Arizona DOT Announces Procurement Decision for South Mountain Freeway Project

The Arizona Department of Transportation announced today its decision to deliver the $1.9 billion South Mountain Freeway Project under a single design-build-maintain public-private partnership.  While there will be a long-term maintenance component, ADOT, in collaboration with the Maricopa Association of Governments and the Arizona Division of the Federal Highway Administration, has decided to use available public funds together with public financing to pay for the project.
 
ADOT received an unsolicited proposal for the project more than a year ago.  Under its P3 regulations, it proceeded with a detailed analysis of the unsolicited proposal, concluding that the proposed acceleration of the project through a single contract had merit.  ADOT, with the assistance of its consultants HDR, PFM and Nossaman, then undertook a risk-adjusted cost assessment and value for money analysis, examining and comparing six different project delivery methods ranging from traditional design-bid-build with delivery of the project in separate segments, to a design-build-finance-maintain availability payment approach.  The quantitative results of the value for money analysis were tightly grouped and non-quantitative considerations received considerable discussion and analysis.

Prior to making its decision, ADOT and its partner agencies sought industry input.  ADOT issued a request for information and held an industry forum in February 2014 to garner industry views on a range of pertinent questions.  Weighing this input together with the quantitative and qualitative considerations in the value for money analysis, ADOT and its partner agencies determined that the DBM alternative will provide the best value for Arizona taxpayers, will provide effective mitigation of risk and will be the most efficient delivery option.
 
The environmental work on the South Mountain Freeway Project is ongoing, and the Final Environmental Impact Statement (FEIS) is expected in mid to late September.  ADOT’s announcement makes clear that a Request for Qualifications will only be released if a build alternative is recommended under the FEIS.  If it issues a RFQ, ADOT expects to provide a six-week period to respond, with shortlisting within four weeks after it receives statements of qualifications.

Contact projects@azdot.gov for inquiries about the project and the procurement process.

Study Finds San Francisco Veterans Administration Medical Center is Prime Candidate for P3 Delivery Method

According to a recently released study by the Bay Area Council Economic Institute, a public-private partnership (P3) may be the most effective method to deliver a proposed expansion of the San Francisco Veterans Administration Medical Center (SFVAMC) – but there are some barriers that need clearing. 

The SFVAMC is a leading Veterans Administration (VA) medical center, having the largest research program in the national VA system, and providing one-third of the clinical education and curriculum for medical students and residents from the medical school at the University of California, San Francisco (UCSF).  The SFVAMC has outgrown its existing, 80-year facility near the Golden Gate Bridge, and is considering building a new state-of-the art building in the city’s Mission Bay district, where it would relocate research and hospital operations and form part of UCSF’s growing health sciences complex there.  

Based on current delays in federal appropriations, the much-needed expansion project faces an estimated wait time of 10 to 15 years if delivered through conventional federal procurement methods.  In contrast, the Economic Institute’s study finds that there is an immediate opportunity for the VA to pilot a P3 to design, build, finance, operate, and maintain the expansion project.   If structured properly as a P3, the project can attract private capital and could result in a significantly accelerated delivery schedule.  When compared to conventional procurement methods, the study concludes that a P3 could achieve capital cost savings of at least 20 %, and life-cycle cost savings (including operations and maintenance) of 10-30 %. 

Moving forward with the P3 alternative, however, will require changes in federal procurement laws. For starters the Economic Institute recommends passing enabling legislation to allow the VA to enter into long-term space lease agreements and lease-leaseback transactions.  For now, the VA is in dialog with US congressional leaders, as well as UCSF and prospective private partners, to move the project to the next step.  

The study was broadly peer reviewed, by Stan Taylor and Patrick Harder of the Firm’s Infrastructure Practice Group.

A copy of the Economic Institute’s study may be found at: http://www.bayareaeconomy.org/publications-list/

Nossaman Posts Draft Model P3 Legislation for Public Buildings and Invites Comments

As demand for government services continues to grow across the United States, federal, state and local government agencies must identify innovative and cost effective methods to deliver essential social infrastructure. While many agencies are interested in pursuing innovative P3 delivery models to procure public buildings, they often lack the clear necessary legislation to authorize P3 deals. 

