Over the past several years Watt Tieder’s presence in Asia as a top-tier international construction law firm has continued to grow, especially in the Republic of Korea. During the week of June 19, 2017 Watt Tieder gave a series of lectures hosted by top Korean law firm Kim & Chang and the International Korean Contractors Association in Seoul. The lectures focused on the United States’ procurement systems, trends and potential opportunities for Korean contractors on public and private projects, and international arbitrations under the International Chamber of Commerce (“ICC”) and similar systems. While there, Watt Tieder continued its series of meetings with nearly a dozen of the largest Korean conglomerates to discuss their current plans and needs.
Questions during the lecture series and in private meetings underscored the Korean construction community’s substantial interest in the potential for President Trump’s proposed $1 trillion infrastructure package, Public Private Partnership (“PPP”) opportunities, as well as a need for controlling costs in the conduct of international arbitrations. Other areas of significant interest included existing levels of construction spending in the United States, which are expected to exceed $1 trillion in 2017, as well as common legal issues and barriers faced by foreign contractors, and how they can be addressed.
The Current U.S. Public Construction Market
As has been extensively discussed in news reports, the United States federal government, as well as state governments, need to invest significant sums in infrastructure in the coming years. As CNBC.com recently reported:
Nearly every state is currently struggling just to keep its existing infrastructure in good repair, let alone finding enough money to address rapidly growing new demands on transportation and other systems. Each year that another critical repair or capacity expansion project is deferred, it costs us dearly. Although the current debate has focused on $1 trillion over ten years, experts contend that we need to spend even more and much quicker.
The overall gap between the U.S.’s infrastructure needs and current funding is often pegged at around $2 trillion. The American Society of Civil Engineers (ASCE) estimates that investment gap will result in dramatic costs to the U.S. economy by 2025: $3.9 trillion in losses to gross domestic product; $7 trillion in lost business sales; and the loss of 2.5 million American jobs.
Given this reality, it is no surprise that the opportunity to bid on public construction projects was a significant topic of conversation during our private meetings as well as during the seminars. In particular, Korean contractors are keenly interested in President Trump’s proposed $1 trillion infrastructure package, and the opportunities it might present.
As discussed during the trip, however, no federal infrastructure package has been approved or even introduced in Congress. As the New York Times recently explained:
Infrastructure remains stuck near the rear of the legislative line, according to two dozen administration officials, legislators and labor leaders involved in coming up with a concrete proposal. It awaits the resolution of tough negotiations over the budget, the debt ceiling, a tax overhaul, a new push to toughen immigration laws — and the enervating slog to enact a replacement for the Affordable Care Act.
Mr. Trump’s team has yet to produce the detailed plan he has promised to deliver “very soon,” and the president has yet to even name any members to a new board he claimed would green-light big projects.
Despite the delays, we believe it likely that an infrastructure package will be passed in the not too distant future. Aside from the fact that bridges and other critical infrastructure projects are becoming unsafe and unusable, the job creation and resulting economic benefits of such projects is something members of both political parties are likely to agree on.
Even without the passage of a new infrastructure bill, however, many opportunities exist for Korean contractors who are interested in the American market. The United States federal government already spends approximately $400 billion annually on construction, which provides tremendous opportunities for Korean contractors. Similarly, state and local governments also spend billions of dollars. Upcoming opportunities include, among others, light rail and subway projects, bridges, airport renovations, large buildings, and sports stadiums.
Contractors who are interested on bidding on federal construction projects are well advised to regularly consult cbd-net.com, which lists all procurement opportunities with the U.S. Government, as well as subcontracting leads and foreign business opportunities.
The Private Construction Market Also Has Many Opportunities for Korean Contractors
Construction spending in the United States is at its highest level since 2006. A significant portion of that is private construction projects that many Korean contractors are well qualified to build. As of last month, Seattle, Washington alone had 58 construction cranes dotting its skyline, with Portland, Oregon and San Francisco and Los Angeles, California adding 90 more. Chicago, Illinois, Washington, D.C. and many other cities in the United States and Canada also have extensive opportunities for large, sophisticated contractors.
For example, Seattle and San Francisco continue to build office and high-rise residential buildings at record paces. Similarly, plans are underway in several US cities to construct significant new professional sports stadiums (Las Vegas, Nevada; Oakland, California; and Los Angeles, California) and Seattle, Washington is seriously studying the feasibility of significantly renovating one of its stadiums.
Korean contractors interested in learning about opportunities for private construction projects should regularly check DodgeProjects.Construction.com, which publishes upcoming private construction projects.
Use Of PPP Projects In The United States And Canada Is On The Rise
Regardless of whether President Trump is able to get his proposed $1 trillion infrastructure package passed, it seems certain that the use of PPPs in the United States will increase due to the sheer magnitude of infrastructure work that needs to be done. It should thus come as no surprise that www.infrapppworld.com lists 92 PPP projects in the United States and Canada that are currently in tender, with more being planned.
Use of PPP projects has proven successful in other parts of the world, and after a somewhat slow start in the United States, they seem poised to be used in ever increasing numbers as infrastructure needs dictate that projects be built. As the use of PPPs expand in the United States, contractors who are able to demonstrate success in early projects, as well as those who already have experience in other countries, will be uniquely qualified to bid on and obtain future projects.
Watt Tieder Is Well Positioned To Assist Korean Contractors Enter The U.S. Market
For a variety of reasons, the United States can be a daunting market for foreign contractors to enter. Licensing requirements vary greatly from state to state. Joint venture relationships should always be formalized with written contracts. And bidding on public projects is difficult, with proposals needing to comply with numerous specific requirements. The penalty for not providing exactly the information requested can often be having a bid rejected that might otherwise be successful. With our decades of experience, Watt Tieder is well positioned to assist Korean contractors to successfully enter the U.S. market with licensing help, setting up U.S. subsidiaries, preparing joint venture agreements, reviewing bids, assisting companies in finding office space and negotiating leases, and a multitude of other issues.
Watt Tieder Is Planning An Upcoming Seminar On The Efficient Conduct Of International Arbitration
In response to concerns expressed by many of the Korean contractors during our recent trip, Watt Tieder is planning a seminar on the efficient conduct of international arbitration. During the seminar we will review our basic approach to the expeditious conduct of complex international construction disputes. Among the presenters will be Watt Tieder founding partner Jack Tieder, who is the author of the 2017 Construction Law Update chapter entitled International Arbitration Under The 2012 ICC Arbitration Rules, As Amended Effective 1 March 2017. Jack has also served as both a panel member and lead counsel on nearly 50 complex international arbitrations under the ICC and UNCITRAL, among many other international arbitration boards. Anyone interested in attending the seminar or receiving materials should contact any of the authors of this article for additional information. We will also announce the seminar in upcoming editions of this Newsletter.
The United States is poised to spend trillions of dollars on construction in the coming years. With their experience in constructing major projects all over the world, Korean contractors are poised to capture major projects in nearly every sector.