On Thursday, February 23, Kegler Brown’s Construction lawyers, Don Gregory and Mike Madigan, presented an informative strategy session on ways to deal with central Ohio’s labor shortage and diversity and inclusion goals.

1. A Booming City
Strategies to Deal with Central Ohio’s
Labor Shortage + Diversity/Inclusion
Goals on MegaProjects

2. More
Opportunity
in ‘23
Presented by
Don Gregory

3. Ohio: A New
Growth State
#9 in 2022 – only state
in north or Midwest

4. A Tale of Two States
Central Ohio Rest of the State
If Columbus was
removed, loss of 1% Ohio grew 3%
Labor force increased by
215,000
Labor force decreased
by 91,000
If population growth were its own city, Columbus’
growth would be Ohio’s 6th largest City, right behind
Dayton (177,000)

5. Fastest Growing City
in the Midwest
Last 10 years = 12.2%
Bigger than San Francisco (#14)
Only city in Midwest of Top 15
Projected Growth:
1M in next 20 years

10. More Cranes,
More Projects

11. More MegaProjects

12. What is a MegaProject?
According to the Oxford Handbook of
Megaproject Management,
"Megaprojects are large-scale, complex
ventures that typically cost $1 billion or
more, take many years to develop and
build, involve multiple public and private
stakeholders, are transformational, and
impact millions of people"

13. Ohio MegaProjects
$20B – Intel
Licking County
$3.6B – Brent
Spence Bridge
Hamilton County
$3.5B – Honda Motor
+ LG Energy Solution
Fayette County

14. More Infrastructure

15. More Challenges

16. Inflation +
Pricing Volatility

17. Equipment Delays

18. Labor Shortage

19. Battles for Good
Project Supervision

20. Recent Trends

21. Demands for
Workforce D+I

22. More Joint Ventures
on Larger Projects

23. More Design Assist
+ Design Delegation

24. Presented by
Mike Madigan
Join the Crowd
if you Plan to Build Soon

25. Notable Projects Currently Under Construction
$1.79 Billion – Ohio State’s New Hospital Project
$350 Million – Wexner Center Outpatient Care West Campus
Ohio State’s Carmenton Innovation District
$345 Million – The Merchant Building/North Market Tower
$300 Million – OSU Energy Partners Combined Heat and Power Plant Project
$230 Million – Interdisciplinary Research Facility
Ohio State’s Carmenton Innovation District

26. Projects Expected to Ramp Up
$3.3 Billion – Nationwide Children’s Hospital Campus
$205 Million – Gahanna-Jefferson Public Schools
$211 Million – Scioto Peninsula Phase II

27. Building in this Environment is not for the Faint of Heart
How to Deal with the Challenges?
Early Procurement Techniques
Create The Team Early
Less One-Sided Contract Terms
Shared Pain/Gain Approach
Shorter Payment Cycles
Shorter Time to Receive Payment = Shorter Time to Construct
JV Agreements for Key Trades
Competitors Become Partners
Diversity + Inclusion Considerations
Recent Legislation, Private Owner Emphasis, and Examples of What Not Do

28. Early Procurement Techniques: Create the Team Early
Change The Traditional Approach
Architect + Construction Manager + Subcontractor = Over Budget
Involve Construction Manager/Cost Estimator Much Earlier
Feasibility and Initial Financing Phase
Emphasize Accurate Estimates and Design To Budget

29. § 1.1.3 The Owner’s budget for the Cost of the Work, as defined in Section 6.1:
(Provide total and, if known, a line item breakdown.)
The Architect will endeavor to design the project within the Owner’s budget.
The Architect is aware that the Owner’s budget for the Cost of the Work is presently $100,000,000. and is
reasonable at this stage based on the information known to date. Architect shall endeavor to design the
Project within that 5% of that budget unless otherwise authorized by the Owner.
Emphasize The Architect Design To The Owner’s Budget
Preconstruction + Design Development