We offer below, for consideration and comment, a draft model social infrastructure P3 bill.  We developed the draft legislation based on our experience advising US public agencies using innovative delivery methods for other classes of infrastructure. This draft model legislation seeks to provide the authorizations that a public sponsor requires to engage in the P3 delivery of a social infrastructure project.  The draft model legislation is also intended to be a flexible instrument and as such it does not set out rigid rules that a public sponsor must follow in the execution of P3 project.  
 
We invite you to review and consider our draft bill.  We are very interested in receiving your comments and suggestions.  Please send your comments by June 11, 2014 to Yukiko Kojima at ykojima@nossaman.com or to Andrée Blais at ablais@nossaman.com.

Yukiko Kojima co-authored this entry.

Congressional Panel Explores International Experience with Public-Private Partnerships

On Tuesday, April 8th, the House Transportation and Infrastructure Panel on Public-Private Partnerships held a hearing on "The International Experience with Public-Private Partnerships".  The Panel focused in particular on the Canadian experience, observing that over the past two decades Canada has become one of the most advanced and active markets for P3s. The witness list and links to their testimony are as follows:

The Honorable John Delaney, United States Representative, Maryland

Dr. Larry Blain, Chairman of the Board of Directors, Partnerships British Columbia | Written Testimony

Mr. David Morley, Vice President, Business and Government Strategy, Infrastructure Ontario | Written Testimony

Cherian George, Managing Director – Americas, Global Infrastructure & Project Finance, Fitch Ratings | Written Testimony

Dr. Matti Siemiatycki, Associate Professor, Program in Planning, University of Toronto | Written Testimony

Congressman John Delaney began by describing the magnitude of the nation’s infrastructure deficit.  Referring to an estimate made by the American Society for Civil Engineers, he explained that close to $4 trillion needs to be invested to bring infrastructure in the US up to world class standards.  As governments are cash strapped, he advocated that private sector capital be engaged to increase investment in infrastructure to fill the gap, and he noted the importance of smart P3 frameworks to meet this infrastructure challenge.  Congressman Delaney referred to The Partnerships to Build America Act (H.R. 2084), which he introduced to the House on May 2013.  He explained that The Partnerships to Build America Act would provide for the financing of state and local government transportation, energy, communications, water, and education infrastructure projects through the creation of an infrastructure fund.

The Panel did not put questions to Congressman Delaney, leaving that for the House. The Panel did, however, engage in a lively discussion with the remaining witnesses about the Canadian experience with P3s and explored the suitability of the Canadian approach for infrastructure projects in the US.

Witnesses outlined various factors that have resulted in successful P3 projects in Canada.  The creation of specialized provincial agencies staffed with experts skilled with both evaluating projects for P3 delivery and negotiating with the private sector was noted as a significant factor contributing to successful P3 deals. Further, the development by these agencies of consistent and predictable procurement processes and standardized documentation has facilitated the delivery of P3 projects and encouraged the development of the P3 market in Canada.

Mr. George of Fitch Ratings, discussing P3s from a global perspective, pointed out that P3s can provide public value, but these transactions need to be appropriately designed and carefully crafted to address all stakeholder concerns.  He indicated that projects that have a defined scope where performance can be measured are better suited to P3 delivery.  He noted that lessons can be learned from past P3 projects undertaken around the world.  He spoke to a few examples including the 407 toll road in Ontario and Chicago’s Skyway toll concessions, each of which came under considerable criticism and involved legal disputes.

Witnesses pointed out that in Canada P3s are not typically used to raise new money to pay for infrastructure through user fees or tolls.  Instead, P3s are viewed in Canada as a way to finance a project using private capital that is repaid overtime by the government through availability payments.  Congressman Sean Patrick Maloney (D-NY) indicated that while P3s are not viewed as a funding solution in Canada, P3s are being considered for that purpose in the US.

Dr. Siemiatycki of the University of Toronto indicated that the leading motivation in Canada for P3 delivery is achieving value for money, as opposed to finding new funding sources. Dr. Blain indicated that while their approaches and methodologies do vary, the various agencies developing infrastructure through P3s in Canada undertake value for money assessments that compare the relative cost of P3 delivery to the cost of traditional delivery. While noting the strengths of Canadian P3s, Dr. Siemiatycki described the challenges associated with determining whether P3s actually deliver better value for money when compared to traditional project delivery using government financing.

The Panel had many questions for the witnesses about the concept of value for money and whether a P3 delivery is actually cheaper than traditional delivery. The Members posed questions about expected rates of return and profit to the private party, risk transfer and associated risk premiums paid to the private party, and the disclosure of data relating to the assessment of a project for P3 delivery.

