House Transportation Committee Establishes Panel on Public-Private Partnerships

House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) and Ranking Member Nick Rahall (D-WV) announced the creation of a special committee panel to examine public-private partnerships (P3s) in the United States.  This panel will inform the Committee’s work this year on reauthorizing surface transportation programs and other legislative activity.

Committee Vice Chairman John J. Duncan, Jr. (R-TN) will serve as the Chair, while Rep. Michael Capuano (D-MA) will be the Ranking Member.  Joining them are five other Republicans - Candice Miller of Michigan, Lou Barletta of Pennsylvania, Tom Rice of South Carolina, Mark Meadows of North Carolina and Scott Perry of Pennsylvania, and four Democrats – Peter DeFazio of Oregon, Eleanor Holmes Norton of Washington D.C., Rick Larsen of Washington, and Sean Patrick Maloney of New York, to look at “P3s across all modes of transportation, economic development, public buildings, water, and maritime infrastructure and demand.”

More specifically, the Committee says the panel will identify: “(1) the role P3s play in development and delivery of transportation and infrastructure projects in the U.S., and on the U.S. economy; (2) if/how P3s enhance delivery and management of transportation and infrastructure projects beyond the capabilities of government agencies or the private sector acting independently; and (3) how to balance the needs of the public and private sectors when considering, developing, and implementing P3 projects.”

The format of panel events will resemble the activities of last year’s Panel on 21st Century Freight Rail Transportation, which held hearings in Washington, D.C., and around the country to examine the future of freight rail. The first event of the P3 panel has yet to be announced. This is not the first time the Transportation and Infrastructure Committee has focused on the use of P3s for various kinds of infrastructure.  Rep. Barletta’s Economic Development, Public Buildings and Emergency Management Subcommittee has held several meetings about the use of P3s in redeveloping underutilized federal properties, Rep. Denham’s Railroads Subcommittee has held several meetings regarding the use of innovative financing in intercity passenger rail, including a roundtable in Chicago, among other events.

Maryland Purple Line P3 Project Receives Qualifications from Six Teams

The Maryland Department of Transportation and Maryland Transit Administration (“MDOT/ MTA”) announced on December 11, 2013 that six private-sector teams responded to a Request for Qualifications to design, build, construct, finance, operate and maintain the Purple Line project.  The list of proposer teams is included in the joint press release.

The 16-mile light rail line, which will be constructed under Maryland’s newly adopted Public-Private Partnership law, runs between Bethesda in Montgomery County, Maryland and New Carrollton in Prince George’s County, Maryland.  Funded by a combination of federal, state and local governments, the total project cost is estimated at $2.2 billion.

Transportation Secretary James T. Smith, Jr. noted that “the six responses, from local, national and worldwide firms, clearly demonstrate leaders in the P3 industry have strong interest in delivering this long-awaited project.”

MDOT/MTA will announce a short list of teams in January 2014, following a thorough review.  Formal proposals will be due in early summer, and in late 2014 or early 2015, MDOT/MTA will select a preferred partner.  Construction is expected to begin as early as Spring 2015.

Maryland Transit Administrator Robert L. Smith said that the “intent is to short list as many as four teams to ensure competition and innovation in the Purple Line project.”

More information can be found on the project website.

Congressional "P3 Caucus" Holds First Public Meeting

The Congressional Public Private Partnerships (P3) Caucus held its first public event on Tuesday, November 19 in the Cannon House Office Building.  Co-chairs Reps. Mike Rogers (R-AL) and Gerald Connolly (D-VA) were joined by caucus member John Delaney (D-MD) for an hour-long discussion entitled “Innovating public service delivery with P3s."  Panelists were Porter K. Wheeler, Ph.D., P3 Policy Program at George Mason University; Drew Preston, Manager, Congressional and Public Affairs, U.S. Chamber of Commerce; Matt Reiffer, Director, Transportation Programs, American Council of Engineering Companies; and Joseph Fengler, Director Defense Logistics Policy, Honeywell. 

The Caucus’s members and panelists held a wide-ranging discussion, touching on the use of P3 strategies in the defense, transportation, and education spaces for both infrastructure and services.  The group addressed at length issues regarding legal authority for P3s, the “language barrier” between the private and public sectors, and cited examples of successful P3s both domestically and internationally.

Rep. Connolly highlighted “win-win” transportation P3s in Virginia, including the I-495 Express Lanes in northern Virginia and the Dulles rail line, each examples of new infrastructure financed up front by the private sector.  He noted, however, a public policy challenge with P3s being the perception of a loss of direct accountability of a concessionaire to the public.  Additionally, Rep. Connolly highlighted a similar public policy concern where a private company takes over existing public roads.

As a member of the Armed Services Committee, Rep. Rogers is especially interested in P3s as they relate to the military, where he has already seen an example of a successful P3 in his district.  Mr. Fengler of Honeywell discussed the successful P3 between Anniston Army Depot and Honeywell, highlighting the differences between a traditional government purchase contract and a typical P3-type service contract.  Rep. Rogers, however, voiced concerns he hears as a member of the Homeland Security Committee about cancelled RFPs by other agencies. He has heard that after private sector responses suggesting alternative service delivery are offered, instead of meaningful public-private partnerships being explored, the RFPs are cancelled, betraying a private perception of governments as inflexible and agency leadership difficult to approach.

