Responsible Contractor Policy

  1. Purpose

    This document sets forth the investment policy (the “Policy”) for the Responsible Contractor Program (the “Program”). The design of this Policy ensures that contractors, investors, managers, consultants or other participants selected by Panda Power Funds or its affiliates, as applicable, (collectively the “Company” or “Panda Power Funds”) take prudent and careful action while managing the Program. Additionally, use of this Policy assists in providing sufficient flexibility in controlling investment risks and returns while using contractors.

  2. Introduction

    Panda Power Funds has a deep interest in the condition of workers employed by the Company. The Company, through the Responsible Contractor Policy described below, supports and encourages fair wages and fair benefits for workers employed by its contractors and subcontractors, subject to fiduciary principles concerning duties of loyalty and prudence, both of which further require competitive returns on the Company’s investments. The Company endorses small business development, market competition and control of operating costs.

    Panda Power Funds also endorses the use of qualified organized labor in those areas where union organization is prevalent. The Company supports many of the ideals espoused by labor unions and believes that an adequately compensated and trained worker delivers a higher quality product and service.

  3. Definition of a Responsible Contractor

    A Responsible Contractor, as used in this Policy, is a contractor or subcontractor who pays workers a fair wage and a fair benefit as evidenced by payroll and employee records. “Fair benefits” are defined as including, but are not limited to, employer-paid health care coverage, pension or 401 (k) benefits and training programs. What constitutes a “fair wage” and “fair benefit” depends on the wages and benefits paid for comparable work, based upon local market factors, that include the nature of the project, comparable job or trade classifications, and the scope and complexity of services provided.

  4. Initial Requirements of The Responsible Contracting Policy
    1. Duty of Loyalty: Not withstanding any other considerations, company assets shall be managed for the exclusive benefit of the investors, partners and shareholders of Panda Power Funds. The Company’s duty to investors, partners and shareholders shall take precedence over any other duty.
    2. Prudence: Panda Power Fund’s partnership, staff and advisors are charged with the fiduciary duty to exercise the care, skill, prudence and diligence appropriate to the task.
    3. Competitive Return: To comply with duties of loyalty and prudence, all investments and services are made and managed in a manner that is intended to produce a competitive risk-adjusted return.
    4. Competitive Bidding: Third-party contractors and their subcontractors, who are not affiliated with the Company, for construction, maintenance, operations and services shall be selected through a competitive bidding and selection process. This policy shall not apply to the extent that the Company (including its affiliates) provides such services directly. The purpose of this provision is to encourage fair competition and to actively seek bids from all qualified sources within an area, particularly those identified as Responsible Contractors. The Company and its subcontractors shall create a bidding process that includes invitations to bid, distributed to a broad spectrum of potential qualified bidders. The review of the bids shall include consideration of loyalty, prudence and competitive risk-adjusted returns. Additional factors to be considered include experience, expertise, reputation for honesty, integrity, timeliness, dependability, fees, safety record and the adherence to the Responsible Contracting Policy.
    5. Local, state and national laws: All affiliated entities, corporate managers, construction/plant managers, contractors and their subcontractors shall observe all local, state and national laws (including by way of illustration those pertaining to insurance, withholding taxes, minimum wage, labor relations, health and occupational safety).
  5. Selection Preference Of A Responsible Contractor

    If the initial requirements of Section IV “A” through “D” are satisfied, the Company expresses a strong preference that Responsible Contractors be hired.

