in Massachusetts is much greater with approximately 3,000 dams (public and private) and nearly 140 miles of publically owned seawalls that require repairs worth more than $700 million in total. See the Local Financial Impact Review: Massachusetts Dam Safety Law (www.mass.gov/auditor/docs/dlm-municipal/dlmdamsafetyreport.pdf) and the Massachusetts Coastal Infrastructure Inventory and Assessment Project (www.mass.gov/eea/docs/czm/stormsmart/seawalls/ public-inventory-report-2009.pdf). continued on page 23

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MAY, 2014

Raising the Grade continued from page 22 Transportation

MINIMAL

FAIR

GOOD

VERY GOOD

EXCELLENT

Massachusetts roads, bridges, and transit systems have been neglected for many years due to insufficient funding. However, recent initiatives like the Accelerated Bridge Program and new transportation funding efforts in the legislature that dedicate new revenue sources for transportation infrastructure are positive steps that will help the economy and address safety concerns. Recent MassDOT activities have included the Fast 14 project, which reconstructed fourteen I-93 bridges in ten weekends, and the long overdue Longfellow Bridge reconstruction project is now underway. Passage by the legislature of a comprehensive, $12.7 billion, 10-year bond bill demonstrates new commitment on behalf of MassDOT to place our systems in a state of good repair and to allow for select investments in new transit and highway capacity. The Commonwealth has begun to move forward on a backlog of needed transportation projects. Initial funding for an electrified South Coast Rail and the Green Line Extension was included in the bond bill along with planning and preliminary design for the Knowledge Corridor in western Massachusetts, which will connect with the Northeast Corridor. While progress is good, serious needs still remain, such as the replacement of vehicles on the MBTA’s Orange Line and Red Line, major highway interchange improvements, and a regional transportation initiative that will connect the North Shore and northern New England to the Northeast Corridor. In regards to funding transportation, a repeal of the gas tax indexing is being discussed. Should a repeal occur and this important source of transportation funding be eliminated, an alternate funding source would be needed. A major setback to transportation funding would negatively impact our economy and quality of life.

Water Infrastructure

MINIMAL

FAIR

/ GOOD

VERY GOOD

EXCELLENT

For too long water infrastructure in the Commonwealth has been underfunded. Municipalities and owners are reluctant to raise the necessary funds for capital investment and maintenance for fear of taxpayer backlash. This is due in large part to the public’s perception that water is a “free” natural resource. This past year, the state legislature took up the difficult challenge of beginning to address the 20-year, $39 billion water infrastructure funding gap projected in the 2012 Massachusetts Water Infrastructure Finance Commission Report: Toward Financial Sustainability. In February of 2014, the state senate passed Bill S.2021 which strengthens the Commonwealth’s revolving funds for drinking water and wastewater. While this legislation would enact many positive steps, it does not specifically address the funding gap cited in the Water Infrastructure Finance Commission’s report.

continued on page 25

MINIMALsolutions FAIR GOOD Mabey Inc. – A leader in engineered for theVERY GOOD EXCELLENT Newconstruction England’s transmission owners continue to implement the ISO New England Regional System Plan by reinforcing the system and industry since 1989 Energy

creating new interconnections with neighboring power systems. The Department of Public Utilities (DPU) has issued orders for utilities to develop a Grid Modernization Plan that includes investing in renewable energy infrastructure for advanced metering functionality and the • Trench Shoring approval of 12 long-term power purchase agreements for onshore wind facilities in New England. The Northeast’s natural gas industry is Underground tanks and utilities, striving to move forward with infrastructure projects designed to meet growing market demand. Numerous projects are in development sewer systems, lift station to expand the Northeast pipeline system and center around bringing Marcellus Shale supplies in Appalachia to market. These projects construction, more. flexibility and reliability, as well as provide economic and are designed to help further increase regional natural gas capacity,and deliverability, environmental benefits to the region. In addition, there are planned system expansions on local utility systems to meet growing demand for • Propping natural gas—at the residential and commercial/industrial levels. Lastly, the implementation of renewal energy sources continues to increase.

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Primary and secondary roadways for emergency, temporary,FAIR permanent MINIMAL GOOD and pedestrian use.

VERY GOOD

EXCELLENT

Procurement of design services utilizing Qualification Based Selection (QBS) is a top priority of the engineering community. While MassDOT • design Temporary Roadways and some other state agencies use QBS to select consultants, many municipalities and agencies select designers using a “low bid” method. The result is the commoditization of engineering andMats design services. The selection of engineering services based upon qualifications, Mabey help get your crew and rather than solely on price, will help to provide higher quality designs with lower life-cycle costs. Utilizing the most qualified design consultants equipment working on-site safely. will result in a project that uses the latest technologies and construction methods; thereby providing an overall savings in project cost.

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ContactatInformation: Anthony M. Puntin, 800-95-mabey PE, Executive Director See our case studies mabey.com/cs Boston Society of Civil Engineers Section/ASCE The Engineering Center, One Walnut Street, Boston, MA 02108

MAY, 2014

617.305.4111 • apuntin@engineers.org • www.bsces.org

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Toward Financial Sustainability. In February of 2014, the state senate passed Bill S.2021 which strengthens the Commonwealth’s revolving Toward Financial Sustainability. In February of 2014, the state senate passed Bill S.2021 which strengthens the Commonwealth’s revolving funds andwastewater. wastewater.While While this legislation would enact positive it not does not specifically the funding fundsfor fordrinking drinking water water and this legislation would enact manymany positive steps,steps, it does specifically addressaddress the funding gap cited in the Water Infrastructure Finance Commission’s report. gap cited in the Water Infrastructure Finance Commission’s report.

Raising the Grade continued from page 23 Energy Energy

MINIMAL GOODGOOD EXCELLENT MINIMAL FAIRFAIR GOOD GOODVERYVERY EXCELLENT

NewEngland’s England’s transmission transmission owners toto implement thethe ISOISO NewNew England Regional System Plan by reinforcing the system and New ownerscontinue continue implement England Regional System Plan by reinforcing the system and creatingnew new interconnections interconnections with power systems. TheThe Department of Public Utilities (DPU)(DPU) has issued orders for utilities creating withneighboring neighboring power systems. Department of Public Utilities has issued orders for to utilities to developaaGrid Grid Modernization Modernization Plan investing in renewable energy infrastructure for advanced metering functionality and the and the develop Planthat thatincludes includes investing in renewable energy infrastructure for advanced metering functionality approval of 12 long-term power purchase agreements for onshore wind facilities in New England. The Northeast’s natural gas industry is approval of 12 long-term power purchase agreements for onshore wind facilities in New England. The Northeast’s natural gas industry is striving to move forward with infrastructure projects designed to meet growing market demand. Numerous projects are in development striving to move forward with infrastructure projects designed to meet growing market demand. Numerous projects are in development to expand the Northeast pipeline system and center around bringing Marcellus Shale supplies in Appalachia to market. These projects to expand the Northeast pipeline system and center around bringing Marcellus Shale supplies in Appalachia to market. These projects are designed to help further increase regional natural gas capacity, deliverability, flexibility and reliability, as well as provide economic and are designed to help further increase regional natural gas capacity, deliverability, flexibility and reliability, as well as provide economic and environmental benefits to the region. In addition, there are planned system expansions on local utility systems to meet growing demand for environmental to the and region. In addition, therelevels. are planned system expansions on localenergy utility sources systemscontinues to meet to growing demand for natural gas—atbenefits the residential commercial/industrial Lastly, the implementation of renewal increase. natural gas—at the residential and commercial/industrial levels. Lastly, the implementation of renewal energy sources continues to increase.

Qualification Based Selection

MINIMAL

Qualification Based Selection

FAIR

MINIMAL

FAIR

GOOD

VERY GOOD

GOOD

EXCELLENT

VERY GOOD

EXCELLENT

Procurement of design services utilizing Qualification Based Selection (QBS) is a top priority of the engineering community. While MassDOT and some other state agencies QBS to select design consultants, many municipalities and agencies designers using a “low bid”MassDOT Procurement of design servicesuse utilizing Qualification Based Selection (QBS) is a top priority of theselect engineering community. While method. result is the commoditization and consultants, design services. Themunicipalities selection of engineering services based upon qualifications, and someThe other state agencies use QBSoftoengineering select design many and agencies select designers using a “low bid” rather than will help to provide quality and designs withservices. lower life-cycle costs. Utilizing the most services qualified design method. Thesolely resultonisprice, the commoditization of higher engineering design The selection of engineering based consultants upon qualifications, will result in a project that uses the latest technologies and construction methods; thereby providing an overall savings in project cost.

rather than solely on price, will help to provide higher quality designs with lower life-cycle costs. Utilizing the most qualified design consultants will result in a project that uses the latest technologies and construction methods; thereby providing an overall savings in project cost.

