Transportation Funding Challenges

In recent years, the uncertainty regarding federal funding for transportation has continued to rise. This pressure to keep funding for transportation stable has caused some states to implement other solutions. States such as Wyoming, Virginia, Maryland, and Vermont are increasing their excise or sales taxes on fuel in an effort to boost revenue for transportation needs. This newfound movement could prompt other states to follow suit through the willingness on the part of lawmakers to raise taxes related to transportation.

In an article recently published by Civil Engineering magazine, the authors examine why the funding for transportation has declined. It’s no surprise that because of the difficult economic conditions in recent years, many states have faced a series of challenges regarding transportation funding, including chronic gaps between investment needs and outlays, a growing need for transportation services, and less revenue from gas prices as motorists switch to vehicles offering greater fuel efficiency. As the article states, these factors combined have put states in a real bind, in terms of paying for their transportation needs.

Another contributing reason why transportation funding has become an issue is because of the stopgap of funding from legislation (known as the MAP-21 law) that occurred between the years of 2009 to 2012, therefore complicating efforts by the states to conduct long-range planning.  MAP-21 will provide stable funding through the fiscal year of 2014, but after that any certainty for states begins to fade.

Therefore, states are seeking to boost the transportation funding they receive from the federal government. The federal program has some stability right now in terms of being able to fund at the MAP-21 levels through the end of the next fiscal year.  However, there is a lot of uncertainty about how to keep the program going thereafter, so states are focusing on ways to go above and beyond what they can expect to receive from the federal government.

An example of this is shown as Wyoming has increased its taxes on gasoline and diesel fuels by 10 cents per gallon. The state has also enforced a law which also increases taxes on snowmobiles, off-road vehicles, and motorboats, which is expected to generate nearly $72 million additional revenue for the Wyoming Department of Transportation.

As other states have moved forward with enacting legislation to vamp their approach to funding transportation infrastructure, leadership by governors has proved crucial in increasing the overall goal in expanding transportation funding. As we examine our own state’s revenues dedicated toward transportation funding, following the examples led by Wyoming and other states could be necessary. The full article, “Transportation Funding Challenges Prompt States to Consider Gas, Sale Tax Increases” can be read in its entirety in the June 2013 issue of Civil Engineering magazine.

To Whom Are We Responsible?

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As design professionals, we work hard to meet all our clients’ needs. We want to deliver a project that makes the best use of their available space and budget, meets their schedule, and stands up to the test of time. We want to have laser-like focus on understanding what our client wants and coming up with solutions to make that happen, because meeting client expectations is job #1. In some states, liability from an unusual source may push us to make it job #2, and consider the contractor’s needs, as well. A recent article from Civil Engineering magazine examines an interesting liability situation where an engineer faces potential liability for the contractor’s delay. In some states, the economic loss doctrine establishes a legal “shield” that bars a contractor from suing a designer for financial damages when the contractor does not have a contract with the designer, but in states that don’t recognize the doctrine, there’s a strong potential for unanticipated liability to arise.

The case described in the article involves an $8.4 million contract between the Greater LaFourche Port Commission and James Construction Group for the construction of a steel sheet piling bulkhead and mooring bits in Port Fourchon, Louisiana. Picciola & Associates, Inc., was retained by the port to provide professional engineering services on the project, including design and construction administration.

The dispute involves a portion of the project referred to as the Delmar Site, which comprised a bulkhead, two crane pads, and a crane pad foundation. The contract called for James to pay liquated damages of $2,000 per day if it failed to complete the Delmar Site within 210 days of the notice to proceed. However, the location of the Delmar Site was moved, and James received a change order that increased the contract price and contract time. As a result, James was 133 days late in finishing the Delmar Site, and the port withheld $266,000 in liquidated damages as well as the contract balance, prompting James to sue both the port and Picciola.

James and the port have settled their dispute, but the construction company has continued its separate suit against Picciola, arguing that James detrimentally relied on incorrect plans and information from Picciola, including alleged statements to the effect that the contractor would not be required to complete the Delmar Site within 210 days of the notice to proceed and that the liquidated damages would be waived. Picciola contends that it had been acting as an agent of the port and had no separate duty of care to James. While Picciola’s initial motion for summary judgment was granted by the trial court, who found that the designer was acting as a professional engineer on behalf of the port and therefore owed no separate duty of care to James, an appellate court decision has sent the dispute back to trial, citing Louisiana law that allows James to assert a cause of action in tort based on Picciola’s alleged negligence.

If Louisiana recognized the economic loss doctrine, James wouldn’t have a claim against Picciola. The contractor’s claim would be with the port, and the port, if it believed that Picciola had been negligent in performing its services for the port, could bring a claim against Picciola for damages arising from that negligence. The engineer would be liable, not because it didn’t take care of the contractor, but only to the extent it didn’t take care of its client. It’s not possible to determine whether Picciola did anything wrong just by reading the appellate court’s decision, but it’s worth noting that thus far the port hasn’t brought any claim against the engineer.

While the jury sorts through all the questions of fact in this case, the question we all should be asking is: if an engineer acts as an owner’s representative and makes decisions on behalf of the owner, should the engineer be exposed to financial liability for third parties that may arise from those decisions? If designers have to worry about those risks, will they truly be able to act in their clients’ best interests, or will they make decisions based on the possible financial outcome for the contractor? Laws that require designers to have mixed loyalties on a project aren’t in anyone’s best interest, and this case is a prime example of why the economic loss doctrine is so important in helping design professionals keep our focus on doing what’s best for our clients.