Construction Legislative Week in Review
www.agc.org March 12, 2015
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On the Inside
WATER RESOURCES
Help Support WRRDA Levels of Funding for Harbor Maintenance
FEDERAL CONTRACTING
AGC Opposes Blacklisting Executive Order
AGC Advances Measures to Address Individual Surety Fraud
SMALL BUSINESS
AGC Comments on Performance of Work Requirements Proposed Rule
TAX
Senate Finance Committee Action
TRANSPORTATION
TCC Sends HTF Letter to Budget Committees
Highway Trust Fund Revenue Ideas Proposed
IMMIGRATION
H-2B Visa Program Shuts Down After Court Ruling
WATER RESOURCES
Help Support WRRDA Levels of Funding for Harbor Maintenance
Contact Your Member of Congress and Ask Them to Sign House Letter
 

This week, AGC sent a letter urging all members of the House of Representatives to sign an AGC-supported letter authored by Representatives Charles Boustany (R-La.) and Janice Hahn (D-Calif.) urging appropriators to utilize Harbor Maintenance Trust Fund (HMTF) revenues at the levels set by the Water Resources Reform & Development Act of 2014 (WRRDA). WRRDA authorizes Congress to spend up to $1.25 billion—69 percent of HMTF revenues—on harbor maintenance activities in fiscal year (FY) 2016. However, the House Appropriations Committee must agree to actually spend that level of funding in FY 2016 for the promise in WRRDA to be realized. As such, AGC urges you to take action and urge your representative to sign onto the Boustany/Hahn letter to the House Appropriations Committee asking appropriators to spend HMTF revenues at the FY 2016 WRRDA levels.

The HMTF funds port and harbor dredging maintenance activities throughout the nation through revenues generated from a tax on shippers based on the value of the goods being shipped through ports. For many years, Congress has spent about half of the HMTF revenues on things other than harbor maintenance. WRRDA, which passed the House by a 412-4 vote last year, increased authorized funding of HMTF revenues for actual harbor maintenance through FY 2020 when all HMTF revenues are authorized for harbor maintenance activities.

Again, please take action and urge your Representative to sign onto the Boustany/Hahn letter.

For more information, please contact Jimmy Christianson at christiansonj@agc.org or (703) 837-5325. Return to Top

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FEDERAL CONTRACTING
AGC Opposes Blacklisting Executive Order
 

AGC noted its opposition to President Obama’s “Fair Pay and Safe Work Places” Executive Order (EO), commonly referred to as the “Blacklisting” EO in a letter to members of the House Education and Workforce Committee. The executive order would allow contracting officers to deny contractors the right to compete for work on an individual contract-by-contract basis based on a contracting officer’s review of contractor labor and safety violations of state and federal laws.

In the letter, AGC noted that it supports sensible and effective means to protect the health, safety and livelihood of construction contractors’ most valuable asset: their employees. However, this EO neither sensibly nor effectively addresses those concerns. AGC explained that the EO will function in an unreasonable, inconsistent and ineffective manner, excluding from service to the government not only bad-actor contractors, but also well-intentioned, ethical contractors. The EO needlessly creates a complicated and unmanageable bureaucracy to address problems for which a host of federal laws, regulations and bureaucracies already hold jurisdiction. Furthermore, the EO will lead to crippling delays in federal contracting, encourage unnecessary litigation, and increase procurement costs to the government and taxpayers.

AGC expects the Department of Labor and Federal Acquisition Regulation Council to propose guidance and rules implementing the EO shortly. As such, AGC will continue to advocate against this unnecessary, ineffective and unreasonable measure.

For more information, please contact Jim Young at youngj@agc.org or Jimmy Christianson at christiansonj@agc.org. Return to Top

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AGC Advances Measures to Address Individual Surety Fraud
New Legislation Introduced, FAR Council Petition Sent
 

Representative Richard Hanna (R-N.Y.) recently introduced legislation that would help prevent individual surety fraud in the federal construction bonding marketplace.  The Security in Bonding Act of 2015, H.R. 838, would require individual sureties to use real, liquid assets placed in escrow to back their bonds.

In recent years, there have been numerous instances in which contracting officers have accepted individual sureties’ bonds backed by assets that subsequently turned out to be illusory, such as coal mine waste and over-valued personal homes. As a result, when subcontractors sought payment through these bonds, there was no asset to collect payment and thus no real payment protection on the bond. This legislation would help end that fraudulent individual surety practice and provide true payment protection.