Reprinted with permission from:

Boston Society of Civil Engineers Section/ASCE

Contact Information: Anthony M. Puntin, PE, Executive Director

The Engineering Center, One Walnut Street, Boston, MA 02108

617.305.4111 • apuntin@engineers.org • www.bsces.org

Boston Society of Civil Engineers Section/ASCE The Engineering Center, One Walnut Street, Boston, MA 02108

Contact Information: Anthony M. Puntin, PE, Executive Director 617.305.4111 • apuntin@engineers.org • www.bsces.org

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Cost Adjustment Clauses: A Sampling of Language by Awarding Authorities for Water and Sewer Projects By Mark Molloy, Esq., Lynch Associates, Inc. “Contracts for water and sewer projects awarded as a result of a proposal or invitation for bids under said section 39M shall include a price adjustment clause for fuel, both diesel and gasoline; liquid asphalt; and portland cement contained in cast-in-place concrete.” Mass. Gen. Laws ch. 30, §38B. With the passage of Chapter 150 of the Acts of 2013 requiring the inclusion of cost adjustment terms requirements in water and sewer projects bid under Mass. Gen. Laws ch. 30, §39M, awarding authorities and contractors have begun to contemplate two central questions: how will these clauses be drafted and how will they impact each party. As is well known, cost adjustment clauses can have a variety of impacts. Over time, they have been shown to result in lower bid prices; provide greater contractor stability; promote greater competition from contractors; lead to fewer bid retractions; and benefit the awarding authority in the event of a cost decrease. The Massachusetts Department of Transportation (“MassDOT”) has used cost adjustment, or price adjustment clauses, for over 30 years. Since the passage of the recent transportation bond bills, all municipalities have been using cost adjustment clauses for road and bridge projects funded under the respective bond bills. 26

Without overstating the obvious, however, water and sewer projects are not road and bridge projects. While the various projects are not necessarily exclusive of one another, some of their components may require cost adjustment language that addresses the differences. For example, measuring the use of fuel by a water and sewer contractor may have the added difficulty of considering fuel to operate a variety of pumps or generators necessary to work underground. Moreover, the average water and sewer project uses substantially less steel than any average bridge project. Finally, the cost of necessary pre-cast concrete items on a water and sewer project may be more easily projected than a road and bridge project. In light of these differences, contractors and awarding authorities need to work together to identify the methodology that works best for both parties. In determining what language is appropriate, three key principles should be adhered to: (1) accountability; (2) transparency and (3) ease of use. For all parties, accountability, or the ability to justify the increase or decrease in a written record, is essential. Likewise, whatever process is used to determine a cost adjustment must be transparent so that both parties to contract can demonstrate the process to outside parties. (i.e. the general public, financial auditors, etc.). The term “ease of use” reflects that any cost adjustment mechanism must be one that is, generally speaking, simple to use. A complex formula requiring excessive, time-consuming labor to even calculate the inputs necessary to determine whether the initial five continued on page 27

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MAY, 2014

Cost Adjustment Clauses continued from page 26

(5%) percent threshold has been surpassed does not benefit the awarding authority in the event of a decrease or a contractor in the event of an increase. The following are samples of cost adjustment clauses that have been used by awarding authorities to incorporate cost adjustment language into the post-January 1, 2014 bids. The samples, which contain certain elements of or whole parts of the MassDOT language, are offered as examples only. They are not provided as preferred language, model language or even, necessarily, the best language for each awarding authority. For each awarding authority, what constitutes the “preferred”, “model” or “best” will be determined by what the awarding authority or its agents believe should provide them with the most accountability, transparency, and ease of use. To that end, please consider the following examples:

Massachusetts Water Resources Authority (Price Adjustments) Add the following after Section 15 of Section 00100, Instructions to Bidders: SECTION 16 – PRICE ADJUSTMENTS 16.1

This Contract contains Base Prices for Diesel Fuel; Gasoline; Liquid Asphalt; and Portland Cement Contained In Cast-in-place Concrete and provisions for price adjustments for those commodities in accordance with Chapter 30, Section 38A of the Massachusetts General Laws. A. The Base Price(s) are specified below and will be updated five days prior to the final bid opening date. B. The cost of Diesel Fuel, Gasoline, Liquid Asphalt, and Portland Cement Contained In Cast-inplace Concrete shall be included in the lump sum price bid in Item 1 of the Bid Schedule. C. Price adjustments will be paid only when the variance between the Base Price and the Period Price for the month during which the cost is incurred exceeds plus or minus five percent (5%). A price adjustment will either result in additional compensation to the Contractor or repayment to the Authority, depending on whether there is an increase or decrease. D. Price adjustments will be based on the actual quantity included in a monthly Application for Payment, as supported by paid invoices, and will be made after the work has been performed, using the applicable Period Price. i.

The Contractor will be compensated for price adjustments from the allowance in the Bid Schedule in Section 00300. ii. The Authority will be repaid from retainage. iii. The entire difference between the Base Price and Period Price for the month in which the cost was incurred will be paid. 16.2 Base Prices and basis of payment are as follows: A. Diesel Fuel and Gasoline Diesel Fuel – Gasoline –

Base Price: $__________ (including state tax) Base Price: $__________ (including state tax)

1. Price adjustments will be based on the Period Price of Gasoline and Diesel Fuel for each monthly period as it appears on the Massachusetts Department of Transportation (MassDOT) website [http://www.massdot.state.ma.us] continued on page 29

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Cost Adjustment Clauses continued from page 27 2. The price adjustment only applies to actual fuel usage during each month for site dedicated equipment requiring gasoline or diesel fuel, including but not limited to construction equipment, trucks, and bypass pumps. 3. The price adjustment will be determined by multiplying the number of gallons used during the applicable monthly period times the difference between the Base Price and the Period Price of Diesel Fuel or Gasoline. B. Liquid Asphalt Base Price – $__________ 1. Price adjustments will be based on the New Asphalt Period Price for each monthly period as it appears on the MassDOT website. The Period Price will be posted on the MassDOT website within two (2) business days following receipt of this issue. 2. The Price Adjustment only applies to the actual virgin liquid asphalt content in the mixture placed. 3. The Price Adjustment will be determined by multiplying the number of tons of hot mix asphalt mixtures placed during the applicable monthly period times the liquid asphalt content percentage times the difference between the Base Price and the Period Price of Liquid Asphalt. C. Portland Cement Contained in Cast-in-Place Concrete Base Price – $__________ 1. Price adjustments will only be made on contracts using greater than 100 cubic yards of concrete containing Portland cement. 2. Price adjustments will be based on the Period Price of Portland cement for each monthly period as it appears on the MassDOT website. The Period Price will be posted on the MassDOT website the Wednesday immediately following the publication of the monthly price in ENR. 3. The price adjustment only applies to the actual Portland cement content in the mix placed based on the approved concrete mix design. No adjustments will be made for any cement replacement materials such as fly ash or ground granulated blast furnace slag. 4. The price adjustment will be based on the variance between the Base Price and the Period Price for the Portland cement component only and will not include transportation or other charges. 5. The price adjustment will be determined by multiplying the number of cubic yards of Portland cement concrete placed during each month times the Portland cement content percentage times the variance between the Base Price and the Period Price of Portland cement. continued on page 30

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Cost Adjustment Clauses continued from page 29

Boston Water & Sewer Commission IB. 13 Price Adjustment – Diesel Fuel; Gasoline and Liquid Asphalt; and Portland Cement Pursuant to Chapter 150 of the Acts of 2013 and M.G.L. Chapter 30, section 38A this contract contains a price adjustment clause that will provide for either additional compensation to the Contractor or repayment to the Commission, depending on an increase or a decrease in the average price of Diesel Fuel, Gasoline, Liquid Asphalt, and Portland Cement Contained in Cast-in Place Cement. The Base Price will be the price as indicated in the Massachusetts Department of Transportation Highway Department web site (www.mhd.state.ma.us) for the month in which the contract was advertised, which includes state tax. The Period Price will be the average of prices charged to the State, including state tax for the bulk purchases made during each month as indicated on the Massachusetts Department of Transportation Highway Department website (www.mhd.state.ma.us). A price adjustment will be made on a monthly basis but only when the monthly cost change or variance between the Base Price and Period Price exceeds plus or minus five percent (5%). The complete adjustment will be paid in all cases with no deduction of the 5% from either upward or downward price adjustments. The Contractor will be compensated through monthly payments after the work has been performed using the monthly period price for the month during which the work was performed. The Commission will be compensated from retainage. No price adjustments will be allowed beyond the Completion date of this Contract unless there is an approved extension of time. Diesel Fuel and Gasoline Diesel Fuel

–

Base Price: $__________ (including state tax)

Gasoline

–

Base Price: $__________ (including state tax)

The price adjustment will be based on the Period Price of Gasoline and Diesel Fuel for each monthly period as it appears on the Massachusetts Department of Transportation website (www.massdot.state.ma.us). The price adjustment only applies to actual fuel usage during each month for site dedicated equipment requiring gasoline or diesel fuel including but not limited to construction equipment, trucks, and bypass pumps. It shall not include transportation, idling, or other charges. The price adjustment will be determined by multiplying the number of gallons used during the applicable monthly period times the difference between the Base Price and the Period Price of Diesel Fuel or Gasoline. The Contractor shall supply to the Commission, on a monthly basis, the certified fuel usage for each vehicle or piece of equipment. Liquid Asphalt Liquid Asphalt

–

Base Price: $__________

The price adjustment will apply only to the following items: Item B1-1 Item B1-2 Item B1-3 Item B1-3A Item B1-4 Item B1-5

Temporary Paving Boston Streets Permanent Trench Repair in Boston Streets Permanent Trench Repair DCR Streets Temporary Pavement DCR Streets Permanent Pavement State Highway Bituminous Concrete Overlay Paving

S.Y. S.Y. S.Y. S.Y. S.Y. S.Y.