30. § 3.3.2 The Architect shall develop the Design Development Documents to be within 5% of the Owner’s Cost of
Work identified in Owner’s Cost of Work identified in §1.1.3. To the extent the estimate for the Design
Development Documents exceeds 5% of the Owner’s Cost of Work identified in §1.1.3 or later modified
in writing by the Owner, Architect shall make the necessary changes to the Design Development
Documents to be within 5% of the Owner’s established Cost of Work at no additional charge to the
Owner.
Emphasize The Architect Design To The Owner’s Budget
Preconstruction + Design Development

31. Culminates in The GMP
§ 6.7 In consultation with both the Construction Manager and Architect, the Owner shall direct the Construction
Manager to prepare a Guaranteed Maximum Price (“GMP”) proposal.
§ 6.8 If the Owner’s budget for the Cost of the Work is exceeded by the Guaranteed Maximum
Price Proposal the Owner shall
1 give written approval of an increase in the budget for the Cost of the Work;
2 authorize rebidding or renegotiating of the Project within a reasonable time;
3 terminate in accordance with this Agreement;
4 in consultation with the Architect, revise the Project program, scope, or quality as
required to reduce the Cost of the Work; or,
5 implement any other mutually acceptable alternative.
§ 6.8.1 If the Owner chooses to proceed under §6.8.4, the Architect shall modify the Construction Documents
as necessary to comply with the Owner’s budget for the Cost of the Work. The modifications under §6.8.4
shall be at no additional costs.
Preconstruction + Design Development

32. Emphasize CM Provides Accurate Estimates
§ 3.1.6.3 By issuing estimates at the stages above, Construction Manager represents it has taken into account
the level of completeness of the Contract Documents and used the degree of skill, care, expertise and efforts
reasonably exercised by construction managers of similar size, experience and reputation to make: (i)
appropriate judgments and inferences in connection with the requirements of such Contract Documents and
(ii) appropriate inquiries to the Owner and Architect to clarify the Contract Documents as necessary to
calculate the estimate. Furthermore, Construction Manager acknowledges that the Owner is relying on
Construction Manager’s estimates and professional judgment as the Owner makes decisions relating to
the Project’s design and size. If any of the estimates exceeds the Construction Budget by more than 5
percent, the Owner may require the Construction Manager to immediately work with the Architect to
develop viable proposals to reconcile the estimate with the Construction Budget.
Preconstruction + Design Development

33. Involve the Key Trades As The Design Develops
Sitework
Concrete/Structure
MEP
Building Envelop
Interior Framing/Drywall
Avoid A Design Requiring Material and Equipment That
Has Problematic Availability, Constructibility or Pricing
Preconstruction + Design Development

34. Markup Definition and %
Open Book Arrangement Key Terms
With Early Trade Contractors

35. Cost of Work Definition
Open Book Arrangement Key Terms
With Early Trade Contractors

36. Reporting and Audit Rights
Open Book Arrangement Key Terms
With Early Trade Contractors

37. Think It Through When Granting a CM
Access to Your Books + Methodologies
Does The CM Have Self Perform Capabilities That You Could Compete Against?
Does This CM Have A Long-Standing Presence in Central Ohio or Has Recently
Entered the Market?
Has the CM Entered Into JV Agreements with Your Competitors?

38. Design Involvement
for Early Trade
Contractors

39. Levels of Design Responsibility

40. Levels of Design Responsibility

41. Terminology Is Still Evolving

42. Open Book Arrangement Culminates In A GMP Or Lump Sum Agreement
When Will This Occur and What Is The Level of Design?
When Entering Into A GMP – The Devil Is In The Details

43. Make Project’s More Attractive For Trade Contractors
With Shorter Payment Cycles
Provided an Application for Payment is submitted to the Contractor no later than the 15th and 30th day of
the Month, Owner shall make the corresponding payment no later than 10 business days receipt
provided the Application for Payment complies with the Agreement. If an Application for Payment is
received by the Contractor after the application dates fixed above, payment shall be made by the Owner
no later than forty (40) days after the Contractor receives the Application for Payment. This provision
shall only apply to Progress Payments and not to Final Payment.
The Contractor shall, within five (5) working days, pay each Subcontractor and Supplier, upon receipt of
payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractor's
portion of the Work, the amount to which said Subcontractor is entitled, reflecting percentages actually
retained from payment to the Contractor on account of such Subcontractor's portion of the Work. The
Contractor shall, by appropriate agreement with each Subcontractor, require each Subcontractor to make
payments to Sub-subcontractors and Suppliers in similar manner.

