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

On Friday, Dec. 9, 2011, New York Gov. Andrew Cuomo signed historic design-build legislation into law, giving five state entities - the New York State Department of Transportation, the New York State Thruway Authority, the Office of Parks, Recreation and Historic Preservation, the Department of Environmental Conservation and the New York State Bridge Authority - general authorization to enter into design-build contracts for capital projects for physical infrastructure.  Previously, only public universities had legislative authorization to use design-build. 

The legislation contemplates a two-step procurement process, with the first step involving submittal of statements of qualifications and establishment of a shortlist of design-build teams eligible to submit proposals.  Step two involves "best value" selection based on a review of proposals, and allows the procuring agency to engage in negotiations with the selected firm prior to contract award.  The procuring agency has discretion to establish payment and performance bonds for design-build projects, as it deems necessary, thus resolving concerns about the chilling effect on competition for large projects associated with a 100% bonding requirement.

The legislation also permits alternative procurement methodologies for construction contracts, allowing award based on (a) a best value determination, (b) guaranteed maximum prices accompanied by cost data and other information, and (c) lump sum bids.

The new legislation took effect immediately and will sunset three years after the date of enactment (although procurements already in process as of the sunset date will be permitted to proceed).   The passage of this legislation is particularly noteworthy since New York, which represents a significant portion of the public works market, has now opened-up for design-build contracting. This chart provides information about other states that have previously passed laws allowing use of design-build for transportation projects. Significantly, the New York legislation allows for design-build projects over $1.2 million, with no limit on the type or number of projects.

It is anticipated that this legislation will play a central role in assisting the State of New York to pursue more innovative, alternative project delivery methods to meet its backlog of infrastructure and capital needs.  Among other things, the new Infrastructure Investment Act (2011 N.Y. Laws ch. 56) will enable the New York State Department of Transportation and the  New York State Thruway Authority to use design-build for the Tappan Zee Hudson River Crossing Project.  The Tappan Zee Project, which will replace an existing bridge across the Hudson River (pictured above),  was granted expedited federal approval by President Obama and U.S. Transportation Secretary Ray LaHood in October of this year.

Tristan Robinson contributed to this post.

*Author Nancy Smith is chair of the Design-Build Institute of America's Legislative Committee.

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At its October 27 meeting, the Texas Transportation Commission approved the issuance of a request for qualifications for the Horseshoe Project in Dallas County.  The project will be the first under new design-build legislation passed by the Texas legislature during the 2011 session.  Subchapter F, Chapter 223, of the Transportation Code prescribes the process by which the Texas Department of Transportation (TxDOT) may enter into a design-build contract with a private entity that provides for the design, construction, expansion, extension, related capital maintenance, rehabilitation, alteration, or repair of a highway project. Transportation Code §223.242 authorizes TxDOT to enter into, in each fiscal year, up to three design-build contracts for highway projects with estimated construction costs of $50 million or more.

The Horseshoe Project is part of the larger Project Pegasus, a $2.1 billion (construction only) project in downtown Dallas on two major interstates, I-35E and I-30.   All four legs of Project Pegasus are on the list of 2011 Top 100 Most Congested Roadways in the State of Texas.  The Horseshoe Project will replace two key bridges and connecting roadways crossing the Trinity River at I-30 and I-35E, as well as upgrading outdated roadway geometry.  The estimated construction cost of the Horseshoe Project is $800 million. 

The Horseshoe Project is one of several major new design-build projects in the United States, including the Gerald Desmond Bridge replacement project in Long Beach, Calif., VTA’s BART Berryessa extension project in the Silicon Valley, and New York's Tappan Zee Bridge replacement project, which is one of 14 projects chosen by the Obama administration for expedited federal review and approval.

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On October 21, I participated on a panel regarding “Successful Teaming” at the 2011 DBIA Conference & Expo in Orlando, Fla.  In the broad sense, “teaming” in the design-build context is collaboration among all project participants to help foster integration and achieve “win-win” solutions for delivering a project.  The panel addressed best practices for drafting teaming agreements and promoting communication and integration among team members.  My presentation focused on why the owner is interested in teaming and how the owner can influence teaming arrangements.  Key takeaways from the panel discussions included the following:

• Always put your teaming agreement into writing and address key terms and conditions.  Although it may take time and money, it is in the interest of all team members to memorialize the underlying basis and relationship of the teaming arrangement into writing.  The teaming agreement should address the extent the members’ relationship is exclusive, how confidential information exchanged among members should be treated, and how costs will be allocated among members.
   