The group uniformly noted the lack of unity in P3 enabling laws at the federal and state level and across different spaces, in contrast to Canada and Puerto Rico, perceived to have progressive and further developed P3 infrastructure in place.  Mr. Fengler noted that the Department of Defense does not engage in the kind of decades-long contracts that may allow for additional efficiencies and “thinking big,” where state transportation agencies mostly focus on long-term projects. Mr. Wheeler of George Mason University noted that 33 states have P3 enabling laws, but no two are the same, and furthermore, there is no formal federal legal structure, which creates uncertainty for potential P3 partners seeking opportunities in the United States. Rep. Delaney noted that no panelist could identify a repository of “best practices” for P3s in the U.S. 

Rep. Rogers ended the meeting by promising that the P3 Caucus would meet again, and regularly, to continue a useful discussion on the place and utility of P3s in the United States.

Indiana Finance Authority Shortlists 4 Proposers for its I-69 Section 5 Project

On July 31, 2013, the Indiana Finance Authority (“IFA”), in coordination with the Indiana Department of Transportation (“INDOT”), shortlisted four teams for its I-69 Section 5 Project (the “Project”) located between Evansville, Indiana and Indianapolis, Indiana.  The Project marks the second foray of Indiana into the emerging availability payment structure of public-private partnerships in the United States, having led with the East End Crossing project (part of the Louisville-Southern Indiana Ohio River Bridges Project), successfully financed the end of March, 2013.  The Project also marks the second effort of the joint IFA and Indiana Department of Transportation Team in using innovating project delivery approaches to meet growing transportation infrastructure demands in Indiana. 

The Project is one of six sections that are anticipated to complete the interstate connection from Evansville, Indiana to Indianapolis, Indiana, including improvements to Highway 37 outside of  Bloomington, the home of Indiana University. The broader I-69 project is part of the national I-69 corridor connecting Mexico with Canada. Four of the six sections have either been completed or construction is underway.  Section 5 is approximately 26 miles long, varying from 4 to 6 lanes wide in each direction, located in Morgan, Johnson, and Marion Counties, involving construction of four new interchanges and four new overpasses with varying degrees of improvements to the existing interchanges and overpasses. 

The shortlisted teams, in alphabetical order, are:

  • Connect Indiana Development Partners (joint venture of Macquarie Capital Group Limited, Lane Infrastructure, Inc. and Lane Industries Incorporated), partnering with The Lane Construction Corporation and Ames Construction, Inc. as the joint venture design-builder, Parsons Brinckerhoff, Inc. as the project designer and with others.
  • Isolux Infrastructure Netherlands B.V. (through its members, Public Sector Pension Investment Board and Grupo Isolux Corsán S.A.), partnering with Corsán as the builder, AZTEC Engineering Group, Inc. and TYPSA (Tecnica y Projectos S.A.) working together as the project designer and with others
  • Plenary Roads Indiana (through the Plenary Group), partnering with Granite Construction Company and Fred Weber, Inc. as the joint-venture builder, AECOM as the project designer and with others.
  • WM I-69 Partners (joint venture of Walsh Investors, L.L.C. and Meridiam Infrastructure), partnering with Walsh Construction Company II, LLC as the builder, Parsons Transportation Group as the project designer and with others.

As was the case with the East End Crossing procurement, several new players to the US P3 transportation scene responded to the I-69 Section 5 RFQ, including Isolux and Plenary.

IFA plans to issue a final RFP in October of this year with award and execution of the comprehensive P3 agreement in the first half of 2014.

The press release can be found on the INDOT website or the IFA website.

Confidentiality Issues in Government Contracting: Promoting Open Government and Fair Competition

State public records acts and the federal Freedom of Information Act (FOIA) were enacted to prevent favoritism and corruption, but have had unintended consequences on competition for public projects.  As discussed in a recent article, requests for information have become a vehicle for contractors to obtain valuable information about their competitors that might not otherwise be available. 

In addition, requirements to disclose information about a project to the public, including information about proposals received, whether compelled by law, political pressure, or otherwise, pose challenges for agencies running complex procurements.  The desire for greater transparency must be balanced against competing objectives as well as constraints such as federal and state laws limiting disclosure in certain cases, the risk of challenges to the procurement, and the desire to maximize the agency’s negotiating leverage to achieve the best commercial outcome. 

One example is a recent public-private partnership (PPP) procurement that proceeded under enabling legislation requiring the preferred bidder’s “proposal” to be posted to the project website prior to contract execution.  The procuring agency adopted a conservative interpretation of the law and asked the preferred bidder to provide a redacted proposal (including financial and technical submittals), removing only those portions of the proposal that were exempt from disclosure under the public records act.  This information is now available to the bidder’s competitors without any need to submit a formal request.

Another example involves an agency that conducted a PPP procurement under laws requiring public access to all procurement meetings in which official acts are taken.  To avoid premature disclosure of proposal information, evaluation subcommittee members were required to work independently, eliminating the opportunity to use a consensus approach to scoring, and project selection committee members were precluded from learning the proposal scores, or otherwise discussing the proposals, until the public meeting where the proposer was selected.