44. Make Project’s More Attractive For Trade Contractors
Reduced Retainage Requirements
1) No Retainage
Offset Any Potential Risk Through Performance and Payment Bonds For Key Trade Contractors
2) Tier Release as Construction Progresses Similar to State of Ohio Contract
8% on Labor Through 50% of the Project
0% on Material Incorporated/Installed
8% on Material Delivered or Stored

45. State of Ohio’s Subcontract Form and Retainage Provision

46. Another Benefit
State of Ohio’s Subcontract Form and Retainage Provision

47. JOINT
Ventures
Presented by
Mike Madigan

48. Competitors become teammates

49. Common to see JV
agreements at the
construction
manager level

50. Reasons for a JV
Pool Resources
Share Risk
Enter Market
Seek Diversity
Increase Bonding
Second Opinion on Price

51. Why are we seeing more
JV agreements with trade
contractors?

52. Large Projects + Skilled Trade Shortage = More JV Agreements

53. Key Considerations
of JV Agreements
5
How will profits
and losses be
handled?
What form will
the JV take?
How will it be
managed?
Who controls
the purse
strings?
How will
differences or
impasse be
handled?

54. JV: A “partnership”
combining the resources
of the “partners” for a
particular purpose or
project

55. Legal Effects
Joint and several liability that may
be shifted or allocated among the
joint venture “partners”
Indemnification is often used to
shift risk to “responsible” party

56. Different Ways
to Structure
the JV
Separate JV Entity
Party
1
Party
2
XYZ JV LLC
More Cumbersome/Reduces Risk
1. Operating agreement that
creates the separate LLC
2. Better opportunity to confine
losses to LLC
Joint Venture Agreement
Party
1
Party
2
More Streamlined/More Risk
1. JV Agreement
2. Additional liability for losses
of the JV

57. Project Contract
Diagram Using
Separate JV LLC
Entity Construction Manager
Party
1
Party
2
XYZ JV LLC
Owner
Prime Contract:
Open Book with a GMP
Subcontract:
Open Book with a GMP
Party 1 Subcontract:
Open Book with a GMP
Party 2 Subcontract:
Open Book with a GMP

58. Single-Use Entity: A single
use entity, such as an LLC,
may provide another layer of
legal insulation to protect
against claims, but creates
another level of legal and
accounting maintenance

59. How will you split
profits/losses?
Normally in same %
as ownership

60. Resolve Impasse
Coin flip
Designated decision-maker
Expedited arbitration
Mediation

61. Who controls
the money?
Who controls bank accounts?
Who receives payments + pays
bills?
Will joint “sign-off” be required?
How will the parties charge their
internal costs?

62. How will you
handle bonding?
Who posts the bond?
How will that party be
indemnified by the other for a
bond claim?

63. Field Operations +
Office Administration
Questions
Who will be the controlling
(managing) member?
What is required to remove the
controlling member?
What authority does the
controlling member have?
What about field operations?
What information is available to
the other members and when?

64. Covenant Not to
Solicit Employees
Each Party agrees that during the term of the
Joint Venture until the full and complete
performance of the Contract it will not solicit or
attempt to persuade employees of the other
Party to terminate their employment with such
other Party and accept other employment with a
similar business. This covenant specifically
prohibits solicitation of employees to work with
or for a Party in a business competing with the
other Party during the term of the covenant. Each
Party acknowledges that this covenant is
appropriate in view of the training provided by
each Party to its employees, and the fact that the
covenant is limited to solicitation of employees to
terminate their employment and work for
competitors or similar businesses.