In conjunction with this legislative effort, AGC and other industry groups recently petitioned the Federal Acquisition Regulation (FAR) Council to make regulatory reforms that would similarly help prevent individual surety  fraud. AGC testified in February on this issue, among other procurement reform issues, at a House Small Business Committee hearing. AGC will continue to work with Congress and regulators to make the changes necessary to help prevent fraud and maintain a level playing field in the federal construction bond market.

For more information, please contact Jimmy Christianson at christiansonj@agc.org or (703) 837-5325. Return to Top

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SMALL BUSINESS
AGC Comments on Performance of Work Requirements Proposed Rule
SBA Seeks to Standardize and Simplify Calculation with Risk to Construction
 

AGC recently submitted comments on the Small Business Administration’s (SBA) proposed rule revamping small business prime contractor performance of work requirements. The proposed rule would change that requirement in concept from a prime contractor performance of work requirement to a limitation on the amount of work the prime contractor could subcontract. AGC noted the improvements this proposed rule would make, but AGC also highlighted the significant risks it would present small business construction prime contractors.

On the positive side, the proposed rule would simplify the performance of work calculation.  SBA proposes to change the calculation from one that differs by small business set-aside category and excludes materials to one that is simply determined by the amount prime contractors pay to subcontractors compared to the overall amount paid by the government for the contract. Additionally, it would keep the current performance of work percentages—15 percent for general contractors and 75 percent for specialty and trade contractors—the same—15 percent limitation on subcontracting for general contractors and 25 percent for specialty and trade contractors.

However, AGC highlighted a number of concerns as to how the proposed rule would function in the practical federal construction market. One point to note: SBA’s proposed rule does not take into account government initiated modifications for which a small business contractor would have no ability to either self-perform or to adjust its subcontractor payments. Another issue AGC discusses is the unworkable subcontractor bid listing requirement this rule would mandate.

AGC will continue to work with the SBA to address its concerns during the rulemaking process.

For more information, please contact Jimmy Christianson at christiansonj@agc.org or (703) 837-5325. Return to Top

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TAX
Senate Finance Committee Action
 

On Tuesday, the Senate Finance Committee conducted a tax reform hearing on compliance and administration of the tax code. Witnesses included Carol Markman of EP Caine & Associates, Mihir Desai of Harvard University, Bruce Bartlett, former deputy assistant secretary for economic policy, and T. Keith Fogg of Villanova University School of Law.

“I'd like to get rid of them,” stated Chairman Hatch, alluding to the personal exemption phase-out (PEP) and cap on itemized deductions (Pease). “That would be one of the great simplification factors.” PEP and Pease have been estimated to raise about $150 billion over a decade. The provisions affect individual taxpayers with adjusted gross incomes of $250,000. Later in the hearing, Markman raised concerns with the “1031 issue” under which gains on real estate sales can be postponed if they are reinvested in other property, but only business property.

The Finance Committee announced a fourth in a series of recent tax reform hearings for March 17 on international taxation with four witnesses scheduled to appear including: Pam Olson, PricewaterhouseCoopers LLP; Anthony Smith, Fisher Scientific; Dr. Rosanne Altshule, Professor, Rutgers University; Stephen Shay, Professor, Harvard Law School.

For more information, please contact Brian Lenihan at lenihanb@agc.org or (202) 547-4733. Return to Top

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TRANSPORTATION
TCC Sends HTF Letter to Budget Committees
 

This week, the AGC-led Transportation Construction Coalition (TCC) sent a letter to the House and Senate Budget Committees urging them to address the looming insolvency of the Highway Trust Fund (HTF) in their fiscal year 2016 budget resolutions.  The budget provides the opportunity for Congress to show their support for addressing the HTF shortfall and working towards passage of a well-funded multiyear transportation reauthorization bill.

Specifically, the letter asked the committees to provide a “reserve fund” for the HTF.  The inclusion of a “reserve fund” in the budget would allow for the reauthorization of MAP-21 to be written at funding levels greater than what the HTF can currently support.  Such a fund is necessary because the gap between outlay of the HTF and the revenue coming in to continues to be between $12 and $18 billion per year.  Congress is working against a May 31 deadline to pass a new transportation authorization bill and provide the revenue necessary to close the funding gap.