The price adjustment will be based on the New Asphalt Period Price as it appears on the Massachusetts Department of Transportation Highway Department website (www.mhd.state.ma.us). The price adjustment only applies to the actual virgin liquid asphalt content in the mixture placed in accordance with the Commission’s specifications. It shall not include transportation or other charges. continued on page 31

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MAY, 2014

Cost Adjustment Clauses continued from page 30 The price adjustment will be determined by multiplying the number of tons of hot mix asphalt mixture placed during each monthly period times the liquid asphalt content percentage times the difference between the Base Price and the Period Price for Liquid Asphalt. Portland Cement Contained in Cast-in-Place Concrete Portland Cement Contained in Cast-in-Place Concrete

â&#x20AC;&#x201C;

Base Price: $__________

This provision applies to all projects using greater than 100 Cubic Yards of Portland Cement concrete containing Portland Cement. The price adjustment will apply only to the following items: Item D4-02A Item D5-10 Item D5-11

Cement Concrete Sidewalks Plain Concrete Reinforced Concrete

S.F. C.Y. C.Y.

The price adjustment will be based on the variance in price for the Portland Cement component only from the Base Price to the Period Price. The price adjustment applies only to the actual Portland Cement content in the mix placed on the job in accordance with the specifications. No adjustments will be made for any cement replacement materials such as fly ash or ground granulated blast furnace slag. It shall not include transportation or other charges. The price adjustment for Portland Cement concrete mixes will be paid for per cubic yard under this item. It will be determined by multiplying the number of cubic yards of Portland Cement concrete placed during each monthly period times the Portland Cement content percentage times the difference between the Base Price and Period Price of Portland Cement. Note: For items that are not paid on a per cubic yard basis the price adjustment will be calculated per cubic yard from the actual volume used based on information submitted to or gathered by the Commission. The terms and conditions of this Notice to Bidders are hereby made a part of and incorporated in the Proposal continued on page 33 and Contract attached hereto.

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Cost Adjustment Clauses continued from page 31

Town of Scituate, MA (Price Adjustments) PART 1 – GENERAL 1.01 WORK INCLUDED: A. Price adjustments, as required by MGL Chapter 30, Section 38A, shall be implemented for this Project. Price adjustments, as enumerated in Part 3 of this specification, shall be made for the following items: Water and Sewer Projects Road and Bridge Projects • Diesel fuel and gasoline • Diesel fuel and gasoline • Liquid asphalt • Asphalt • Portland cement contained in • Concrete cast-in-place concrete • Steel B. Price adjustments shall be made in accordance with the methodology adopted by the Massachusetts Department of Transportation in the following SPECIAL PROVISIONS documents, which are attached, but modified as contained herein: 1. Document 00811 Monthly Price Adjustment for Hot Mix Asphalt Mixtures, revised February 2, 2009 2. Document 00812 Monthly Price Adjustment for Diesel Fuel and Gasoline, revised January 26, 2009 3. Document 00813 Price Adjustments for Structural Steel and Reinforcing Steel for Contracts Bid on or after April 5, 2011, dated May 11, 2011 4. Document 00814 Price Adjustments for Portland Cement concrete Mixes, dated January 12, 2009 C. Base and Period Prices used to calculate price adjustments shall be as published by the Massachusetts Department of Transportation as presented in Documents 00811 through 00814. continued on page 35

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Cost Adjustment Clauses continued from page 33 1.02 CONTRACTOR CREDIT TO OWNER SHOULD PRICES DECREASE: A. Price adjustments will only be made if the variance between the base price and the period price is Five Percent (5%) or more. B. In the instance where the period price is below the base price by 5% or more, then the Contractor shall credit the Owner the adjustment. PART 2 – PRODUCTS Not used PART 3 – EXECUTION 3.01 DIESEL FUEL AND GASOLINE: A. Price adjustments shall be determined based on documented quantities of diesel fuel and gasoline usage for site dedicated equipment. This methodology shall replace the price adjustment basis on fuel usage factors, as described within the Massachusetts Department of Transportation Document 00812. B. All site dedicated equipment shall be approved by the Engineer for the calculation of any qualifying price adjustment. Prior to the start of work the Contractor shall submit to the Engineer a list of all dedicated equipment for the project. The Contractor shall forward updated submittals, as necessary, throughout the duration of the contract. Only that equipment included within the current approved list shall be considered eligible for calculating a price adjustment under this Section 01250. C. The Contractor shall submit fuel delivery slips to the Engineer as a basis for calculating total diesel fuel and gasoline usage for site dedicated equipment. At a minimum, the delivery slips will include the name of the fuel delivery company, the date and location of fueling, the type of fuel, description of the fueled equipment and the quantity for each type of fuel delivered in gallons. Any slips not providing the minimum information shall not be included in the calculation of total diesel fuel and gasoline usage for price adjustment purposes. 3.02 LIQUID ASPHALT: A. The “New Asphalt Period Price Method” shall be used to determine price adjustments. B. For bid items involving asphalt paving that are measured and paid on a linear foot basis, or some other basis besides tonnage, the number of tons shall be determined by the Engineer using compacted measure of thickness within the established payment limits. 3.03 STRUCTURAL AND REINFORCING STEEL: A. Steel price adjustments shall not be made for water and sewer projects. B. Period prices for steel are subject to change up to four (4) months after the date of original publication. Therefore, no price adjustment will be made until the index for the period is finalized. 3.04 PORTLAND CEMENT AND CONCRETE: A. The price adjustment applies to all projects contained herein in Section 1.01A. B. Field Concrete used in water and sewer projects, typically used for thrust blocks and concrete encasement, shall not be considered for price adjustment. Cast-in-Place concrete used on these projects will be included in the price adjustment determination.

The use of cost adjustment languages will benefit both awarding authorities and contractors. As part of the greater contract, cost adjustment clauses do not nullify a contractor’s or awarding authorities existing reporting or accounting responsibilities. Instead, they are a tool meant to complement existing terms. On many water and sewer jobs, the likelihood is that the cost adjustment language will never be invoked or necessary to use. However, in the cases where a cost adjustment claim is made, whether for an increase or a decrease, a mechanism that ensures accountability, transparency, and ease of use will benefit all parties involved. n MAY, 2014

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Environmental Viewpoint Robin L. Main, Esq.

Rhiannon Campbell, Esq.

Hinckley Allen, LLP

The American Iron and Steel Requirement Note: Robin L. Main is a Partner in Hinckley Allen LLP’s litigation group and co-chair of the firm’s environmental practice group. Rhiannon A. Campbell is an Associate in Hinckley Allen LLP’s litigation and environmental practice groups.

n the Consolidated Appropriations Act of 2014, Congress included a provision titled the “American Iron and Steel” requirement. The provision requires that projects that involve the construction, maintenance, or repair of any public water system or treatment works, and that are funded by the Clean Water State Revolving Loan Fund or the Drinking Water State Revolving Loan Fund, use iron and steel products that are produced in the United States. The requirement applies to all projects funded through an assistance agreement that is executed between January 17, 2014 through the end of the 2014 Federal fiscal year. The requirement applies to all parts of the project, even if some parts of the project are funded from a separate government program.

Products considered "iron and steel products" for the purpose of this requirement include lined and unlined pipes and fittings, manhole covers, municipal castings, hydrants, tanks, flanges, pipe clamps and restraints, valves, structural steel, reinforced precast concrete, and other construction materials that are made primarily of iron or steel. To be considered "primarily" made of iron or steel the product must be made of more than 50% iron or steel, measured by cost. Raw materials such as iron ore or scrap steel may come from nonUnited States sources. Under certain circumstances the Environmental Protection Agency ("EPA") may waive the requirement.