Witnesses did not all agree on whether construction, operations and maintenance costs are cheaper in a P3 delivery compared to a traditional delivery. However, the witnesses were generally aligned in noting the benefits of P3 delivery for the right projects including budget and schedule certainty, lifecycle asset management, risk transfer and innovation.
 

Indiana Achieves Commercial Close on its Second Availability Payment P3

Indiana closed its second availability payment-based P3 project, the I-69 Section 5 project.  "Section 5" is the fifth of six planned sections to link Evansville, Indiana with Indianapolis.  The RFQ for Section 5 was published on May 23, 2013 and the Indiana Finance Authority ("IFA") – once again partnering with the Indiana Department of Transportation – never missed a deadline, achieving commercial close on April 8, 2014.

Indiana’s private partner is the I-69 Development Partners, with Isolux Infrastructure Netherlands B.V., a Spanish-Dutch P3 developer (“IIN”) partnering with its affiliate, Corsan-Corviam Construccion, S.A., as its design-builder, and the joint venture of Arizona-based AZTEC Engineering Group, Inc. and Técnica y Proyectos S.A. (or “TYPSA”), as its designer.  Regional and Indiana-based team members Burgess & Niple, Inc., E&B Paving, Inc. and others round out the concessionaire team.  The I-69 Section 5 project involves reconstructing a 21 mile stretch of existing Indiana State Route 37 to interstate standards, a project with both rural and urban design features, underground geological “karst” challenges and located adjacent to the home of Indiana’s flagship state university in Bloomington.

The Section 5 marks IIN’s first stateside P3.  IIN, with three other major international and domestic  developers and regional P3 players, are also shortlisted for Indiana’s next P3 procurement, the Illiana/I65 Project, linking Northwest Indiana with the companion P3 project being procured by the Illinois Department of Transportation, creating alternative entry into the greater Chicago area.

I-69 Development Partners bid an attractive $21.78 million base year “maximum availability payment,” and also achieved a high technical evaluation score.  Four shortlisted teams submitted proposals in response to IFA’s RFP and  were evaluated in late January.  A low bid and a high technical evaluation won IIN the day.  Financial Close is expected in late June 2014.

John Smolen co-authored this entry. 

Florida I-595 Express Lanes Open

On March 26, the Florida Department of Transportation (FDOT) celebrated the grand opening of the $1.2 billion I-595 Express Corridor Improvements Project (Project) in Broward County, Florida.  The Project is the nation’s first Availability Payment public-private partnership and the first public-private highway deal in Florida.

The Project consists of the reconstruction of the I-595 mainline from the I-75/Sawgrass Expressway interchange to the I-595/I-95 interchange on I-595 and from Peters Road to Griffin Road on Florida's Turnpike, for a total project length of 13 miles.  The Project includes three reversible express, variable-toll lanes at grade in the median of the existing highway, from Interstate 95 to Interstate 75, a distance of approximately 10 miles.  

In March of 2009, FDOT signed the concession agreement with ACS Infrastructure Development Inc., a U.S. subsidiary of Group ACS in Spain, to design, build, finance, operate and maintain the I-595 for 35 years.  Construction of the Project began in June 2009 and was completed in less than 5 years and ahead of schedule.
 
Some of the key milestones and achievements highlighted by FDOT are:
  • I-595 improvements completed over 15 years sooner than originally projected
  • Innovative design/build processes allowed for execution of the I-595 Project in record time
  • Less than 0.7% of the construction cost in scope changes
  • No time added to the contract
  • All project milestones achieved
  • Project of the Year Award in 2009 by the American Road & Transportation Builders’ Association (ARTBA) for outstanding contributions to the promotion of public private partnerships that advance transportation infrastructure improvements
  • Award of Excellence in Civil/Public Works in 2010 by Southeast Construction Magazine for partnering with three private golf courses for storm water treatment and saving millions of dollars in right of way acquisitions.
  • 2009 North American Transport Deal of the Year by Project Finance Magazine. 
Nossaman is proud to have served as FDOT’s outside legal advisor on this groundbreaking transaction.
 
For more information about the I-595, visit the project website.