  6. Transition, Enforcement, Monitoring and Administration
    1. Applicable Contracts and Investments: This Policy shall apply to all contractors and subcontractors who provide construction services for infrastructure investments where the Company, including affiliate entities, owns more than a 50% interest. The Policy shall not apply to investments such as hybrid debt, joint ventures, opportunity funds and other construction investments where Panda Power Funds and affiliated entities do not have a majority ownership and/or full control of the investment. However, in those instances where Panda Power Funds and its affiliates do not have more than a 50% ownership and/or full control of the investment, staff will make reasonable attempts to encourage partners to comply with the spirit and practice of responsible contracting.
    2. Notification: Panda Power Funds shall provide all current and prospective construction/plant managers with a copy of this policy.
    3. Solicitation Documents: All requests for proposals and invitations to bid contracts covered by this Policy shall be made according to the Policy’s terms. Responses by bidders shall include information pertinent to the Responsible Contractor Policy to assist in evaluating a bid.
    4. Contracts and Renewals: All pertinent contracts and contract renewals entered into after the effective date of this Policy shall include the applicable terms of this Policy.
    5. Responsibilities: The responsibilities of the Company’s staff, corporate managers, construction/plant managers, contractors and unions are defined as follows:
      1. Staff: Company staff shall have the following responsibilities:
        1. Assist corporate managers in compiling annual report regarding compliance with the Policy.
        2. Furnish annual report to executive committee along with recommendations needed to correct any non-compliance with the Policy.
        3. Insert appropriate contract language where applicable.
        4. In those instances where the Company does not have more than a 50% ownership and/or full control of the investment, make reasonable attempts to encourage partners to comply with the spirit and practice of responsible contracting.
      2. Corporate Managers: Corporate managers responsibilities shall include:
        1. Communicate the Policy to all construction/plant managers.
        2. Review a contract listing for each project to be prepared by that project’s construction/plant manager.
        3. Maintain a simplified bid summary for each applicable contract. The summary should include identifying contract, successful bidder and bidder’s status as Responsible Contractor.
        4. Produce an annual report, compiled from project-level reports, regarding compliance with the Policy. Report should contain recommendations to correct any areas of non-compliance.
        5. Monitor and enforce the Policy including reasonable investigation of potential violations.
        6. Annually, the signatory to the Company contract will file a certification statement that their firm complied with the Responsible Contractor Policy for the preceding year and upon request will provide written substantiation of such compliance. This provision will be subject to periodic audits.
      3. Construction/Plant Managers: Construction/Plant Managers will have responsibility for the following:
        1. Communicate in bid documents the Responsible Contractor Program policy to contractors seeking to secure construction or service contracts.
        2. Communicate the Policy to any interested party.
        3. Ensure there is a competitive bidding and selection process that is inclusive of potentially eligible Responsible Contractors.
        4. Require bidders to provide to construction/plant manager a Responsible Contractor self-certification on a form approved by Panda Power Funds.
        5. Prepare and send to appropriate corporate manager, a list of all contracts subject to the Policy.
        6. Provide a project-level annual compliance report to appropriate corporate manager.
        7. Maintain documentation for successful bidders.
        8. Where applicable, seek from trade unions/service unions input in the development of Responsible Contractor lists
        9. Maintain lists of any interested Responsible Contractors. (Names, addresses and telephone numbers).
      4. Contractors: Contractors will have the responsibility for the following:
        1. Submit to the construction/plant manager a Responsible Contractor self-certification on a form approved by Panda Power Funds.
        2. Communicate to subcontractors the Responsible Contractor Program policy
        3. Provide to the construction/plant manager Responsible Contractor documentation.
        4. Unions: It is the policy of the Company to utilize union labor in those areas where union organization is prevalent. Where appropriate, trade/service unions shall be asked to perform the following tasks:
        5. Deliver to the construction/plant manager lists of names and phone numbers of Responsible Contractors.
        6. Refer interested and qualified Responsible Contractors to the construction/plant manager.
        7. Continually monitor the local labor markets to update the lists
        8. rovide technical input where available.
    6. Outreach: Company staff will develop and maintain a list of all Panda Power Funds projects that are more than 50% owned and/or fully controlled projects. The list will include the project name, address, construction/plant and corporate manager names and phone numbers. Company staff will provide this list to anyone who requests a copy. Actual contract expiration inquiries will be initially addressed at the project level. Except to the extent that services are being provided by the Company directly, construction/plant managers shall provide solicitation documents to any potential qualified contractor who has, in writing, expressed an interest in bidding for the relevant third-party contract.
    7. Minimum Contract Size: The Policy shall absolutely apply to all contracts of a minimum size of $100,000 individually or annually as applicable. Minimum contract size refers to the total project value of the work being contracted for and not to any desegregation by trade or task. For example, a $100,000 contract to paint two structures in a single complex would not be treated as two $50,000 contracts, each less than the minimum contract size. Desegregation designed to evade the requirements of the Policy is not permitted.
    8. Applicable Expenditures Categories: The Policy shall apply to construction, maintenance and operational service contracts.
    9. Fair Wage, Fair Benefits, Training: The Policy avoids a narrow definition of “fair wage,” “fair benefits” and “training” that might not be practical in all markets. Furthermore, the Policy does not require a “prevailing wage” as defined by Government surveys. Instead, the Policy looks to local practices with regard to type of trade and type of project. The Policy recognizes that practices and labor market conditions vary across the country and that flexibility in its implementation is very important. In determining “fair wages” and “fair benefits” with regard to a specific contract in a specific market, items that may be considered include local wage practices, state laws, prevailing wages, labor market conditions and other items.

      In place of a prevailing wage standard, the Policy requires a broad outreach and competitive bidding and selection program, as described in Section IV: D and Section VI: F and J.

      This program is premised upon the availability of a list of Responsible Contractors in every market where the Company has a more than 50% owned and/or fully controlled project. While construction/plant managers and contractors are responsible for gathering and analyzing information relevant to identifying and hiring a Responsible Contractor, compilation of this list does not depend solely on the construction/plant managers or contractors. This Policy instead invites the various local trades to suggest contractors, which in their view qualify as Responsible Contractors. Sources of information include local building and service trade councils, builders association and governments.

    10. Competitive Bidding: Construction/plant managers may choose from the list of Responsible Contractors a reasonable number of contractors to be invited to bid. Given the time and expense required to solicit and evaluate bids, it is not essential that corporate managers, construction/plant managers and contractors invite all potential bidders. This policy does not require the Company to solicit third-party bids to the extent that it is self-performing certain services.

      The construction/plant manager must ensure that there is a competitive bidding and selection process, which is inclusive of potentially eligible Responsible Contractors. Inclusion is not necessarily assured by large numbers of bidders.

    11. Neutrality: If there is a legitimate attempt under the National Labor Relations Act of 1935 by a labor organization to organize workers employed in construction, maintenance, operation or services at a Company project, the Company will encourage a position of neutrality.
    12. Enforcement: The Company will place any corporate or construction/plant manager who does not comply with this Policy on a probation watch list. If the manager does not modify their pattern of conduct after discussions with the Company, the Company will consider this pattern of conduct when reviewing its relationship with the manager. The key indicator is a pattern of conduct that is inconsistent with the provisions of the Policy.