• The owner is not a passive observer.  Rather, the owner is an interested party who can and does influence teaming, both in a direct and indirect way.  For example, during the pre-award phase—especially in the context of public requirements—the owner influences teaming through requirements contained in the solicitation documents.  Therefore, members need to carefully review the solicitation documents to determine the extent that their teaming arrangement needs to be tailored to fit the requirements of a particular project.
   
• Perform due diligence before entering into teaming arrangements.  It is important that members conduct a certain degree of due diligence to determine whether a prospective team member will be a good fit.  Matters to inquire about can include a prospective member’s safety record, organizational conflicts of interest, financial stability and resources, and past dealings with the owner.

It was a pleasure participating with my fellow panel members: Robynne Parkinson of the Law Offices of Robynne Thaxton Parkinson, Pat Miller of Baker & Daniels, and Craig Unger of Unger Security Solutions.  And a special thanks to our moderator, Tom Porter of Tom Porter Services, for keeping the panel focused and on topic.

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Fred Kessler co-authored this post.

We are pleased to report that AB 294--the bill that was the subject of our blog yesterday--is no longer in play. 

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Fred Kessler co-authored this post.

A last-minute amendment to California Assembly Bill 294, if passed, would wreak havoc on Caltrans and local agency plans to use design-build for state highway projects (Public Contract Code section 6800 et seq.) and to enter into public-private partnerships (P3s) for highway projects (Streets and Highways Code section 143).
 
The language added to the bill would preclude local agencies from hiring consultants to work on the projects, stating that all work must be done through Caltrans employees or consultants under contract with Caltrans.  Project consultants are often hired well in advance of the decision to use design-build or P3s for the project--which means that this bill would create significant inefficiency by requiring new consultants to be brought on board once that decision is made.   

Given the existing sunsets for P3 projects (January 1, 2017) and design-build projects (January 1, 2014), this bill could make public-private partnerships and design-build a hollow tool for California highway projects.
 
This appears to be an attempt by the Professional Engineers in California Government (PECG) to do an end-run around a recent California appellate court ruling regarding the Presidio Parkway P3 agreement.  Although the legislation would not affect contracts that have already been awarded, such as the Presidio Parkway agreement, the bill would impact future P3 projects under Section 143 and future design-build projects under Section 6800, possibly including some projects that are already in the procurement process.  In the Presidio Parkway case, PECG sought a determination that the agreement was invalid because engineering consultants under contract with the San Francisco County Transportation Authority performed services on the project while section 143 allegedly requires the consultants to be under Caltrans direct contract and supervision.  Caltrans and the SFCTA have pursued the project for many years under a series of cooperative agreements.
 
The bill, authored by Assemblyman Portantino, was originally short-titled "Design-sequencing contracts" and is now called "Transportation projects: procurement."  It would appear more appropriate to call it "Increased inefficiency in government."
 
The legislative session closes at the end of next week (September 9), and September 2 is the last day to amend existing bills.  It seems likely this bill will make it to the floor.  The authors of this blog urge readers to contact their legislators and ask them to oppose the bill.

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Over the past 10 years, California lawmakers have made tremendous strides in providing express design-build procurement authority to pubic agencies in the state. This authority, however, has not been applied evenly across all project types or agencies.

As matters stand in 2011, much broader design-build authority exists for public buildings or “vertical” projects than for transportation or “horizontal” projects.  Within the realm of horizontal projects, projects on the state highway system are subject to a number of constraints that do not apply to other types of projects.  And the express authority provided to a limited number of agencies under California’s Design-Build Demonstration Program and Design-Build Transit law is temporary and set to expire within the next decade.  In general, most public agencies still face an uphill battle if they wish to use design-build for transportation projects.

To reap the full benefits of design-build, the California Legislature would be well-advised to adopt permanent, general legislation that allows public agencies to use design-build on a wider range of projects, leaving the details of the procurement to be determined by the agencies as appropriate for their needs. 

See Nossaman’s article "California Public Contracting Laws: Design Build Authority for Transportation Projects" for more information on California’s most recently enacted transportation-specific design-build laws and on options available to public agencies who do not have express design-build authority but may nonetheless wish to combine design and construction services under a single contract for a transportation project.

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Brian Papernik also contributed to this post.

