Infra Insight Blog : written by Nossaman LLP Infrastructure attorneys, covers infrastructure project delivery, including Public-Private Partnerships, Operations & Management Agreements, policy, and news.

On April 7, 2010, the California Transportation Commission (CTC) authorized the first two regional design-build projects under the state's innovative contracting authority under Senate Bill 4, SBX2 4. 

• The ExpressLane Project is a joint state/local project of the Los Angeles County Metropolitan Transportation Authority (LA Metro) and the Department of Transportation (Caltrans), which will be implemented by Caltrans.  The project will convert existing carpool lanes on Interstates 10 and 110 to high-occupancy toll (HOT) lanes, or ExpressLanes.
   
• The Riverside County Transportation Commission (RCTC) SR-91 Corridor Improvement Project is a local transportation entity project slated for implementation by a regional entity.  It will widen State Route 91 with the addition of new freeway lanes, toll/express lanes, expanded freeway-to-freeway connectors and better access to and from the freeway at congested locations.

Other regional transportation agencies will no doubt be encouraged by the CTC’s unanimous approval of these two projects.

SBX2 4, which authorizes alternative contracting for certain projects was approved on February 20, 2009.  The CTC developed its related P3 policy guidance on October 14, 2009. 

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“It was the best of times, it was the worst of times…”  Dickens could have been describing 2009, as the P3 market continued to look strong, notwithstanding the economic downturn. Last year three significant P3 deals reached financial close in the United States: in March the I-595 in Florida, in October the Port of Miami Tunnel also in Florida, and mid-December the North Tarrant Express in Texas. All were remarkable in their own right, and cumulatively earned Nossaman the top spot in Infrastructure Journal’s league tables in the North American Transport P3 legal advisor category. 

We take a look back at what made the deals remarkable and what 2010 might bring…

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The Utah Department of Transportation has announced its selection of the Provo River Constructors team to deliver the Utah County I-15 Corridor Expansion (I-15 CORE). Provo River Constructors is comprised of Flour Enterprises, Inc., Ames Construction, Inc., Ralph L. Wadsworth Construction Company, Inc. and Wadsworth Brothers Construction Company, Inc. The group will expand the I-15 freeway by two lanes in both directions from Lehi Main Street to Spanish Fork Main, extend the express lane from University Parkway in Orem to Spanish Fork, rebuild and reconfigure 10 freeway interchanges, replace and restore 55 bridges, and provide additional improvements without decreasing the number of lanes during the majority of construction. 

The Department used an innovative procurement methodology, selecting the proposer who offered to deliver the improvements that provided the best value to the Department for a fixed price set by the Department.  Best value was determined with reference to the ability of specified proposal elements to meet or exceed the project’s goals, values and requirements, as set forth in the procurement documents.

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A recent court case upholds the concepts of innovative design and quality performance utilized by alternative delivery methods that have become necessary due to shrinking public agency budgets and the need to accelerate critical projects. The case concerned the U.S. Army Corps of Engineers’ (Corps) use of an Indefinite Delivery/Indefinite Quantity (IDIQ) Contract through a two phased proposal process for a $301 million construction project to build a series of military facilities to be performed under a series of future task orders. 

An IDIQ Contract allows the procuring agency flexibility to engage contractors before the exact times and/or exact quantities of future supplies and/or services become known. The goal of the Corps’ project was to meet time, cost and quality targets set by the Army as well as to standardize construction methods to provide new facilities for soldiers and their families. The Corps determined, through market research, that the use of an IDIQ contract was the most appropriate method to meet these goals.

The government’s use of an IDIQ contract was challenged by Tyler Construction Group, a small business general contractor, on the ground that the Federal Acquisition Regulation (FAR) did not authorize the use of an IDIQ procurement for the acquisition of large design-build military construction projects or for major construction projects generally and its use violated the Small Business Act.  The award of the IDIQ Contract was upheld in June 2009 by the U.S. Court of Appeals for the Federal Circuit. (SeeTyler Construction Group v. United States, No. 2008-5177, 2009 WL 1796702 (Fed. Cir. June 25, 2009). 

The Court reasoned that explicit legal authorization is not required to use an IDIQ contract where it is in the best interests of the government, not addressed in the FAR and is not prohibited by law. Further information may be found in the Construction Litigation Reporter, Volume 30, Number 9, September 2009, p. 363-366. 

Although this case involved a federal agency procurement, the reasoning of the court may also apply to state and local agencies interested in using IDIQ to meet their goals. Any agency interested in using IDIQ should consult with counsel before undertaking any procurement action.

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A client recently asked our firm about delivery methodologies commonly used for mega-projects.  A recent ENR article highlights this trend towards use of alternative delivery methods, including design-build, contractor at risk and PPPs. 

According to the article, the US Army Corps of Engineers is using design-build and construction management at risk (which the Army Corps calls Early Contractor Involvement (ECI)) on many projects to speed up delivery of the Hurricane and Storm Damage Risk Reduction System, including the Gulf Intracoastal Waterway West Closure Complex (GIWWCC).

The GIWWCC project was the New Orleans District’s first ECI contract. “By using ECI for this key project, our design teams and GIC are able to proceed in construction of some features, while actively participating in and providing pre-construction design services of other features,” says Colonel Alvin Lee, the Corps New Orleans District commander.

In April, Gulf Intracoastal Constructors (GIC), a joint venture of Omaha-based Kiewit Corp. and Traylor Bros. Inc. of Evansville, Ind., was awarded the $6.97-million base portion of the ECI contract for pre-construction services and pile load tests. That allowed the contractor to begin design and construction sequencing even before being awarded the $854.8 million construction portion of the contract June 26 and the pump portion May 28—which has resulted in a much faster delivery schedule than would have been the case had they used design-bid-build. 

According to Susan Maclay, president of the Southeast Louisiana Flood Protection Authority West, local stakeholders are concerned about the uncertainty associated with use of alternative delivery, but having protection in place by June 1, 2011, is a welcome trade-off. “We applaud the Corps for thinking 'outside of the box’ to allow the contractor to use ECI, to design while delivering,” Maclay says.

While the Corps is now utilizing ECI to help protect New Orleans from future hurricanes, it is not the first project sponsor to use the approach. The Louisiana Department of Transportation and Development (LA DOTD) used a similar approach on the Twin Spans repair project to expedite the re-opening of I-10 following Hurricane Katrina. Subsequently, LA DOTD has used a design build approach for the John James Audubon Bridge across the Mississippi River and the I-12 widening Project and is currently in the process of procuring design build contractors for the I-10 Widening Project and the US 90 Interchange @ LA 85.  

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Texas Department of Transportation (TxDOT) officials executed a comprehensive development agreement (CDA) Tuesday October 6 with NorthGate Constructors, J.V., led by Kiewit Texas Construction L.P. (Fort Worth), and Zachry Construction Corporation (San Antonio).  NorthGate Constructors, J.V. will develop, design and construct 8.4 miles of the SH 114/121 corridor known as the DFW Connector. Construction on the $1.02 billion design/build project is expected to begin by 2010 and the project is scheduled to open to traffic in 2014.
 

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