For some PPP projects, disclosure of information to the public is affected by restrictions associated with federal funding.  Both the Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) impose such restrictions.  The FHWA design-build rule (23 CFR Part 636) requires certain information about proposals to remain confidential until selection is made.  The FTA’s Best Practices Procurement Manual specifically recommends that public agencies keep proposals confidential prior to award, in order to promote more meaningful negotiations and ensure trade secret protection.  The FTA also warns against the practice of “technical leveling” (i.e., providing information to proposers about ideas submitted by others, and then asking for revised proposals) since proposers are unlikely to invest their resources to develop ideas that may be transferred to other firms.

In the face of competing policies and requirements, several agencies have adopted a compromise solution, asking proposers to include executive-level summaries of their proposals and making it clear that the summary is subject to public disclosure.  Others require proposers to provide detailed information about their proposals in a form suitable for posting to the agency website after selection for negotiations, but prior to contract execution.  Agencies facing political pressure to provide greater disclosure might want to look to one of these models, if permitted by applicable law.

Nancy Smith co-authored this entry.

FHWA Holds P3 Model Contract "Listening Sessions" and Beta-tests "P-3 VALUE Toolkit"

As part of its effort to meet MAP-21’s legislative requirement to develop “standard public-private partnership transaction model contracts for the most popular types of public-private partnerships,” the Federal Highway Administration held a “listening session” with representatives from the transportation industry at the U.S. Department of Transportation in Washington D.C. on January 16.  Representatives from state departments of transportation, general contractors, trade associations, legal advisors and others were in attendance, and solicited to provide FHWA with the P3 community’s view of what the model contracts should be. 

In her introductory remarks, the Hon. Beth Osborne, Deputy Assistant Secretary of Transportation for Policy, saw the effort as “compiling best practices” of the P3 community, but one for which FHWA did not have “pre-conceived notions.”  FHWA and USDOT representatives spent the better part of four hours hearing out the industry’s hopes for, expectations about and cautionary recommendations regarding FHWA’s final product.  The resounding theme of the audience comments was that “every P3 is different,” FHWA’s effort should tilt toward educating public sponsors as to the project-specific risk-sharing and “value-for-money” considerations that makes a P3 an effective delivery tool, and FHWA should refrain from prescribing risk allocations or other contract terms.

In a companion effort, FHWA is also beta-testing an interactive model, which intends both to help educate public sponsors in alternative procurement strategies (like the public-private partnership (“P3”)) “apples to apples” comparison with conventional procurements).  The “P3-VALUE Toolkit” collects project sponsors’ (and their consultants’) project-specific risks, quantifies their value, and, with other financing assumptions and project-specific parameters considered, produces a snapshot of the value-for-money that a P3 strategy may or may not present for that project.  FHWA held an initial roll-out “webinar” of the draft toolkit on January 10, with a follow-up webinar session on January 24.

FHWA has set up a docket, Federal Register No. FHWA-2012-0126, to collect industry comments by May 31, to keep pace with the rigorous requirement of MAP-21 to produce and promulgate model contracts by December 31, 2013.

Fred Kessler co-authored this entry.

Virginia Releases P3 Public Outreach Materials

A key element of a successful P3 program is an effective and comprehensive public outreach strategy.  Demonstrating why Virginia remains a leader in closing P3 transportation deals, the Virginia Office of Transportation Public-Private Partnerships (OTP3) recently prepared a variety of fact sheets, presentations and FAQs focusing on different aspects of P3s in Virginia.  The materials can be found at the OTP3 website.

These materials were prepared in cooperation with the Public Private Transportation Act Working Group.  This group was established in June 2012 to solicit ideas and feedback on how to improve public involvement in P3 development and procurement, and consists of elected officials as well as private and public sector stakeholders.            

Ohio River Bridges - East End Crossing - Reaches Commercial Close

On December 27, 2012, the Indiana Finance Authority (“IFA”) achieved commercial close of the East End Crossing project in southern Indiana, part of the broader Louisville-Southern Indiana Ohio River Bridges Project.  WVB East End Partners, LLC (“WVB”), is the private counterparty for the East End Crossing project under an availability payment concession, a first for Walsh and VINCI in an equity role in the US P3 market.  The parties reached agreement and executed the public-private agreement before the end of the year as scheduled, capping an extraordinary procurement on an expedited pace, throughout which IFA met each and every interim schedule deadline, making IFA’s East End Crossing procurement among the fastest “P3” procurements in the United States.  Financial close is scheduled for the end of March, 2013. 

WVB East End Partners, LLC is a joint venture consortium of affiliates of Walsh Investors, LLC, VINCI Concessions S.A.S. and Bilfinger Berger PI International Holding GmbH.  WVB has contracted with the joint venture of Walsh Construction Company and VINCI Construction Grand Projets to design and build the project with Jacobs Engineering Group, Inc. as the project’s lead designer.  Walsh Construction Company was also selected by the Kentucky Transportation Cabinet as the apparent best value bidder for the $900 million Downtown Crossing, Kentucky’s part of the overall Ohio River Bridges Project. 