MAY, 2014

The EPA may grant a waiver when the application of the requirement would be inconsistent with the public interest, when iron and steel products are not produced in the United States in sufficient and reasonably available amounts and of satisfactory quality, or when the inclusion of such products would increase the cost of the project by more than 25%. To obtain a waiver, a funding recipient must submit a waiver application. The EPA will then publish the waiver on its website for fifteen days, allowing the public to comment on the request. After the expiration of the comment period the EPA will determine whether to grant the requested waiver.

American Iron and Steel contract language must be included in all contracts, from the assistance agreement itself to the purchase agreements. To obtain sample contract language or to learn more about the requirement generally, please view the EPA's March 20, 2014 memorandum, which fully details the requirement. The memorandum is available at http://water.epa.gov/grants_funding/upload/ AIS-final-guidance-3-20-14.pdf. n

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MAY, 2014

Representative Paul A. Brodeur (D-Melrose)

Q: A:

Please give our readers some insight into your background and how you got involved in state government.

I grew up in Melrose and am a proud product of the Melrose Public Schools. I graduated cum laude from Lafayette College in Easton, Pennsylvania with a Bachelor of Arts degree in Government and Law in 1986. I received my J.D. from Suffolk University Law School in 1994 and was admitted to practice in Massachusetts. I was in private practice until becoming an assistant district attorney in Middlesex County. I have also served as enforcement counsel at the Massachusetts Securities Division and as acting general counsel at the Executive Office of Elder Affairs. I was elected Alderman-at-Large for Melrose in 2001, serving as President in 2004 and also serving several terms as Chairman of the Appropriations Committee. I was elected to the House in 2010. I am currently in my second term, and serve as the Vice Chairman of the Joint Committee on Consumer Protection and Professional Licensure. I also serve on the Joint Committee on Health Care Finance and the Joint Committee on Public Service. I was appointed by Speaker Robert A. DeLeo to serve on the Pension Classification Commission and the Elder Protective Services Commission, a commission established by legislation I authored. I have worked a diverse range of issues while in the legislature, including local economic development and infrastructure improvements, job creation, home care services, education, and public safety. I am a member of the Tech Hub Caucus and the Manufacturing Caucus and am proud to represent Melrose, Wakefield, and Malden in the House. My wife, Liz and sons Ethan and Sam are four of the twenty Brodeurs currently living in Melrose.

As a former Alderman in the City of Melrose, you bring a valuable perspective on how cities and towns can best work with the legislature. Please share your thoughts as to how your role as State Representative differs from your tenure as a local official.

MAY, 2014

My nine years on the Board of Aldermen provided invaluable insights into the importance of a strong relationship between the Commonwealth and its cities and towns. Cities and towns need a predictable source of funds and a strong voice at the table in the formation of policies affecting municipal government. Particularly in areas of capital expenditures like water and sewer infrastructure and road and bridge maintenance and repair, the state provides critical assistance. And as a ratepayer and representative of Massachusetts Water Resources Authority (“MWRA”) communities, I am well aware of the value of rate relief. In several important respects, serving as state representative is similar to being an alderman. You do your best to provide excellent constituent service to the residents of your district and help them navigate government. You work hard to improve the quality of life in your community. As a state representative, I have a broader constituency and deal with a wider range of issues than an alderman. The local aid line items of Melrose, Wakefield, and Malden’s local government are a top priority for me, though I recognize the need to balance those needs against many worthwhile programs funded by the state that directly serve my constituents. continued on page 41

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Interview continued from page 39

As you are aware, access to clean drinking water and proper management of wastewater is critical. In light of the Senate’s passage of water infrastructure legislature this session, please discuss your thoughts relative to the importance of maintaining water and wastewater infrastructure.

Access to clean drinking water should be thought of as a basic public health program as well as an environmental preservation initiative. In Massachusetts, local, regional, and state governments share responsibility to maintain sound water infrastructure in order to provide residents with safe, clean, reliable sources of drinking water. Proper management of wastewater is part of that mission. Consistent investment in water and sewer infrastructure in conjunction with a local infrastructure master plan is important to local economic growth and responsible financial management. Long-term planning and careful fiscal policies are critical to maintaining these systems into the future.

Massachusetts, along with the rest of the country, continues to rebound from difficult economic times. Please give your thoughts on how the state will continue to address these difficult financial times and the importance of finding novel ways to drive local aid to cities and towns to help support basic municipal services, specifically maintenance and needed improvements to water infrastructure.

While there are many positive signs pointing to an improving economy, many individuals and families throughout Massachusetts are still facing the effects of the financial crisis. Recognizing the importance of local aid to cities and towns and the local services, the legislature has increased unrestricted local aid by almost $47 million from FY13 to FY15. In addition, Chapter 70 aid to schools has grown despite the economic downturn and will increase by almost $100 million in FY15

under the legislature plan. In recent years, the legislature has also undertaken reforms to pension and health care obligations of cities and towns. The House Budget for FY15 demonstrates the chamber’s continuing commitment to local aid funding. I was proud to vote for this budget. Cities and towns are also benefiting for regionalization efforts, and the state can provide additional incentives in support for these types of innovations. In my own district, we have seen tremendous success and savings in combining health departments, veterans’ services and even certain IT operations. The state should continue to support municipal energy efficiency programs available to municipalities under the Green Communities Act.

The Commonwealth Sewer Rate Relief Fund is an important program in the state budget. These funds help to alleviate sewer rates for municipalities throughout the Commonwealth. This program was once funded at $61 million, but in recent years the appropriation has been cut down to $500,000. Please discuss the importance of assisting communities by offsetting annual rate increases to water and sewer bills.

Improving a high quality water and sewer system is critical to the health and well-being of our residents and is important to continued economic growth in Massachusetts. However, it is a costly proposition. MWRA member communities in particular are still paying for the debt service from the court-ordered Boston Harbor cleanup. The Sewer Rate Relief fund is a vitally important resource for rate payers who are bearing the brunt of those costs. The fund is an excellent mechanism for mitigating those costs for ratepayers and for preserving funds in municipal budgets for other services. As the economy has begun to recover from the Great Recession, the legislature has recommitted to funding this account, which is funded in the House budget for FY15 at $1.1 million, a ten percent increase over FY14. I will continue to advocate for increases in this important program. n

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Insurance Perspective

The Massachusetts Commissioner of Insurance has approved a stipulation for the general revision of workers’ compensation rates, effective 12:01 A.M., April 1, 2014. The rate change will affect new and renewal policies with an anniversary rating date of April 1, 2014 and after, including all policies in the Massachusetts Workers’ Compensation Assigned Risk Pool. The anniversary rating date is commonly the effective date of the policy but can be different if a policy is canceled and rewritten or if there are multiple policies. Average Rates Although there is no change in overall statewide average rates; the change in average rates by industry group is as follows; manufacturing is a decrease of (11.3%), construction is a decrease of (0.9%), office and clerical is an increase of 3.9%, goods and services is an increase of 2.5%, and miscellaneous groups is an increase of 6.7%. The changes by class, even within the same industry group, vary substantially. The average rate change does not take into consideration the overall average decrease of 13.4% in the existing workers’ compensation F-class rates, nor the decrease in the U.S. Longshore and Harbor Workers’ Compensation Act (USL&H) percentage from 32.0% to 25.4%

MAY, 2014

Lou Tonry

Albert J. Tonry & Co., Inc.

Change in Manual Rates The following is a list of the more common classifications we work with and the new manual rates per $100 of payroll. The rates for all Massachusetts classes can be found at www.wcribma.org, the web site of the Workers’ Compensation Rating and Inspection Bureau of Massachusetts. If you would like to look up specific class codes please visit the WCRIB Class Code lookup page found at https:// www.wcribma.org/mass/ToolsAndServices/MACI/ Main.aspx. The manual rates by industry group decreased (11.5%) for manufacturing, decreased (3.1%) for construction, increased 1.5% for office and clerical, increased 2.2% for goods and services, and increased 6.6% for miscellaneous. Again, the changes by class, even within the same industry group, vary substantially.

Experience Rating Plan Changes The Experience Rating Plan Expected Loss Rates and D-Ratios have also changed. These rates and ratios are used in calculating experience rating factors (experience mod. and ARAP) and continued on page 46

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Insurance Perspective continued from page 45 are a significant component in determining the final premium for an experience rated risk. Expected loss rates used in calculating experience factors increased by an average of 8.9% over all industry groups. Every situation is different but, in general, this will mean an improvement in experience factors and thus, a lower premium. A risk is eligible for experience rating when the payrolls or other exposures developed in the last year or last two years of the experience period produced a premium of at least $11,000. If more than two years, an average annual premium of at least $5,500 is required. Experience mods and ARAPs already issued effective 4/1/14 or after on a preliminary basis will be recalculated to reflect the new Expected Loss Rates.