Congressional Panel Explores Industry's Views on Public-Private Partnerships

On Wednesday, March 5, the House Transportation and Infrastructure Special Panel on Public-Private Partnerships held a hearing entitled "Overview of Public-Private Partnerships for Highway and Transit Projects" to review the role of P3s in delivery of highway and transit projects. The witness list and links to their testimony are as follows:

Mr. Joseph Kile, Assistant Director for Microeconomic Studies, Congressional Budget Office (CBO) Written Testimony

Mr. James M. Bass, Interim Executive Director and Chief Financial Officer, Texas Department of Transportation Written Testimony
 
Mr. Phillip Washington, General Manager, Regional Transportation District Written Testimony
 
Mr. Richard A. Fierce, Senior Vice President, Fluor; on behalf of Associated General Contractors of America Written Testimony
 
The hearing was well-attended by Members of the panel, who all expressed their interest in the issue and usefulness of the hearing, and the question and answer period delved into a variety of subjects, from if and how the federal government should be involved in P3s to exploring specific examples of how P3s would be beneficial.
 
Both Members and witnesses discussed the importance of evaluating each potential project for its suitability to proceed as a P3.  There was wide agreement that P3s are a valuable tool for infrastructure projects, but they are not a “silver bullet” for solving our nation’s infrastructure needs.  There were many questions directed at Mr. Kile from the CBO as Members tried to drill down on whether savings exist in the short and long term by using P3s versus traditional financing and project delivery.  The CBO’s research is limited by the number of major P3s to examine, but Mr. Kile noted that they are delivered slightly faster and are slightly less expensive.  Witnesses also said that P3s, particularly those involving the operation and maintenance of projects, may benefit from efficiencies as the private sector takes into account life-cycle costs during the design and construction of the project. 
 
Members and witnesses also identified environmental streamlining as an area where project timeframes and costs can be reduced. Mr. Bass noted that as a result of MAP-21 provisions, Texas will be taking lead responsibility for environmental reviews, which will create permitting efficiencies.  Additionally, as states go through the procurement process with P3s, it is critical that environmental reviews of projects stay on schedule.
 
Rep. Sean Patrick Maloney (D-NY), a self-professed fan of P3s, asked panelists whether the PAB and TIFIA programs are structured correctly as is, or if they need expansion.  Witnesses universally expressed the importance of these two particular programs to successful P3 projects, with Mr. Fierce of Fluor advocating to lift the cap on PABs. 
 
Del. Eleanor Holmes Norton (D-DC) expressed some concern at how “private” some P3s are, given the common use of PABs, the TIFIA program, or other federal funding sources to make up a large portion of the project funding.  Witnesses clarified that in some projects, the private equity bridges a gap in funding that allows a project to move forward faster than it otherwise could. 
 
Rep. Michael Capuano (D-MA), while saying he likes the idea of finding new tools to upgrade our country’s infrastructure, noted that P3s would play a lesser role if policymakers made the politically unpopular decisions to increase taxes or other fees and fully fund the Highway Trust Fund and local funding sources. 
 
Rep. Candice Miller (R-MI), from a state without a P3 law, focused on eliciting from witnesses what states have had success with P3s.  Witnesses pointed to Virginia as a leader, and also to the useful role the U.S. Department of Transportation has taken in bringing together folks with expertise in P3s in various states to share thoughts with other states considering adopting a P3 law. 
 
Simon Santiago co-authored this entry. 

Indiana Finance Authority Shortlists 4 Proposers for its Indiana Portion of the Illiana Corridor Project & I-65 Added Capacity Project

On February 28, 2014, the Indiana Finance Authority ("IFA"), in coordination with the Indiana Department of Transportation ("INDOT"), shortlisted four teams for its Indiana Portion of the Illiana Corridor Project (the "Indiana Portion") and I-65 Added Capacity Project ("I-65 Project" and collectively with the Indiana Portion, the "Project").  The project website is located at http://www.in.gov/ifa/2763.htm.  

The Illiana Corridor Project is a collaborative effort among the Illinois Department of Transportation (“IDOT”), INDOT, and IFA to construct a highway, approximately 46.8 miles long, which provides an east-west connection between I-65 in Indiana and Interstates 57 and 55 in Illinois.  The Indiana Portion consists of the new construction of an 11.7 mile, four-lane median divided tolled highway, extending from the Illinois/Indiana stateline at the west end and connecting to I-65 north of Lowell, Indiana at the east end.  The I-65 Project involves the construction of additional travel lanes on I-65 and will be located between SR 2 extending north to US 30.  IDOT is pursuing a separate procurement for the portion of the Illiana Corridor located in Illinois; three out of the four teams shortlisted by IFA were also shortlisted by IDOT.