IFA issued its Request for Qualifications March 9, 2012 shortly after Indianapolis played host to the 2012 Super Bowl, and shortlisted four of six bidder teams on April 20.  All four shortlisted teams submitted conforming proposals on October 26, and WVB was preliminarily selected by IFA on November 16.  With today’s commercial close, IFA successfully conducted a procurement from shortlisting to contract execution in less than nine months.

Barney Allison co-authored this entry.

A Tale of Two Bridges (A Tale of Bi-State Cooperation)

On November 16, 2012, the Indiana Finance Authority (“IFA”) selected WVB East End Partners (“WVB”) as the “Preferred Proposer” for IFA’s East End Crossing project in southern Indiana.  WVB East End Partners is a joint venture consortium of Walsh Investors, LLC, VINCI Concessions S.A.S. and Bilfinger Berger PI International Holding GmbH, partnering with Walsh Construction Company and VINCI Construction Grand Projets as the builders, with Jacobs Engineering Group, Inc. as the designer, and with others.  VINCI Concessions S.A.S. will be performing the operations and maintenance of the East End Crossing for the thirty-five year term.

The East End Crossing is one component of a larger, bi-state project that has been in the planning and development stage for almost ten years.  The Louisville-Southern Indiana Ohio River Bridges Project (or “ORB”) spans the Ohio River in two places, and Indiana and its neighbor to the south, the Commonwealth of Kentucky, split the project in half.  Thus, the ORB is a tale of two bridges, each state responsible for one, but working cooperatively to achieve completion of both.

“One Project; Two Procurements”

On March 5, 2012, Indiana Governor Mitch Daniels and Kentucky Governor Steve Beshear met and decided on a “one project, two procurements” strategy.  Indiana was to handle the East End Crossing (a bridge, tunnel and associate roadway project eight miles east of the present Kennedy Bridge between Louisville and Southern Indiana).  Kentucky was to handle the Downtown Crossing (refurbishment of the Kennedy Bridge, addition of a second span, and associated roadway improvements).  Each would share 50/50 in the gross toll revenues generated by the two projects; toll revenues would be collected by a single toll systems operator for each project. 

What followed the March 5 memorandum of understanding was an historic bi-state development agreement that fleshed out how this understanding would turn into the ORB.  The “bi-state” mapped out parallel, separately handled procurements of each state’s part of the ORB and the involvement of each state in the other’s procurement.  The bi-state agreement also established an approach to ownership of the right of way for each project so as to enable each state to allow its contractor to perform work in the other state.

Kentucky elected a conventional design-build contract procurement, with the Commonwealth handling the financing of its project.  Indiana pursued an innovative availability payment public-private partnership, leaving the financing to the winning proposer.  Each state was offered the right to review and approve the technical plans and specifications for the portion of each project to be built and operated in that state.

Eight short months later, Kentucky held a public bid opening, selecting Walsh Construction Company as its apparent best value bidder.  Less than twenty-four hours later, Indiana, through IFA and in very close coordination with the Indiana Department of Transportation (“INDOT”), announced WVB as its preferred proposer and anticipated counterparty in a public-private partnership.  Walsh Construction Company is part of WVB, and through two, separated and distinct procurements, will be involved in the entire ORB.

The “one project, two states” approach aligned both states in a collective effort to address a growing need for additional cross-river transportation in the greater Louisville-Southern Indiana region, which is presently hampered by significant traffic congestion on the existing Kennedy Bridge and within its interchange and connecting roadways.  And now, one major infrastructure project will be the product of two innovative solutions.

About the ORB

The ORB is a construction, reconstruction, and rehabilitation project to address demand for remedying inadequate and inefficient cross-river mobility for existing, planned and expected population growth in downtown Louisville and Southern Indiana counties. 

When completed, the ORB will improve connecting roadways and provide two new toll bridges across the Ohio River.  Kentucky’s Downtown Crossing will deliver the new “Downtown Bridge” –  carrying I-65, upstream on the Ohio River from the existing Kennedy Bridge.  The East End Crossing builds a new bridge connecting I-265/KY 841 (the “Gene Snyder Freeway”) with S.R. 265 (the “Lee Hamilton Highway”) in Indiana.  The ORB also features several multi-modal improvements to increase transportation choices for area residents, including enhanced bus service and pedestrian and bicycle trails and pathways.

Indiana and Kentucky plan to see both bridges open as early as late Fall, 2016.

John Smolen co-authored this entry.
 

Indiana Selects Preferred Proposer For East End Crossing (Ohio River Bridges Project)

On November 16, 2012, the board of the Indiana Finance Authority (“IFA”), with Governor Daniels in attendance, based on the recommendation of Kendra York, IFA’s Public Finance Director, approved the preliminary selection of WVB East End Partners as the preferred proposer for the East End Crossing project, Indiana’s second foray into public-private partnerships as a solution to infrastructure planning for the State.  The East End Crossing is Indiana’s part of the Louisville-Southern Indiana Ohio River Bridges Project (the “ORB Project”).  WVB East End Partners is a joint venture consortium of Walsh Investors, LLC, VINCI Concessions S.A.S. and Bilfinger Berger PI International Holding GmbH.  The WVB East End Partners consortium proposes to contract with Walsh Construction Company and VINCI Construction Grand Projets as the builders, with Jacobs Engineering Group, Inc. as the lead designer.  VINCI Concessions S.A.S. will be performing the operations and maintenance of the East End Crossing for the thirty-five year operating term.  Ms. York made the announcement at the historic Indiana Repertory Theater in downtown Indianapolis.  Governor Daniels applauded the efforts of the proposer teams, emphasizing the success of several recent Indiana infrastructure projects, benefits of this project to the citizens of the State of Indiana and the Commonwealth of Kentucky. 