Yesterday, the Metro Gold Line Foothill Extension Construction Authority awarded a $486 million design-build contract to a Kiewit/Parsons joint venture. The contract is for the 11.5 mile extension of the Metro Gold Line light rail from the Sierra Madre Villa station in the City of Pasadena to Citrus Avenue near the boundary of the City of Azusa and the City of Glendora.  The Authority previously awarded a separate design-build contract to Skanska for the Iconic Freeway Structure within the same alignment. 

The Authority made the award decision for the Foothill Extension project using a best value selection methodology, considering both price and technical factors. For this project, the most highly rated proposal had both the lowest price and the highest technical rating. Although not always the case, this result is not uncommon for best value procurements, since the proposer with the highest technical rating is likely to have a better understanding of the project and therefore able to figure out ways to reduce costs and manage risks without adversely impacting quality.

The procurement process started in early in January 2010 with a request for interested teams to submit statements of qualifications. The Authority shortlisted three teams and went through a pre-RFP industry review process, issuing the request for proposals in August 2010.  The Authority received initial proposals in January 2011, entered into discussions with the proposers and obtained final proposals from all three teams in June 2011.

Instead of basing its best value determination on a pre-set formula, the Authority used a "qualitative price/technical tradeoff" methodology--an approach that is generally recommended by procurement experts. Federal agencies have moved toward the tradeoff methodology in part due to concerns that use of point scoring and formulas increases the risk of protests, and also based on a belief that it is appropriate for the selection official to have responsibility for making the selection decision. The selection official is required to analyze the differences between the competing proposals and to make a rational selection decision based on the facts and circumstances of the specific acquisition, consistent with the evaluation factors and subfactors stated in the solicitation documents. A number of state and local transportation agencies have used a tradeoff approach for their design-build contracts, including the Maryland State Highway Administration with respect to its Intercounty Connector contracts, although many state and local agencies remain more comfortable using formulas.

The authors assisted the Authority in this procurement as well as the contracts for the initial "Arroyo Seco" operating segment.

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During the recent legislative session, TxDOT received authority under Senate Bill 1420 to develop certain projects, including, among others, the SH 99 Grand Parkway project in the Houston area, as well as the I-35E Managed Lanes project in the Dallas/Fort Worth area through a public private partnership procurement process. On June 10, 2011, TxDOT intends to issue requests for information (RFIs) to assist in formulating strategies for the development of these urgently needed projects. Copies of each RFI will be available on TxDOT's website. TxDOT is seeking RFI responses from individual firms or teams with experience in developing and/or financing large transportation infrastructure projects and plans to hold one-on-one meetings with companies expected to lead prospective developer teams in July 2011.

The IH 35E Project consists of the redevelopment of a 28-mile section of Interstate 35E (IH 35E) from IH 635 to US 380 in Dallas and Denton Counties. The project is planned to include reconstruction and widening of the existing IH 35E to incorporate additional main lanes/general purpose lanes, managed lanes and frontage roads.

 

The SH 99 Grand Parkway Project consists of an approximately 180-mile circumferential scenic highway crossing seven counties and encircling the Greater Houston area divided into Segments A, B, C, D, E, F-1, F-2,G, H, I-1 & I-2. TxDOT is currently contemplating the development of four to six-lane divided toll road with intermittent frontage roads (varying by location) spanning Segments E, F-1, and F-2, and a portion of Segment G from IH 10 to IH 45 in Harris County. Montgomery County is considering options for the development of the remaining portion of Segment G. Additional segments will be developed in the future as required to meet capacity demands.

 

Beginning on June 10, 2011, check here for further details regarding the projects, the one-on-one meetings and the requests for information.

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On Wednesday, the California Transportation Commission (CTC) approved the $950 million Gerald Desmond Bridge Replacement Project for one of 10 state project slots available under California’s Design-Build Demonstration Program. 

The CTC’s approval authorizes the Port of Long Beach and the California Department of Transportation (Caltrans) to deliver the project using the best-value design-build method contemplated under the program.  The Port of Long Beach and Caltrans released the request for qualifications (RFQ) for the project’s design-build contract on November 5, 2010.   

"The new bridge will be an iconic structure for Long Beach that modernizes the Port and puts thousands of people to work over the 5-year building period," said Long Beach Mayor Bob Foster.  “It is precisely the right project at the right time for California.”

The Port of Long Beach is one of the largest and busiest Ports in the world and functions as a major inter-modal center for cargo movement throughout the Western United States and beyond.  As the first cable-stayed bridge ever built in California, the new Gerald Desmond Bridge will be landmark for the Port and its surrounding communities.