65. z
presented by Tom Sigmund
Ohio Society of CPAs Mega Tax Conference
December 7-8, 2015
Dos +
DON’Ts
The
of DBE
Procurement
Presented by
Don Gregory

66. z
YOURSELF
Do you have an employee
who may become disgruntled?
Do you do public work with
set-asides?
Do you have an interest in
avoiding civil liability?
Do you want to avoid jail?

67. z
If you answered “yes”
to those 4 questions

68. Civil
LIABILITY
Skanska
2011
$19.6M
in fines
NEW YORK
Moretrench
2011
$3M
in fines
NEW YORK
McHugh
2014
$12M
in fines
CHICAGO
TesTech & CESO
2013
$2.883M
in fines
DAYTON!
But everybody
else uses
“fronts”

69. False Claims Act Incentives
– Whistle Blowers

70. Criminal
LIABILITY
Bovis
2012
$175K
in fines
750 hours
comm. service
Tulio Landscaping
2008
$40K
in fines
15 months
in prison

71. What does the
government
consider
fraud?

72. What does the
government
consider
fraud?

73. What are the
“red flags” of
DBE Fraud?
DBE owner lacks
background, expertise,
or equipment to perform
subcontract work or
provide supplies
Employees shuttle back
and forth between prime
contractor and DBE-
owned business payrolls
Business names on
equipment and vehicles
are covered with paint or
magnetic signs

74. There are financial
agreements between
the prime and DBE
contractors
The prime contractor
and DBE have joint
bank accounts
There is an absence of
written contracts
DBE owner never
present at jobsite
Prime contractor always
uses the same DBE
Orders and payment for
necessary supplies are
made by individuals not
employed by DBE-owned
business
Prime contractor
facilitated purchase of
DBE-owned business

75. DBEs should perform
a “Commercially
Useful Function”

76. A DBE performs a commercially
useful function when it is
responsible for execution of the
work of the contract and is
carrying out its responsibilities by
actually performing, managing,
and supervising the work involved

77. What does
the state
of Ohio
require?

79. At least 51% of the business (stock, units,
percentage) is owned by socially and
economically disadvantaged person(s)
EDGE Principles
51%

80. Socially-Disadvantaged Person
Race, Color
Or Ethnic
Origin
Female
Gender
Chronic
Physical or
Mental
Disability

81. The personal net worth of the person at the
time of initial application for certification
must be less than $250,000
Must not exceed $750,000 during any time of
certification as an EDGE business enterprise
EDGE Principles

83. 5% of the Available Points

84. DOs
Document Your
Good Faith Efforts
1
Place DBEs on Solicitation Lists
2
Remain Competitive in the DBE
Procurement Market
3
Maintain Relationships with Reputable DBEs
4
Find Replacement DBEs
5

85. DOs
Use Government
Resources
6
Make Reasonable Inquiries
7
Maintain Monitoring + Enforcement
Programs
8
Cooperate with Enforcement Officials
9

86. DON’Ts
Abuse Your DBE Certification
1
Reject Reasonable Price Offers
2
Use “Time and Material” or “Cost Plus”
Unless Reputation is Established
3

87. DON’Ts
Terminate for Convenience + Self-Perform
4
Bury Your Head in the Sand
5
Put Your Employees on the DBE’s Payroll
6

88. In short, DBEs should:
Possess Required Experience
1
Be Financially Independent
2
Own or Rent Its Own Equipment
3
Handle Its Own Payroll, Invoicing +
Negotiations
4

89. DBE should not be a
mere pass-through or
middle man between
performing parties

90. Don Gregory
dgregory@keglerbrown.com
keglerbrown.com/gregory
614-462-5416
Mike Madigan
mmadigan@keglerbrown.com
keglerbrown.com/madigan
614-462-5478