In early March 2012, Governor Daniels and Kentucky Governor Steve Beshear signed a memorandum of understanding regarding the roles and responsibilities of each state in the “Ohio River Bridges Project,” of which the East End Crossing is one part.  A week later, IFA issued a request for qualifications to develop, build, finance, operate, and maintain the East End Crossing under an availability payment concession structure.  From release of the “RFQ” to the short-listing of four bidders, to submission of proposals by all four bidders, the procurement proceeded at a record pace of less than eight months.  Governor Daniels specifically cited the rapid pace, resulting in a preferred proposer who offered a bid both under budget and ahead of schedule, as a success for public procurements and public-private partnerships. 

The WVB consortium proposed maximum availability payments for the term of $32.9 million (2012 dollars) per year.  Their proposal offered a construction price of $764 million, with planned substantial completion of the project by Halloween, 2016 – almost nine months prior to the date that the Indiana Department of Transportation had specified.  IFA plans to execute the public-private (“P3”) agreement in mid-to-late December.  Financial closing for the consortium is anticipated in late March, 2013. 

Stay tuned for more about the success of this bi-state cooperative effort.

Indiana Toll Road Debate Sparked by Bingaman Amendment

Governor Mitch Daniels of Indiana and Senator Jeff Bingaman of New Mexico exchanged comments regarding Indiana’s privatization of 157 miles of toll roads through two articles that appeared in The Washington Post, titled “Indiana didn’t ‘sell its toll roads” and “Taxpayers paying for roads – twice”.  This exchange concerns the Senator's proposal to, among other provisions, remove lane miles which are under a long-term PPP lease agreement from the formula which generates federal gas tax dollars to the states.  If Senator Bingaman's proposal were to become law, Indiana's groundbreaking long-term lease of the Indiana Toll Road (“ITR”) in 2006 to a private entity which generated over $4 billion of upfront money for needed state transportation improvements, as well as over $4 billion of improvements to the ITR, would cause the Hoosier state to take the biggest hit. 

It's important in this debate to highlight what may be the unique circumstances under which the ITR was initially paid for and then added to the federal interstate system; but the Governor's broader point about the role of the federal government in encouraging private investment and innovation rather than squelching such efforts should resonate in every statehouse.

Indiana Shortlists Four Teams for East End Crossing

On April 23, 2012, the Indiana Finance Authority (“IFA”), in coordination with the Indiana Department of Transportation, shortlisted four teams for its East End Crossing (Louisville-Southern Indiana Ohio River Bridges Project) (the “East End Crossing”) located in Southern Indiana.

The East End Crossing is part of the broader “Ohio River Bridges Project” in the greater Louisville, Kentucky/Southern Indiana region.  Specifically, the Ohio River Bridges Project will consist in improvements to connecting roadways, but most prominently, provide two new toll bridges across the Ohio River:  the “Downtown Bridge” – a new bridge carrying I-65 and upstream on the Ohio River from the existing Kennedy Bridge – and the “East End Bridge” – also a new bridge connecting I-265/KY 841 with S.R. 265 in Indiana.  The Ohio River Bridges Project also features several multi-modal improvements to increase transportation choices for area residents, including enhanced bus service and pedestrian and bicycle trails and pathways.

The East End Crossing project involves construction of the East End Bridge and approaches on both the Kentucky and Indiana sides of the Ohio River.  The selected proposer will develop, design, build, finance, operate and maintain the East End Crossing through an availability payment concession.
The shortlisted teams, in alphabetical order, are:

  • East End Mobility Partners (joint venture of SNC-Lavalin Capital, John Laing Investments Limited and Zachry Resources, Inc.), teaming with Tutor Perini Corporation, Zachry Construction Corporation and SNC-Lavalin Transportation USA, Inc. collaborating as the design-builder, with Frontier Kemper Constructors Inc., ARUP USA, Inc. and Daelim Industrial Co, Ltd., among others.
  • Ohio River Mobility Group (joint venture of ACS Infrastructure Development, Inc., Hochtief PPP Solutions North America, Inc. and Skanska Infrastructure Development, Inc.), teaming with Skanska USA Civil Southeast, Inc., Flatiron Constructors, Inc. and Dragados USA, Inc. as the builders, with URS Corporation and T.Y. Lin International as the designers, and with others.
  • Ohio River Transportation Partners (joint venture of InfraRed Capital Partners Limited, Balfour Beatty Capital and Kiewit Development Company), teaming with Ohio River Transportation Constructors East as the joint-venture builder (Kiewit Infrastructure Co., Traylor Bros., Inc., Massman Construction Co. and Kokosing Construction Company, Inc.), with Ohio River Transportation Designers as the joint-venture design team (HNTB Corporation and Parsons Brinkerhoff), and with others.
  • WVB East End Partners (joint venture of Walsh Investors, LLC, VINCI Concessions S.A.S. and Bilfinger Berger PI International Holding GmbH), teaming with Walsh Construction Company and VINCI Construction Grand Projets as the builders, with Jacobs Engineering Group, Inc. as the designer, and with others.