Construction Class Premium Adjustment Credit The Massachusetts Construction Class Premium Adjustment Program (MCCPAP) has undergone a major revision. Most notably, the average hourly wage to qualify for the credit has increased from $18 per hour, which has been unchanged since the program was first introduced in January 1991, to $30 per hour. Many businesses who previously received the benefit of the Construction Class Credit may no longer qualify or may receive less of a credit than in previous years.

Small Deductible Credits The premium credits applicable to the election of small deductibles under either the Massachusetts Benefits Deductible Program or the Massachusetts Benefits Claim and Aggregate Deductible Program have been revised. The deductible credits will be:

Benefits Claim and Aggregate Deductible Program Under this program, a per claim deductible of $2,500 applies subject to an aggregate of $10,000. For policies with an estimated annual standard premium over $200,000, the aggregate is 5% of the estimated annual standard premium.

Benefits Claim & Aggregate Deductible Program Est. Annual Standard Premimum

Credit

$0–$75,000 5.9% $75,001–$100,000 5.8% $100,001–$125,000 5.7% $125,001–$150,000 5.6% $150,001–$200,000 5.4% Over $200,000 5.0%

Other Factors There were changes to the Retrospective Rate Plan. For details, see the Bureau’s web site at www. wcribma.org. There were no changes in the following: • Expense Constant • Loss Constant • Admiralty Law and Federal Employers’ Liability Act Classifications • Merit Rating Program • Premium Discount Tables A and B • Take-Out Credit • Qualified Loss Management Program [QLMP] • Weights and Ballasts Tables It is important to remember this rate change will affect each insured differently and the premium changes will vary. Please consult with a professional licensed insurance agent to review how this change will affect you. continued on page 47

Benefits Deductible Coverage Program Deductible Amount

Credit

$500

2.2%

$1,000

3.5%

$2,000

5.3%

$2,500

6.0%

$5,000

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MASSACHUSETTS WORKERS’ COMPENSATION RATES Selected Rates per $100 of Payroll MASSACHUSETTS WORKERS’ COMPENSATION RATES Select Rates per $100 of Payroll Class

Description

Alarm Systems 7600 Asbestos Removal 5472 Asbestos Removal NOC 5473 Asphalt Works & Drivers 1463 Building Material Dealers - Store 8058 Buildings Operations By Contractors 9014 Buildings Operations By Owners 9015 Carpentry - Shop 2802 Carpentry NOC 5403 Cleaner Debris Removal 5610 Clerical NOC 8810 Concrete - Bridge Construction 5222 Concrete Construction NOC 5213 Concrete Floors, Driveways 5221 Concrete Work - Private Residence 5215 Conduit Construction-Cable or Wires 6325 Drainage or Irrigation Systems 6229 Drilling NOC 6204 Drivers NOC 7380 Electrical Wiring 5190 Engineer or Architect - Consulting 8601 Excavation / Grading of Land 6217 Executive Supervisor 5606 Fence Erection 6400 Fuel & Material Dealer 8232 Gravel & Sand Digging 4000 Iron Works - Shop - Decorative 3041 Iron Works - Shop - Ornamental 3040 Jetty or Breakwater Construction 6005 Landscape Gardening 0042 Lawn Maintenance 9102 Masonry NOC 5022 Mobile Crane Hoisting Service 9534 Outside Sales 8742 Permanent Yard Description 8227 Class 6003 Class Pile Driving Description Plumbing NOC 5183 Quarry NOC 1624 Quarry NOC 1624 Restaurant 9079 Restaurant 9079 Sewer Construction 6306 Sewer Metal Construction 6306 Sheet Work - Shop & Outside 5538 Sheet Metal Work - Shop & Outside 5538 Sprinkler Installation 5188 Sprinkler Installation 5188 Street Cleaning 9402 Street Cleaning 9402 or Road Construction 5507 Street or Road Construction 5507 Paving 5506 Street or Road PavingWork 5506 Tile, Stone or Mosaic 5348 Tile, Stone or Mosaic Work 5348 Trucking NOC 7219 Trucking NOC 7219 Water / Gas Main or Connection Construction 6319 Water / Gas Operation Main or Connection Construction 6319 Waterworks 7520 Waterworks Operation 7520 Welding NOC 3365 Welding NOC 3365 NOC = Not Otherwise Classified NOC = Not Otherwise Classified

MAY, 2014

9/1/05 Rate

9/1/07 Rate

9/1/08 Rate

9/1/10 Rate

4/1/14 Rate

$3.04 $8.65 $18.65 $5.84 $3.17 $2.65 $3.19 $5.73 $16.48 $5.89 $0.15 $8.61 $22.32 $9.18 $7.22 $3.47 $6.08 $12.12 $7.13 $4.18 $0.46 $6.08 $2.41 $7.60 $5.80 $5.00 $4.50 $13.48 $5.19 $4.98 $2.53 $15.67 $6.76 $0.29 9/1/05 $3.64 9/1/05 Rate $15.92 Rate $4.80 $4.27 $4.27 $1.60 $1.60 $8.05 $8.05 $6.72 $6.72 $5.45 $5.45 $6.75 $6.75 $7.91 $7.91 $7.27 $7.27 $8.78 $8.78 $8.22 $8.22 $6.76 $6.76 $3.42 $3.42 $14.12 $14.12

$3.13 $7.21 $12.86 $6.16 $2.89 $2.09 $2.69 $4.29 $11.46 $5.28 $0.12 $8.62 $19.51 $6.57 $4.98 $3.39 $4.19 $11.05 $6.22 $3.20 $0.31 $4.19 $1.70 $6.07 $4.78 $5.59 $4.76 $9.45 $4.25 $3.84 $2.22 $10.81 $6.06 $0.20 9/1/07 $3.05 9/1/07 Rate $14.68 Rate $3.98 $4.13 $4.13 $1.14 $1.14 $5.55 $5.55 $5.15 $5.15 $4.07 $4.07 $5.24 $5.24 $6.35 $6.35 $5.81 $5.81 $6.21 $6.21 $7.13 $7.13 $5.41 $5.41 $3.83 $3.83 $9.98 $9.98

$3.03 $7.22 $12.48 $6.06 $3.45 $2.50 $2.94 $4.35 $11.92 $5.83 $0.12 $8.43 $21.45 $6.62 $5.07 $3.61 $4.17 $9.81 $5.56 $3.17 $0.33 $4.17 $1.75 $6.33 $4.87 $5.31 $5.16 $9.01 $5.09 $4.23 $1.97 $11.62 $6.95 $0.20 9/1/08 $3.24 9/1/08 Rate $14.99 Rate $3.88 $4.77 $4.77 $1.10 $1.10 $6.28 $6.28 $5.74 $5.74 $4.68 $4.68 $5.49 $5.49 $6.26 $6.26 $6.96 $6.96 $6.45 $6.45 $7.68 $7.68 $5.14 $5.14 $3.29 $3.29 $9.72 $9.72

$3.23 $8.75 $12.60 $7.53 $2.71 $2.48 $2.72 $4.63 $9.61 $5.43 $0.09 $8.70 $18.85 $6.24 $5.33 $4.38 $4.35 $9.67 $5.71 $2.84 $0.26 $4.35 $1.62 $7.05 $4.43 $4.82 $4.71 $7.77 $6.01 $4.03 $2.24 $10.55 $5.60 $0.15 9/1/10 $3.93 9/1/10 Rate $12.92 Rate $3.50 $5.33 $5.33 $1.07 $1.07 $7.61 $7.61 $5.72 $5.72 $4.13 $4.13 $4.92 $4.92 $7.05 $7.05 $7.05 $7.05 $5.81 $5.81 $8.28 $8.28 $4.86 $4.86 $3.15 $3.15 $9.67 $9.67

$3.54 $8.98 $11.70 $8.27 $2.58 $2.66 $2.99 $3.93 $9.86 $5.57 $0.08 $8.93 $17.50 $6.40 $4.95 $4.49 $4.46 $9.01 $6.17 $2.74 $0.29 $4.46 $1.66 $6.55 $4.75 $4.41 $4.25 $7.03 $6.16 $4.11 $2.47 $9.80 $5.75 $0.16 4/1/14 $4.03 4/1/14 Rate $11.99 Rate $3.25 $5.34 $5.34 $1.15 $1.15 $7.81 $7.81 $5.31 $5.31 $4.24 $4.24 $5.40 $5.40 $7.24 $7.24 $7.09 $7.09 $5.93 $5.93 $9.10 $9.10 $4.66 $4.66 $3.46 $3.46 $8.98 $8.98

“BUY FROM THE ADVERTISERS IN CONSTRUCTION OUTLOOK”