The Project marks the third 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 at the end of March 2013 and the I-69 Section 5 Project, scheduled for commercial close in April 2014.  The Project also marks the third effort of the joint IFA and Indiana Department of Transportation Team in using innovative project delivery approaches to meet growing transportation infrastructure demands in Indiana.  

The shortlisted teams, in alphabetical order, are: 
  • Indiana Corridor Transportation Group (joint venture of ACS Infrastructure Development, Inc. and Fengate Capital Management Ltd.), partnering with Dragados USA, Inc., F.H. Paschen, S.N. Nielsen & Associates LLC and William Charles Construction Company, LLC  as the joint venture lead contractor, Jacobs Engineering Group, Inc. as the lead engineering firm and with others. 
  • Illiana East Mobility Partners (through its sole equity member, Cintra Infraestructuras, S.A.), partnering with Ferrovial Agroman US Corp and White Construction, Inc. as the joint venture lead contractor and Janssen & Spaans Engineering, Inc., as lead design and engineer and with others.
  • Isolux Infrastructure Netherlands B.V. (with Isolux Infrastructure Netherlands B.V. acting as sole equity member) partnering with Corsan-Corviam Construccion, S.A. as lead contractor, a joint venture of AZTEC Engineering Group, Inc. and TYPSA (Tecnica y Projectos S.A.) working together as the lead engineering firm and with others. 
  • WM Indiana- Illiana Partners, LLC  (joint venture of Walsh Investors, L.L.C. and Meridiam Infrastructure Illiana IN, LLC), partnering with Walsh Construction Company II, LLC as the builder, Parsons Transportation Group as the lead engineering firm and with others.
IFA plans to issue a final RFP in July of this year with award and execution of the comprehensive P3 agreement at the end of 2014.
 
The INDOT press release can be found on the project website. 

Arizona DOT Issues RFI for South Mountain Freeway Project

Yesterday the Arizona Department of Transportation issued to the P3 and design-build industry a Request for Information for the South Mountain Freeway project.  ADOT is seeking perspective and feedback from lead developers, design-build contractors, maintenance contractors, and equity investors on a list of questions, and is providing an opportunity for industry input on the overall procurement process for the project.

Responses are requested by February 25.  ADOT will convene and open industry forum on the project at the ADOT auditorium on February 27, and the industry has the opportunity to sign up for one-on-one meetings with ADOT on February 27 and 28.

In planning and development for over 20 years, the project is planned as a 22-mile, eight-lane greenfield freeway in the southwest quadrant of Phoenix.  The environmental review of the project is expected to culminate in a final environmental impact statement in the summer of 2014 and a record of decision a few months later.  Estimated capital costs are in the range of $1.8 billion, including at least $600 million for right of way acquisitions.

Maricopa County has a ½ cent sales tax dedicated to transportation.  A major portion of the sales tax revenue is scheduled for the capital cost of the project.  ADOT originally planned the project for construction via traditional design-bid-build delivery in nine separate segments stretching through 2026, timed to match cash flows from the sales tax.  But ADOT’s recent analysis indicates that there may be benefits from using financing to accelerate delivery of the full project under a single procurement.  The financing, in the range of $400 –800 million, could be arranged as public or private debt, including use of private activity bonds and a TIFIA loan. 

The RFI explains that ADOT is examining three P3 methods:  design-build-finance-maintain using availability payments, design-build-maintain, and “enhanced” design-build.  All of these delivery methods are authorized under ADOT’s public-private partnership authority.  ADOT would use a two-stage competitive procurement, first short-listing proposers based on evaluation of statements of qualifications and then using a best value evaluation of proposals to select the winner.

If ADOT decides to proceed with innovative delivery, the RFQ could be issued in the first half of this year, with proposal submission, selection and contract execution within a year thereafter.

View a larger version of the map above on the ADOT website.

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.