IFA plans to issue a final RFP in late July, 2012 with award and execution of the comprehensive public-private partnership agreement by year’s end.

John Smolen co-authored this entry.

Virginia DOT Reaches Financial Close on Midtown Tunnel Project

The Virginia Department of Transportation and Elizabeth River Crossings Opco LLC (“ERC”) reached financial close on a toll concession public-private partnership ("PPP") for the $2.1 billion Midtown Tunnel Project.  It is the first United States transportation PPP to reach financial close in 2012 and will include construction of a new Midtown Tunnel, rehabilitating the existing Midtown and Downtown Tunnels, extending Martin Luther King Boulevard and will provide much needed transportation improvements and congestion relief to motorists in the Hampton Roads region.  Construction will begin in Fall 2012 and completion is expected in 2018.

Under the Public-Private Transportation Act, the Virginia DOT will continue ownership of the Project elements and oversee ERC's activities.  ERC will finance, build, operate and maintain the facilities for a 58-year concession period and also assumes risk of delivering the project on a performance-based, fixed-price, fixed-date contract, protecting users and taxpayers from construction cost overruns and delays. 

The Project will involve tolling of the existing and newly-constructed assets with tolls initially ranging from $1.59 to $1.84 per car for the tunnels and $.50 for the MLK Extension for tunnel users and $1 for non-tunnel users.  This is approximately 40 percent lower than the $2.89 toll rate estimated under the interim agreement signed in January 2010 before Governor Bob McDonnell took office.  Additional financing includes a $422 million TIFIA loan, $663.75 million of private activity bonds and $310 million in public contribution from Virginia DOT.  ERC, a joint venture of Macquarie and Skanska, will contribute up to $272 million in equity.

The Midtown Tunnel Project was a priority of the region’s leaders and is the largest transportation project to get under way in almost 30 years.  More than 500 jobs will support the construction efforts and another 1,000 jobs in other sectors of the local economy.  The Project is anticipated to cut round-trip travel time by 30 minutes a day and improve safety, reliability and connectivity to the region’s transportation network.

Click here to learn more about this Project.

Arizona Adopts Electronic Toll Enforcement Legislation

The Arizona Legislature sent to Gov. Jan Brewer on April 4, 2012 the landmark bill HB 2491, creating state-of-the-art toll collection and enforcement authority for the Arizona Department of Transportation (ADOT).

The bill follows on the heels of the state’s enactment of its public-private partnership (P3) law two years ago.  While that law authorizes tolling, it lacked the enforcement mechanisms needed for effective open road electronic tolling, essential to modern toll road financing and operations. 

HB 2491 includes a three-notice system, increasing charges for delayed payment, an administrative hearing process, and a panoply of means to enforce collection, including license suspension and denial, vehicle registration denial, and towing and impoundment.

The P3 law included the right of toll road users to obtain refunds of fuel taxes on fuel consumed using tolled facilities.  This unusual and administratively impractical provision, backed by the trucking industry, was repealed by HB 2491.  In exchange, the trucking industry accepted a provision limiting the toll enforcement law to new transportation facilities, which could include new tolled lanes.

Arizona does not yet have tolled transportation facilities.  ADOT is considering a potential P3 for a tolled bypass facility at the Nogales border crossing, and the Maricopa Association of Governments is actively studying a managed lanes system for the Phoenix metropolitan area, which could include conversion of HOV lanes to HOT lanes.

Nossaman assisted ADOT in drafting the legislation.

North Carolina Shortlists Four Teams for HOT Lanes Project

On March 30, 2012, the North Carolina Department of Transportation (NCDOT)  shortlisted four teams for its I-77 HOT Lanes Project located in the Charlotte-Mecklenberg area.

The I-77 HOT Lanes Project is the first road transportation infrastructure project under a pubic-private partnership (P3) delivery model in North Carolina and will set the precedent for the use of P3s to implement HOT lanes projects in the state.  NCDOT anticipates that partnership with the private sector, and the innovative funding strategies that private sector funding brings, will more quickly and more efficiently bring this project to completion and introduce new approaches to managing a traffic corridor in a region of the state that has seen tremendous growth and with it heavy commuter congestion.  NCDOT invites the contemporary dynamic tolling technology within the HOT lanes approach, which it anticipates will improve corridor safety and reduce what has been an elevated number of secondary crashes during peak hour congestion.

The project consists of three sections: Central Section, South Section, and North Section.   The project will involve the conversion of existing high occupancy vehicle (HOV) lanes to high-occupancy toll ("HOT") lanes, and the addition of HOT lanes along the I-77 corridor.  The chosen team will develop, design, build, finance, operate, and maintain the Project through a toll concession agreement.