% Change 10 to 14 9.6% 2.6% -7.1% 9.8% -4.8% 7.3% 9.9% -15.1% 2.6% 2.6% -11.1% 2.6% -7.2% 2.6% -7.1% 2.5% 2.5% -6.8% 8.1% -3.5% 11.5% 2.5% 2.5% -7.1% 7.2% -8.5% -9.8% -9.5% 2.5% 2.0% 10.3% -7.1% 2.7% 6.7% % 2.5% % Change -7.2% Change 10 to 14 10 -7.1% to 14 0.2% 0.2% 7.5% 7.5% 2.6% 2.6% -7.2% -7.2% 2.7% 2.7% 9.8% 9.8% 2.7% 2.7% 0.6% 0.6% 2.1% 2.1% 9.9% 9.9% -4.1% -4.1% 9.8% 9.8% -7.1% -7.1%

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MAY, 2014

Supreme Court Upholds EPA Rule Limiting Cross-State Pollution

he Supreme Court on Tuesday, April 29 resurrected an Environmental Protection Agency rule targeting air pollution that drifts across state borders, handing the Obama administration a victory on one of its major environmental efforts. The agency for years, under two administrations, has struggled to carry out a directive under the federal Clean Air Act to protect downwind states from pollution generated in other states, mostly from coal-fired power plants. The EPA’s rules from 2011 were challenged by a coalition of upwind states and industry, which prevailed in lower courts. But the Supreme Court ruled 6 to 2 that the latest effort could be implemented, with Justice Ruth Bader Ginsburg writing for the majority that the agency must have leeway to confront the “complex challenge” of interstate pollution. “Most upwind States propel pollutants to more than one downwind State, many downwind States receive pollution from multiple upwind States, and some States qualify as both upwind and downwind,” she wrote. “The overlapping and interwoven linkages between upwind and downwind States with which EPA had to contend number in the thousands.” Ginsburg was joined by Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, Stephen G. Breyer, Sonia Sotomayor and Elena Kagan. Justices

MAY, 2014

Antonin Scalia and Clarence Thomas issued a scathing dissent, which Scalia read in part from the bench, and Justice Samuel A. Alito Jr. recused himself from the case. EPA Administrator Gina McCarthy called the ruling “a resounding victory for public health and a key component” of the agency’s effort to “make sure all Americans have clean air to breathe.” She said the court’s decision underscored the importance of basing clean air rules “on strong legal foundations and sound science,” declaring it a big win and “a proud day for the agency.” Richard Lazarus, an environmental law professor at Harvard, called the cross-state pollution rule “one of the most significant rules ever” promulgated by the EPA, and supporters said the cost of carrying it out would be more than offset by health benefits. But opponents of the rule said the majority decision rewarded the EPA for a heavy-handed approach that disregarded the legitimate concerns of the 27 states affected. Hal Quinn, president of the National Mining Association, said his organization “is disappointed in the outcome and gravely concerned with the latitude afforded the EPA to preempt states before they have had a reasonable chance to act.” The industry fought the EPA’s attempt to regulate sulfur and nitrogen gases for decades — previous rules promulgated during the George W. Bush administration continued on page 51

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MAY, 2014

EPA Rule continued from page 49 also were rejected — culminating in a years-long battle during the Obama administration. Trip Van Noppen, president of Earthjustice, a nonprofit environmental group that helped argue the case, said people “who live downwind from this deadly pollution have a right to breathe air that doesn’t sicken and kill them.” In determining how much individual upwind states should be required to reduce their emissions, the EPA’s interpretation of the law allows for several factors to be considered, including what it would cost and how much the state has done to cut pollution. But a divided panel of the U.S. Court of Appeals for the D.C. Circuit disagreed with this approach and said the reductions must be proportional to the state’s share of responsibility for downwind problems. Ginsburg said, however, that the realities of interstate air pollution “are not so simple.” The EPA was within its power to design a different approach, she said. The agency was being more efficient and equitable, she said, enacting a rule that “subjects to stricter regulation those states that have done relatively less in the past to control their pollution.” In his dissent, Scalia agreed that might be true. The problem, he said, is that there is “zero” in the law that allows such an approach. “EPA’s utterly fanciful ‘from each according to its ability’ construction sacrifices democratically adopted text to bureaucratically favored policy,” he wrote. He called the majority’s opinion pulled from thin air —“Look, Ma, no hands!” — and said there was a price for such pragmatism. The case, Scalia said from the bench, illustrates “the major problem that many citizens have with the federal government these days: that they are governed not so much by their elected representatives as by an unelected bureaucracy operating under vague statutory standards.” Ginsburg had the last word, however, and it came from the Gospel according to John: “The wind bloweth where it listeth, and thou hearest the sound thereof, but canst not tell whence it cometh, and whither it goeth.” Written by Robert Barnes and Darryl Fears. Reprinted with permission from The Washington Post Company. n

MAY, 2014

Kubota KX080-3 Operating weight: 19,379 lbs. Engine: 78 HP Displacement: 203.3 cu.in. Dig Depth: 15ʼ0.7” Kubota SVL75 Operating weight: 9039 lbs. Engine: 74.3 HP Displacement: 203.3 cu.in. Breakout force: 6240 lbs.

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MAY, 2014

Your Company Must Have A Comprehensive Safety Program! This year’s Safety Manual includes information on: • OSHA’s New Cranes & Derricks Standard (1926.47) • State and Federal Posting Requirements • OSHA’s Updated Trenching & Excavation Safety • New Cell Phone/Distracted Driver Federal Ruling • OSHA’s Changes to the Penalty Calculation Limit • Field Responsibility — Competent Person • Recordkeeping Requirements — Employee Reporting on Fatalities & Hospitalizations • OSHA 10-Hour Training Requirements

Promote A Safe Working Environment It should be your company’s policy to provide a safe place to work, with the prevention of accidents being your ultimate goal. Your Insurance/Bonding carrier requires a Safety Program. State and Federal Agencies require a Safety Program.

OSHA Inspectors Will Be Enforcing: • Overall Construction Safety (29 CFR 1926) • Excavating Standards • Written Safety and Health Plans

• Hazard Communications Programs • Drug Free Workplace • OSHA 10-Hour Training Requirements

Examine The UCANE Pocket Directory When ordering Company Safety Manuals, the Safety Manual section only, in the back of UCANE’s Pocket Directory, will be made up into an individual Employee Pocket Safety Manual with Your Company Name & Logo printed on the cover. Employee signature cards verifying compliance with safety manual procedures are included. When signed, these cards should be placed in each employee’s file.

Employee Pocket Safety Manual Order Form Company Name:_________________________________ Authorized By:______________________ Pocket Manuals w/ Signature Cards: Qty.__________________ x $3.25 Ea. = $________________ 55.00 Printing and Set Up Charge for Personalized Covers: $________________ 10.00 $________________ Total: $________________

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MAY, 2014

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IN THIS ISSUE: • Liquid Alts Move Into the Mainstream • Mixing Annuities and IRAs • Making Expense Accounts Accountable

Smart Tax, Business & Planning

Liquid Alts Move Into th Liquid Alts Move Into the Mainstream

tocks and bonds are considered the main asset classes for investors while virtually everything else is labeled an “alternative.” Volatile stocks and low yields on bonds in recent years have led many investors to include asset classes outside of the mainstream, such as real estate, precious metals and commodities. Moreover, alternative investment strategies also fall into this broad category, and such strategies frequently are followed by hedge funds. Historically, only wealthy investors have had access to hedge funds, but this has changed in recent years with the advent of so-called “liquid alts,” mutual funds and exchange traded funds (ETFs) that use the techniques of hedge funds. According to Morningstar, investors poured nearly $50 billion into liquid alts in 2013, bringing the total assets held by such funds to about $180 billion. Going Long and Short

Originally, hedge funds literally offered investors a chance to hedge their positions in stocks. These funds bought issues the managers preferred (went “long,” in stock market parlance) and sold short shares of companies expected to lag. Thus, investors

MAY, 2014

poure in 201 such f

Goin

could make money in bull or bear markets, assuming

Stocks and bonds are considered the the hedge fund had accurately guessed the relative main asset classes for investors while performance of the stocks it selected. virtually everything else is labeled an Over the years, hedge funds have proliferated. “alternative.” Volatile stocks and low Many of them follow strategies other than the classic yields on bonds in recent years have led long-short model. Different hedge funds might try to many investors to include asset classes profit from merger arbitrage, buying distressed secuoutside of the mainstream, such ascontracts real rities, dealing in derivatives such as futures estate, precious metals andmarket commodities. and options, focusing on bond opportunities Moreover, alternative investment and so on. strategies also fall into this broad The common denominator is that most hedge category, such correlated strategies funds are and not highly to frequently the broad stock are followed by hedge funds. or bond markets. This noncorrelation can play a Historically, only wealthy investors valuable role in your portfolio, reducing volatility. If have had market accesssinks, to hedge funds, but this the stock a hedge fund might have a has changed ineven recent years with the smaller loss, or a gain, improving overall investment Some hedgealts,” funds have peradvent of results. so-called “liquid mutual on page 57 funds and exchange tradedcontinued funds (ETFs) that use the techniques of hedge funds. According to Morningstar, investors

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Origin investo positio issues “long,” short lag. Th bull or fund h perfor Ov prolife strateg short might buying deriva and op oppor Th most h correla marke valuab volatil a hedg loss, o invest

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“BUY FROM THE ADVERTISERS IN CONSTRUCTION OUTLOOK” MAY, 2014 56 “BUY FROM THE ADVERTISERS IN CONSTRUCTIO

Financial Management continued from page 55 formed very well, delivering superior returns as well as reduced portfolio risk. That said, hedge funds have their drawbacks. They may have minimum investments of six or seven figures. Many of these funds use leverage that can magnify losses as well as gains. Transparency is low whereas fees are high. Perhaps most daunting, hedge funds aren’t liquid; investors might have an initial period with no access to their money, followed by monthly or quarterly redemption opportunities that require advance notice.