As a top-tier project at one of the most dynamic and forward-thinking port facilities in the world, the Port of Long Beach expects a high level of interest in this project among the major national and global construction and engineering firms.

Points of Interest:

• $950 million project
• Complex construction of the first cable-stayed highway bridge in California
• Final EIR/EA issued in July 2010
• CEQA certified on August 9, 2010
• Project cleared the environmental process on September 23, 2010
• Received design-build authority from the California Transportation Commission on November 3, 2010

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The Port of Long Beach, one of the largest and busiest Ports in the world and a major inter-modal center for the cargo movement throughout the Western United States and beyond, has reached a major milestone in the approximately $1B plan to replace the Gerald Desmond Bridge on a design-build basis using the authority granted by California’s design-build demonstration program. As the first cable-stayed bridge ever built in California, the project is expected to be a landmark structure for the Port and surrounding communities.

On September 30, the Long Beach City Council approved the environmental impact report (EIR) for the project. The federal environmental approval for the Project is imminent, awaiting only a final signature. The Port expects to issue a request for qualifications as early as the first week in November following the anticipated approval of the project under the design-build demonstration program by the California Transportation Commission. There will be a lot of interest in this project among the major global construction and engineering firms. It’s a signature project at one of the most dynamic and forward-thinking port facilities in the world.

Points of Interest:

• $1B design-build project
• Received approval from Long Beach City Council on September 30, 2010
• Innovative procurement under the same California statute as P3s
• Complex construction of first cable stay bridge on this scale in California history
• A vital route for cargo, the bridge carries about 15 percent of the nation’s goods

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The Mineta San José International Airport Terminal Area Improvement Program was selected as the Best Overall Top Project and as the best Transportation Project in Northern California for 2010 by California Construction magazine during its annual statewide competition that recognizes construction and design excellence.  The project represents the first major airport design-build project in California and includes design and construction of a new terminal, access and roadway improvements, parking facilities, tenant relocations, demolition of existing facilities, and improvements to other airport facilities.  Nossaman served as special design-build counsel for the project, assisting the City Attorney’s office in negotiating and administering the design-build contract. 

The winning design-builder, Hensel Phelps Construction Company and Fentress Architects, was awarded the $513 million contract in late 2006.  Innovative design alternatives were implemented to produce a significant cost savings.  The project also used an integrated building information model (BIM) to reduce construction delays and the number of changes during construction. 

The Metro Gold Line Eastside Extension Project was selected as the best Transportation Project in Southern California for 2010.  The project extending from Union Station to East Los Angeles, added 6 miles to Metro’s rail system, including 3 light rail lines, a heavy rail subway line, 2 aerial bridges, and 1.7 miles of tunnel.  Both the design-build and design-bid-build methods were used for the project.  Nossaman assisted in the design-build procurement for the $898 million project.  Nossaman also assisted with the preparation and negotiation of cooperative agreements between Metro and various local agencies, utility owners and Caltrans.

The two projects were selected by an independent jury of industry experts in design and construction out of 135 nominated projects.  Awards were based on specific entry criteria, including project management, client service, safety, design and functionality. 

The winners will be featured in the magazine’s December 2010 issue, honored at an awards breakfast, and entered in the National Best of 2010 competition to be judged against winners from other regions.

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On August 30 the Metro Gold Line Foothill Extension Construction Authority issued a Request for Proposals (RFP) to three teams vying for the Foothill Extension Phase 2A light rail alignment work.  The design-build-finance project includes 11.5 miles of new track, a 25+ acre light rail maintenance facility, six stations in five cities, and multiple bridges along with the needed utilities and crossing systems.  Phase 2A is anticipated to generate 7,000 jobs and $1 billion of economic output for the region during construction and will be the first Measure R rail project to break ground.  The public-private partnership with the winning bidder will enable the project to be completed much faster than using traditional mechanisms.

The RFP was issued to three firms that were shortlisted earlier in the year through a competitive process.  The teams competing for the project are the Foothill Transit Constructors (Kiewit Pacific Co. and Parsons Transportation Group Inc.), Shimmick Construction Company/URS Corporation and Skanska USA Civil West California District/Balfour Beatty Rail, Inc.  Proposals are due January 27, 2011 and the award is anticipated in April 2011.  On June 18, 2010 the Authority awarded a Design-Build Contract for the Iconic Freeway Structure under Phase 2A to Skanska USA Civil West California District Inc.

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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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