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Land of opportunity – key points on bidding in the US

In recent years, the market for public-private partnerships and other sophisticated infrastructure projects in the US has increased steadily.

As the market continues to grow, foreign investors, developers and contractors are increasingly interested in participating in such projects. 

The US provides a wealth of opportunity as a large country with many different governmental units increasingly authorising P3 projects. 

Some projects attract the largest international investors and construction firms, and many moderately sized state and local projects also attract parties of all sizes from overseas. 

However, the web of local, state and federal government authorities in the US and the layers of applicable laws can be confusing for foreign parties to navigate. 

In many cases, laws of multiple government authorities will apply to a single governmental project. 

There are a number of issues that are important to consider when bidding or contracting for US governmental projects.

Sovereign immunity issues

Many governmental entities in the US have sovereign immunity and there may be restrictions on legal recourse against them. It is important to understand what recourse you would have against your counter-party when entering into a project in the US.

Open government laws

While there are open government laws around the world, it is critical to understand how various open government laws would apply to documents you submit in response to a bid or include in a contract. 

You should also be aware of the measures available to limit disclosure of any confidential information in your bid submission to avoid disclosing trade secrets, technological know-how and the like.

Hiring requirements

It is important to look carefully at requirements for hiring certain percentages of disadvantaged, minority, women and/or local contractors or local labour in government projects. 

Sometimes these requirements are buried in the body of a draft agreement or in appendices, but these can have an influence on the cost and availability of labour for the project.

Appropriation risk

In many instances, payments made by a governmental entity over time may be subject to appropriation. This will usually be stated somewhere in bidding documents or in a draft agreement, and it is important to explore whether it is a risk you are able to take.

Obligations due to the source of funding

Even a local or state project may be funded in part by federal funds, which may mean that a myriad of federal laws are applicable to the project. 

Although these laws may not be spelled out in their entirety in bidding documents or a draft contract, they may significantly impact the cost of the project. 

One example is the Buy America Act, which requires contractors on federally funded projects to purchase certain products produced in the US.

Federal laws

Other federal laws will apply regardless of whether there is federal funding on a project, including certain anti-terrorism laws and regulations enforced by the Office of Foreign Assets Control, which may be of particular concern to foreign investors.

Union issues

It will be important to determine promptly if union labour is required on a particular project. Even if not technically required, ‘prevailing wage’ laws are likely to apply, which will need to be considered in bidding, along with availability of labour in the specific area of the project.

Political changes

As with other parts of the world, support for a particular project or initiative may change with an election or a shift in political popularity. 

Especially if you are participating in a large and/or controversial project, it is important to understand the politics at all levels (local, state and federal) supporting or opposing the project and the likelihood of politics interfering with the project moving forward.

Joanna Horsnail is a partner and Rachel Smith is an associate in the Chicago office of Mayer Brown, where they both specialise in infrastructure development, financing and construction, including for government projects

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