Common Ground As the name indicates, liquid alts address these concerns. These vehicles are mutual funds or ETFs with modest minimum investments and daily access to your money. Liquid alts have some transparency, so investors know what they’re buying and holding. The mutual fund or ETF fee structure is familiar, if on the high side for many liquid alts. The bottom line is that you now can get a fund that follows a hedge fund strategy for your portfolio, just as you’d invest in a stock or bond fund. There are long-short liquid alts, merger arbitrage liquid alts, and so on. Liquid alts often are managed by savvy professionals, including some led by people who also run private hedge funds. Example: Ryan Rogers invests in ABC mutual fund, which has a $2,000 minimum. This fund goes both long and short in the stock market, as described previously. In addition, ABC sells call options on some of the stocks it owns—these options allow other investors to buy shares of the specific stock at a specific price. Revenues from selling the call options may help ABC in down markets, but this tactic also limits the fund’s upside. Whenever he chooses, Ryan can add to his position in ABC or sell shares to raise cash. Ryan can buy ABC and other liquid alts in his taxable brokerage ac-

Correction Notice

lease note that in the March 2014 Financial Management article "Juggling Appreciated Assets and Bequests," the first sentence of the fifth paragraph under the section titled "Reversing course" should have read, "Instead, Ava could make the switch mentioned previously, leaving her $100,000 traditional IRA to charity and the $100,000 of appreciated assets to Brad." We regret the error and apologize for any confusion this may have caused.

MAY, 2014

count, in his IRA, and in his 401(k) plan at work, if it’s on the list of available choices.

Finding a Fit The recent popularity of liquid alts indicates strong demand from investors. If you’re interested, be sure you do your homework carefully because liquid alts vary enormously in their methods and their results. Last year, for example, some liquid alts with bearish strategies lost over 30% while other liquid alts that borrowed money to buy more stocks in last year’s bull market returned over 50%. Generally, though, liquid alts tend to be defensive in their approach to the market. In 2013, when stocks surged and the average domestic equity fund returned over 30%, the average return for liquid alts was around 6%. Tactics such as short selling and covered call writing might be helpful in down years, such as 2000 and 2008, but they also can deprive investors of gains in bull markets. Some advisers favor holding 5%-10% of a diversified portfolio in alternatives, including liquid alts. Potential advantages include noncorrelation to other asset classes, the possibility of outstanding results in years when stocks or bonds falter, and a long-term reduction in portfolio volatility. continued on page 59

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Financial Management continued from page 57

Mixing Annuities and IRAs

ccording to the Investment Company Institute, 68% of households with IRAs have mutual funds in those accounts. That’s followed by individual stocks (41%), annuities (35%), and bank deposits (25%). Therefore, annuities are among the most common IRA holdings; they are also among the most controversial because many observers assert that annuities don’t belong in an IRA. Defining the Terms

To understand this seeming contradiction, you should know some terminology. Generally, the most heated debate does not involve immediate annuities, which also may be known as income or payout annuities. Here, you give a sum of money to an insurance company in return for a specified flow of cash over a specified time period, perhaps the rest of your life. Deferred annuities are a different story. With these investments, the money you contribute can grow inside the annuity contract. Different types of deferred

annuities offer various ways that the amounts invested can grow over the years. Regardless of the method or the amount of accumulation, earnings inside the annuity aren’t taxed until money is withdrawn. Critics of holding deferred annuities inside an IRA say that they are redundant. Any investment inside an IRA is tax deferred or tax-free (with a Roth IRA), so you don’t get any tax benefit by investing IRA money in a deferred annuity. Why pay the costs that come with a deferred annuity when you get the same tax deferral with mutual funds or individual securities or bank accounts held inside your IRA? Because there might be advantages as well as drawbacks. Deferred annuities offer various guarantees, which might include certain death benefits and certain amounts of cash flow during the investor’s life, regardless of investment performance. These guarantees may be a valid reason to include a deferred annuity in an IRA, some annuity issuers and sellers contend. Among different deferred annuities, death benefits and so-called “living benefits” vary widely. Some can be extremely complicated. continued on page 61

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Dedicated to exceeding your expectations. Palmer Paving is an industry leading heavy highway civil engineering construction ﬁrm, serving both public and private sector clients. With our own HMA and aggregate processing plants, we are fully integrated as a materials producer and roadway contractor for projects of any size. We welcome your inquiries and look forward to helping you solve your next site, road construction or infrastructure challenge.

Palmer Paving Corporation, Inc 25 Blanchard Street, Palmer, MA 01069 413-283-8354

23 Arthur Street Easthampton, MA 01027 413-527-6900

www.palmerpaving.com 43 Old Coldbrook Road Barre, MA 01005 413-283-8354

1000 Page Boulevard Springﬁeld, MA 01104 413-737-4020

“BUY FROM THE ADVERTISERS IN CONSTRUCTION OUTLOOK”

MAY, 2014

Financial Management continued from page 59

Specialists In Bonding And Insurance For Contractors

Verifying Value Another thing to consider when deciding whether to hold a deferred annuity in your IRA, is that these annuities must be valued for purposes such as Roth IRA conversions and required minimum distributions (RMDs). This also will arise if you already have such an annuity in your IRA. The reported value of the annuity contract may not be the appropriate number. Example: Sarah Thomson invests $50,000 of her IRA money in a deferred annuity that offers several investment options. After this outlay, Sarah’s investments decline, so her annuity account is now reported at $40,000. Sarah decides this reduced value would generate a lower tax cost on a conversion to a Roth IRA. However, Sarah’s deferred annuity also contains a rider guaranteeing to pay her a certain amount per year for the rest of her life. Such a rider has some value, which Sarah must include in valuing the annuity inside the IRA if she does a Roth conversion. The same problem will arise when Sarah must take RMDs. Sarah’s best course of action may be to ask the annuity issuer for help with the valuation because insurers typically have actuaries and software designed to perform these intricate calculations. Holding an annuity in an IRA raises many issues that don’t arise with other choices. There may be advantages, but you should proceed cautiously. continued on page 62

Since 1926 CARL TRAINA 300 Congress Street Quincy, MA 02169-0907 617.773.9200 238 Bedford Street Lexington, MA 02421 781.861.1800

LOU TONRY

281 Main Street Webster, MA 01570 508.671.9222

www.tonry.com

Trusted Advice Annuity Payback Time Variations of immediate annuities include the following: • Fixed period annuities. Here, you receive definite amounts at regular intervals for a specified length of time. • Annuities for a single life. These contracts provide you with definite amounts at regular intervals for life. The payments end at your death. • Joint and survivor annuities. Usually acquired by a married couple, the first annuitant receives a definite amount at regular intervals for life. After he or she dies, a second annuitant receives a definite amount at regular intervals for life. The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant.