Both the House and Senate Budget Committees are expected to take up their budgets next week.

For more information, please contact Sean O’Neill at oneills@agc.org or (202) 547-8892. Return to Top

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Highway Trust Fund Revenue Ideas Proposed
 

With the May 31 deadline for reauthorization of the federal-aid highway and federal transit programs quickly approaching, finding a solution for keeping the Highway Trust Fund (HTF) solvent remains the biggest hurdle. Recently Sen. Finance Committee Chair Orin Hatch (R-Utah) – whose committee is responsible for finding revenue to finance the Highway Trust Fund – established a task force to recommend ways to keep the fund solvent.  Chairman of the task force, Sen. Dean Heller (R-Nev.), said this week that his group plans to identify a funding mechanism that would support a five- to six-year authorization bill.

As part of this discussion, Senate Majority Whip John Cornyn (R-Texas), said the idea of allowing U.S. oil companies to export crude oil to provide additional revenue for the Highway Trust Fund “has some potential.” Exporting crude oil is currently prohibited by law. The ban was established in 1975 in response to the Arab oil embargo, and according to industry reports, lifting the ban would raise an estimated $1.3 billion in revenue annually. The Senate Energy and Natural Resources Committee has scheduled a March 19 hearing on the crude oil export ban, which is getting a second look, as U.S. oil production has skyrocketed because of advances in hydraulic fracturing and horizontal drilling. Other ideas being considered in the Senate include expanding domestic energy production on federal land and using the increased revenue for the Highway Trust Fund. AGC identified a number of energy-related funding sources in our funding options paper that was distributed during the TCC fly-in last year. View the AGC’s recommendations here.

In addition, last week, the Tax Foundation, a well-respected nonpartisan Washington, D.C. tax policy “think tank,” released a report that looks at options to fix the Highway Trust Fund.  The report lays out the problems – it says a permanent fix is necessary but politically difficult – and it points out that temporary measures do not fix the problem.  It also points out that the president and some in Congress have suggested a tax on foreign-earned profits of multinational corporations to provide stop-gap funding and pay for additional infrastructure spending. The report states that this type of proposal violates a number principles of good government finance, among them, the user-pays principle which states that taxpayers should pay for the government services they use.

The report also says a number of positive things about the gas tax; it is relatively less distortive than other taxes, it conforms to the benefit principle (we call that user pays) and closing the funding gap will give Congress an opportunity to make big decisions about the future of federal investment in infrastructure. The paper models a 10 cents-per-gallon increase, plus indexing to provide the $168 billion needed over ten years to keep current funding. In the first year, the gas tax will raise approximately $15 billion more than it currently does. The Tax Foundation modeled the increase and its impact on the GDP over the next ten years.  They then modeled some tax policy modifications that might offset the GDP impact of a gas tax increase, including:

  • A 2 percentage point decrease in the capital gains tax rate;
  • A 2 percentage point decrease in the top marginal income tax rate;
  • A $1,000 increase in the standard deduction;
  • A 1 percentage point decrease in the bottom marginal income tax rate; and
  • An expansion of the Earned Income Tax Credit.

The tax foundation report can be found here.

For more information, please contact Brian Deery at deeryb@agc.org or (703) 837-5319. Return to Top

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IMMIGRATION
H-2B Visa Program Shuts Down After Court Ruling
 

Last week, a Florida federal district court ruled that the U.S. Department of Labor (DOL) lacked the authority to issue regulations for the H-2B visa program.  The regulations in question were issued in 2008.  Beginning on March 5, as a result of the court’s decision, DOL and the U.S. Citizenship & Immigration Service (USCIS) stopped processing all applications for H-2B visas.

The H-2B program allows U.S. employers to bring foreign nationals into the country to fill temporary, low skilled jobs, including some construction occupations.  

AGC is a member of a coalition of employer groups with a specific interest in the H-2B visa program issues.  The H-2B Workforce Coalition recently issued a statement and memo in response to the court’s decision.   At this time, there is no clear indication when the program will be restarted.  AGC will continue to monitor the status of the program and will notify members of any changes.

For more information, please contact Jim Young at youngj@agc.org or (202) 547-0133. Return to Top

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