The shortlisted teams are:

  • The Charlotte Access Mobility Group (ACS Infrastructure Development, Inc. and InfraRed Capital Partners Limited), partnering with Dragados U.S.A., Inc. and United Infrastructures Group, Inc., as the joint-venture builder with Florence & Hutcheson, Inc. as the designer.
  • Cintra Infraestructuras, S.A., partnering with Ferrovial Agroman, S.A. and W.C. English, Inc., as the joint-venture builder with the Louis Berger Group, Inc. as the designer.
  • Metrolina Development Partners (OHL Concessiones, S.A.), partnering with the Lane Construction Corporation and Obrascón Huarte Lain, S.A., as the joint-venture builder with HDR Engineering, Inc. as the designer.
  • Char-Meck Development Partners (Vinci Concessions, S.A.S.), partnering with Archer Western Constructors, L.L.C. and Blythe Construction, Inc., as the joint-venture builder with Parsons Transportation Group as the designer.

The anticipated procurement schedule is for issuance of the final request for proposals in the second quarter of 2012 with award and execution of the comprehensive P3 agreement by year’s end.

Simon Santiago co-authored this entry.

TxDOT Issues Request for Qualifications for US$4.4 Billion IH 35E Managed Lanes Project

On January 23, the Texas Department of Transportation (TxDOT) issued a Request for Qualifications (RFQ) soliciting qualifications from private developers interested in entering into a design-build contract and capital maintenance agreement and/or a toll concession agreement for the IH 35E Managed Lanes Project. The RFQ provides prospective developers the opportunity to submit qualifications for one or both of the two public-private partnership (P3) methods. Qualification submittals for the project are due March 23, 2012.   

IH 35E serves the rapidly growing areas of southern and central Denton County, as well as major Dallas suburbs. Since it opened as part of the original national interstate program almost 50 years ago, the northern link of the corridor has been under a constant state of maintenance, upgrade, expansion, evaluation, planning, design, and construction.    

The goal of the proposed $4.4 billion high-priority project is to rebuild the 28-mile section of IH 35E from IH 635 in Dallas County to US 380 in Denton County, and provide managed lanes that feature dynamic pricing to keep traffic moving at 50 mph. Almost $600 million in funding has been identified, with most coming from $535 million in regional toll revenue funds dedicated to Denton County.

TxDOT received authority from the 82nd Texas Legislature under Senate Bill 1420 to develop the IH 35E Managed Lanes Project and 10 other specific projects using P3s. The Texas Transportation Commission authorized TxDOT to issue an RFQ for the Project on Sept. 29, 2011. 

KABATA Shortlists Three International Consortiums for Knik Arm Crossing

Yesterday, the Knik Arm Bridge and Toll Authority (KABATA) announced its decision to shortlist three of six teams that submitted statements of qualifications for the Knik Arm Crossing project.  KABATA is procuring an availability payment public-private partnership for the $750 million project. Nossaman acts as KABATA's legal advisor for the procurement.
 
Michael Foster, KABATA's Board Chairman, said, "The process becomes very competitive from here on out. We expect to see some top notch proposals."
 
The shortlisted teams are:

Alaska Infrastructure Access Partners
Infrared Capital Partners Limited
Bouygues TP
Colaska Inc. dba QAP
Weeks Marine, Inc.
URS Alaska, LLC
Moffatt & Nichol, Inc.
USKH, Inc.
R&M Consultants, Inc.
Macquarie Capital (USA) Inc.

Cook Inlet Passage Partners
Meridiam USA III, LLC
Meridiam Infrastructure North America Corporation
Meridiam Infrastructure North America Fund II AIV, LP
Meridiam Infrastructure North America Fund II, LP
Meridiam Infrastructure North America Fund II (Domestic), LP
Kiewit Development Company
Kiewit Infrastructure West Co.
Manson Construction Co.
VMS Inc. dba Transfield Services North America, Transportation Infrastructure
Parsons Transportation Group Inc.
Golder Associates Inc.
Dowl HKM
Dan Brown and Associates, PLLC
BMT Fleet Technologies
KPMG Corporate Finance LLC

North Star Mobility Group
HOCHTIEF PPP Solutions North America, Inc.
HOCHTIEF Aktiengesellschaft
ACS Infrastructure Development, Inc.
ACS Servicios y Concessiones, S.L.
Iridium Concesiones de Infraestructuras, S.A.
Flatiron Constructors, Inc.
Dragados USA, Inc.
Dragados SA Traylor Bros., Inc.
HNTB Corporation
CH2M Hill Engineers, Inc.
Alaska Interstate Construction LLC
Arcadis
Kodiak Map
Hart Crowser
Earth Mechanics
Bitttner-Shen
Denali Drilling
Gregg Drilling

Pennsylvania Commission Issues Final Transportation Funding Report

The Pennsylvania Transportation Funding Advisory Commission just issued its final report on a strategy to improve the commonwealth's transportation funding. Aside from a list of recommendations for streamlining operations, the Commission made the following key recommendations for solving the commonwealth's transportation revenue and funding problems:

  • Expand program management and outsourcing, including bundling "individual projects into programs—such as rehabilitating 100 to 300 bridges at one time—and engag[ing] experienced private sector program managers to produce benefits for PennDOT as well as local governments."
  • Adopt P3 legislation. The report expressly recognized the cost efficiencies and construction time savings that PPPs generate. It cautions that "for PPPs to be an option, there would need to be revenue generation for operations and maintenance associated with the facility (e.g., tolling, fare collection)." A PPP bill has been tied up in the Legislature, but sources indicate that the Legislature may be poised to act now that the Commission has endorsed PPP authorizing legislation.
  •  Create state authority to toll all interstates and devote the revenues exclusively to each corridor. The report also recommends flexibility to use existing public as well as private toll operators. The report recognizes that federal restrictions on tolling interstates will also need to evolve, an issue the commonwealth is acutely familiar with after FHWA denial of its SEP-15 application to toll I-80.
  • Undertake a detailed study on how to transition from the fuel tax to "a new method of revenue generation for highway funding." The report emphasizes that any new method charge users "equally based on their usage." Without using the acronym "VMT," the report clearly is pointing toward vehicle miles traveled as the fundamental basis for generating reliable, fair, and equitable highway funding revenues.