MAY, 2014

• New Units with Hand Sanitizers • Specializing in Units for Construction Sites • Handicapped Units Available

Meredith Allen Our Robert B. Our, III P. O. Box 115 Centerville, MA 02632 www.ourouthouses.com

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Financial Management continued from page 61

Making Expense Acc

Making Expense Accounts Accountable

usiness owners who work for their company typically have expense accounts; the same usually is true for many employees. If your company has what the IRS calls an accountable plan, everyone can benefit from the tax treatment. The company gets a full deduction for its outlays (a 50% deduction for most dining and entertainment expenses), while the employee reports no taxable compensation. A company expense plan judged to be nonaccountable, on the other hand, won’t be as welcome. It’s true that the company can deduct 100% of the payments it makes for meals and entertainment, but it also will have to pay the employer’s share of payroll taxes (FICA and FUTA) on the expense money paid to employees. The employees, meanwhile, will report those payments as wages, subject to income and payroll taxes. In that situation, the employee can include employee business expenses (minus 50% of those for meals and entertainment) with other miscellaneous item-

ized deductions, but only miscellaneous deductions that exceed 2% of Business owners who work foradjusted their gross income can be subtracted on a tax company typically have return. Taxpayers who oweexpense the alternative minimum tax any benefit from accounts; the can’t sameget usually is true for their miscellaneous deductions. many employees. If your company Key Factors

hasInwhat the IRS calls an accountable order for expense accounts to get favorable tax treatment, they should pass the following plan, everyone can benefit from tests: Business purpose. There should be an apthe• tax treatment. The company parent reason why the company stands to this outlay.for An employee might be gets again fullfrom deduction its outlays going out of town to see a customer or a pros(a 50% deduction pect, for example.for most dining

• Verification. Employees should submit a record of their expenses, in order to be reimbursed. Lodging expenses require a receipt, as do other items over $75. Call Your Nearest GENALCO Warehouse In order to reduce the effort of For These Supplies dealing with multiple receipts, emHYDRAULIC GRADE 8 STROBE LIGHTS ployers are allowed to give employOIL NUTS & BOLTS WEATHER CAPS ees predetermined mileage and AIR CLEANERS per diem travel allowances. SubGREASE FITTINGS BUCKET TEETH stantiation of other elements beHYDRAULIC HOSE BUCKET LIPS sides amounts spent (time, place, EQUIPMENT PAINT business purpose) is still required. BUCKETS If the amounts of those allowances CUTTING EDGES don’t exceed the amounts provided CHAIN SLINGS to federal employees, the process BACKUP BELLS AIR, OIL & FUEL can be considered an accountable AND ALARMS FILTERS EXTREME ROTARY plan. (Excess allowance amounts PRESSURE GREASE ASPHALT CUTTERS are taxable wages.) Per diem rates GENALCO inc. 1-877-436-2526 can be found at www.gsa.gov/por55 years of service to New England Industry tal/ category/104711. Needham Heights, MA So. Boston, MA Springfield, MA West Haven, CT Warwick, RI FAX 781-449-6643

FAX 617-268-1290

FAX 413-781-3771

FAX 203-934-2580 FAX 401-736-9769

“BUY FROM THE ADVERTISERS IN CONSTRUCTION OUTLOOK”

continued on page 63

MAY, 2014

and e the em comp A to be hand that t of the and e have payro the ex The e those incom In can in expen meals

Financial Management continued from page 62 Example: XYZ Corp. asks a marketing manager, Jill Matthews, to take a two-day business trip to Atlanta to demonstrate new products. The federal rate for Atlanta (lodging, meals and incidentals) on the federal per diem website is $189 per day. As required by the XYZ accountable plan, Jill accounts for the dates, place, and business purpose of the trip. XYZ reimburses Jill $189 a day ($378 total) for living expenses; her expenses in Atlanta are not more than $189 a day. In this situation, XYZ does not include any of the reimbursement on her Form W-2, and Jill does not deduct the expenses on her tax return. • Refunds. Employees must return any amounts that were advanced or reimbursed if they were not spent on substantiated business activities. • Timeliness. Substantiation and any required refunds should be made within a reasonable amount of time after the expense was incurred. Those times vary, but IRS publications indicate that substantiation should be made within 60 days, and any employee refunds should be made within 120 days. For a plan to be accountable, reimbursements and allowances should be clearly identified. They can be paid to employees in separate checks. Alternatively, expense payments can be combined with wages if the distinction is noted on the check stub. n

Perma-Liner ™ Our cured-in-place-pipe lining systems rehabilitate the underground infrastructure without digging! The Perma-Lateral system is used for the structural repair of house laterals while the Point Repair system is used to repair damaged spots in the main line.

The Most Durable & Long Lasting Methods of Pipe Rehabilitation

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MAY, 2014

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E.H. Perkins Construction, Inc. & Subsidiaries P.O. Box 301, Wayland, MA 01778 (508) 358-6161 • (781) 890-6505

-PLANT LOCATIONSQUINN-PERKINS S & G CO. Burlington (781) 272-0200 PANDOLF-PERKINS CO. Sterling (978) 422-8812 • (800) 339-3389 KANE-PERKINS CO. Hudson (978) 562-3436 • (800) 287-3436 GRAVEL • SAND • STONE FILL AND LOAM BITUMINOUS CONCRETE (PAVING) READY-MIX CONCRETE PRECAST CONCRETE PRODUCTS

Equal Opportunity/Affirmative Action Employer

Advertisers’ Index ATS Equipment, Inc. ...........................................................28 Albanese D&S, Inc...............................................................34 Allied Recycling Center.......................................................32 American Shoring, Inc.........................................................18 Boro Sand & Stone Corp........................................................7 Dennis K. Burke, Inc............................................................56 Concrete Systems, Inc......................................................... 44 Dagle Electrical Construction, Corp......................................8 Darmody, Merlino & Co., LLP............................................29 DeSanctis Insurance Agency, Inc. .......................................19 Dig Safe System, Inc............................................................21 The Driscoll Agency ............................................................17 EJ......................................................................................... 40 Eastern Pipe Service, LLC...................................................63 Eastern States Insurance Agency, Inc..................................11 T. L. Edwards, Inc..................................................................9 Ferguson Waterworks...........................................................58 Foley Carrier Services, LLC................................................33 Geod Consulting, Inc............................................................56 Genalco, Inc..........................................................................62 L. Guerini Group, Inc...........................................................57 HD Supply Waterworks..........................................................2 A. H. Harris & Sons, Inc. ....................................................59 Hinckley Allen, LLP........................................ Ins. Back Cvr. P. J. Keating Company............................................................4 P. A. Landers, Inc.................................................................41 Lawrence-Lynch Corp..........................................................25 Liddell Brothers Inc..............................................................38 Lorusso Corp....................................................................... 60 Lorusso Heavy Equipment, LLC.........................................10 Mabey, Inc............................................................................23 Mass Broken Stone Company.............................................. 46 Milton CAT...........................................................................20 Norfolk Power Equipment, Inc.............................................51 North East Shoring Equipment, LLC...................................50 NorthStar Insurance Services, Inc.......................................14 Ocean State Oil.....................................................................31 Our Outhouses, Inc...............................................................61 Palmer Paving Corporation................................................. 60 E. H. Perkins Construction Co., Inc.................................... 64 Podgurski Corp.....................................................................63 E. J. Prescott, Inc..............................................Ins. Front Cvr. Rain For Rent-New England.................................................12 Read Custom Soils ...............................................................56 Rodman Ford Sales, Inc..........................................................6 Rogers & Gray Insurance Agency, Inc.................................36 Schmidt Equipment, Inc.......................................... Back Cvr. The Scituate Companies...................................................... 24 Shea Concrete Products........................................................52 Smith Print........................................................................... 60 Starkweather & Shepley Ins. Brokerage, Inc.......................50 Sunbelt Rentals/Pump & Power Services............................42 Systems Support Corporation...............................................33 Taylor Oil Company.............................................................13 Ti-SALES, Inc. ....................................................................51 Albert J. Tonry & Co., Inc....................................................61 Travelers................................................................................31 United Concrete Products, Inc. ............................................58 United Rentals Trench Safety...............................................48 C. N. Wood Co., Inc. ............................................................16 Woodco Machinery, Inc.......................................................54

“BUY FROM THE ADVERTISERS IN CONSTRUCTION OUTLOOK”

MAY, 2014

â&#x20AC;&#x153;Nationally Ranked First-Tier in the Litigation-Construction category by U.S. News & World Report and Best Lawyersâ&#x20AC;?*

U.S. News and Best Lawyers considered more than 10,000 law firms in 170 metropolitan locations *Source: U.S. News Media Group and Best Lawyers

Many thanks to our clients, peers and friends whose comments contributed to our being awarded a first-tier national ranking in the Litigation-Construction category.

h i n c k l e y a l l e n . c om ALB AN Y

B OS T ON

C ON C O R D

H A RTFORD

Hinckley, Allen & Snyder LLP, Attorneys at Law

N EW YORK

PROV IDEN CE

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City life isn’t for everyone. But the new 135G and 245G Excavators couldn’t be more at home. . But the new 135G and 245G Excavators couldn’t be more at home. Their reduced-tail-swing configuration opens up a TCihtyeliifreriesnd’ut fcoer dev-etrayiol-nsew ing configuration opens up a wide range of possibilities, making congested wide range of possibilities, making congested jobsites and working around obstacles a welcomed challenge. Coupled with their EPA-certified jInotbersim iteTsiear n4 denwgionerks,isnhgorat-rtohuronwdloowb-esftfaorctlecosnatrowlse, lacnodmspeadciocuhsa, qllueinetgcea.bsC, othuepy’llel kdeewpiytohutwhaenirtinEgPtAo-scteayrtoinfitehde jobsite, despite how easy Itnhetyerairm e toTiloeard4uepnag ndingeest ,toshthoertn-etxh t roonw e. Clo onwta-cetfufo s trotdcaoy.ntrols, and spacious, quiet cabs, they’ll keep you wanting to stay on the jobsite, despite how easy they are to load up and get to the next one. Contact us today.

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