Our Mature Northern Cousins - Canadian P3 Practice

If you want to know what a mature, effective federal and state P3 policy can look like, we need not look very far beyond our U.S. borders.  Two Canadian provinces, Ontario and British Columbia, provide us a road map for building successful, sustainable P3 programs and policies.

At the International Bridge Conference in Pittsburgh last month, panelists for a workshop on P3s, including Len Kozachuk with Infrastructure Ontario (IO), described the essential features of this agency and its “alternative financing and procurement” program.  The contrast with how our federal and state policy makers view P3s was striking:

  • All three major political parties in Ontario support the use of P3s.  They do so because the track record proves the benefits of P3s. The woeful experience in the U.S. is that if one party supports it in a particular state, usually the other party opposes it.
     
  • IO has plenary province-level authority over P3 procurements for all forms of transportation and social infrastructure.  It is a center of expertise.  We are aware of no state entity with comparable procurement powers or expertise.  Virginia is making an effort in this direction with its recently announced Office of Transportation Public-Private Partnerships.
     
  • IO handles a wide range of project types, from transportation to social infrastructure such as hospitals, courts, schools and water projects.   It is a rarity in the U.S. to find any state even considering use of P3s for social infrastructure, and only a handful of states have transportation projects under active consideration for P3s.
     
  • IO is staffed with a strong group of financial, technical and legal professionals and analysts.  IO carefully screen projects for P3 suitability and does not hesitate to reject those that are not ready or suitable.  They then run the procurement, and negotiate and administer the contracts.  In most states, we witness P3 offices in state DOT’s formed as an afterthought, often understaffed, with insufficient prior training and experience and inadequate support from other DOT divisions.
     
  • IO is dedicated to maintaining a pipeline of P3 projects - over 50, worth $23 billion, since 2005.  Compare this to 96 projects throughout the entire U.S., worth $54.3 billion in transportation P3 contracts, over the past 22 years, a bunch of which are design-build only (see Public Works Financing, May 2011 issue, p. 4-5).  And IO has something like 20 more projects concurrently under active procurements, dwarfing any U.S. state effort. 
     
  • When IO folks commence a P3 procurement, they finish it, because they have the political support, authority, analysis, staffing and funding to do so.  This track record has bred credibility for the IO in the P3 industry.  In most states, the use of P3s is decided on a project-by-project basis, with little promise of a steady stream of opportunity.  Delayed, prolonged procurements, and too many failed procurements, undercut acceptance of P3s and industry confidence.
     
  • Every Ontario infrastructure project with estimated capital costs of $50 million or more must be analyzed for P3 suitability.  This is the law for any project seeking Canadian federal support.  Indeed, IO’s working presumption is that P3 will be the preferred method of project delivery for such projects.  In the U.S., nowhere do we find a presumption in favor of P3s for significant projects, much less a standing policy to evaluate for P3 suitability.  P3s are usually viewed as a last resort, when no other means to close a funding gap can be identified.
     
  • The driver behind the presumption favoring P3s in Ontario is life cycle cost efficiency.  “We believe this model — with the inherent private-sector efficiencies — will create an overall lower cost for taxpayers than if the government financed projects directly.” [From website]  Time and again IO has found that P3s produce the best value for money over the useful life of large, complex projects.  While cost effectiveness should be the central reason for using a P3 (see Public Works Financing, May 2011 issue, p. 24), the driver for using P3s in the U.S. is lack of traditional financing.  If the necessary capital can be raised through any non-P3 means, that is usually the choice, even though a P3 approach can delivery quality assets and performance at a lower life cycle cost.

The story is the same in British Columbia, where Partnerships British Columbia has successfully pursued P3s for dozens of transportation and social infrastructure projects.  It analyzes projects for P3 suitability and manages the P3 procurements for provincial and municipal government owners.  All projects of $50+ million are “considered first … to be built as public-private partnerships (PPPs) unless there is a compelling reason to do otherwise.” It delivered 35 PPP projects between 2002 and 2010, worth $12.5 billion. P3s are expected to meet 10-20% of the province’s infrastructure capital needs.  P3 market share in the U.S. since 2008 is about 2% (see Public Works Financing, May 2011 issue, p. 6).

In a nutshell, the Ontario and B.C. governments champion P3s, because they know they produce the best value for the public when applied to the right projects in the right way.   We need many more states with well-positioned elected and executive officials steadfastly advocating a change from episodic to programmatic P3 decision making (see TR News Magazine May-June 2011, p.23).  Our northern cousins are showing us how.