Four Teams Short-listed for the Maryland Purple Line P3

On January 8, 2014, the Maryland Department of Transportation and the Maryland Transit Administration announced that four teams were short-listed to submit proposals to design, build, construct, finance, operate and maintain the Purple Line Project through a public-private partnership (“P3”). The estimated $2.2 billion Purple Line Project is 16.2 mile light rail transit line that extends from Bethesda in Montgomery County to New Carrollton in Prince George’s County, connecting major activity centers inside the Capital Beltway. The four teams, representing a combination of American and European firms, were selected from six private-sector teams that submitted statements of qualification in response to the Purple Line’s Request for Qualifications issued on November 8, 2013. 

The four teams in alphabetical order are:
  • Maryland Purple Line Partners ( Vinci Concessions, S.A.s; Walsh Investors, LLC; InfraRed Capital Partners, Limited; Alstom Transport SA and Keolis SA)
  • Maryland Transit Connectors ( John Laing Investments Limited; Kiewit Development Company; and Edgemoor Infrastructure & Real Estate LLC)
  • Purple Line Transit Partners (Meridiam Infrastructure Purple Line; Flour Enterprises, Inc.; Star America Fund GP LLC)
  • Purple Line Alliance (Macquarie Capital Group and Skanska Infrastructure Development, Inc.)
Transportation Secretary James T. Smith Jr. stated “After careful review and deliberation, I am announcing the decision to move forward with four private teams for this public-private partnership project. These teams clearly demonstrated their qualifications to deliver this important project in their responses to our Request for Qualifications.”  Evaluation criteria included teams’ prior experience, proposer’s personnel and organization, financing capabilities, and overall approach.  The Purple Line project is expected to be one of the largest P3 transit concession projects in U.S. history, with construction beginning in 2015.

Indiana Finance Authority issues the Request for Proposals for the I-69 Section 5 Project

Continuing Indiana’s successful employment of availability payment model public-private partnership (“P3”) concessions, the Indiana Finance Authority (“IFA”) issued its second P3 Request for Proposals (“RFP”) to proposers shortlisted at the end of July for the Interstate 69, Section 5 project (the “Section 5 project”).  As with the successful East End Crossing procurement, IFA, with its partner, the Indiana Department of Transportation, or INDOT, has met each and every procurement deadline since release of the Request for Qualifications (“RFQ”) in late May, which places the Section 5 project on pace to exceed the East End Crossing’s procurement pace, then the quickest procurement of its kind and scale from RFQ to commercial close in the United States.

The Section 5 project is one of six sections under development to complete the federal interstate connection from Evansville, Indiana to Indianapolis, collectively, part of a further development of the national I-69 corridor, running from the U.S. border with Mexico to its border with Canada.  The Section 5 project 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.  Notably, the Section 5 project moves through Bloomington, Indiana, placing maintenance of traffic issues prominently in the would-be Developer’s plan.  Furthermore, the limestone topography of mid-to-southern Indiana presents unique construction challenges.

Proposals are due to IFA on January 23, 2014, and IFA anticipates notifying the preferred proposer by mid-to-late February.

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.

TRB Releases Report Providing Overview of Performance-Based Specifications

State agencies have increasingly turned to alternative contracting methods such as design-build and public-private partnerships to deliver highway construction projects.  As a result, the use of performance-based specifications has also increased.

To provide a better understanding of how these specifications function, the Transportation Research Board (TRB) recently released Legal Research Digest 61, which provides an overview of performance-based specifications, explores how they differ from traditional design or method-based specifications, and explains the risk allocation differences between them.  Particularly helpful is the report’s discussion of how courts have addressed disputes related to performance specifications in design-build contracts, including how courts have applied the Spearin doctrine, which generally posits that owners are unable to hold contractors responsible for consequences of following the owner’s specifications.

TRB’s report can be found here.

Thanks to Frank Liu for his assistance with this entry.

Federal Report Endorses P3 Infrastructure Financing for Transit-Oriented Development

The U.S. Environmental Protection Agency (“EPA”) has issued a report that details funding mechanisms and development strategies that communities can use to provide innovative financing options for transit-oriented development (“TOD”). 

The report affirms the need for local and state transportation agencies to continue to think beyond traditional funding, procurement and contracting approaches to satisfy their burgeoning infrastructure needs. 

Detailed in the report is an explanation of innovative financing mechanisms, which should be required reading for those interested in innovative P3 financing and transit development. 

These include:

  • Direct fees: user or utility fees and congestion pricing;
  • Debt tools: private debt, bond financing and federal and state infrastructure debt mechanisms;
  • Credit assistance: state and federal credit assistance tools, such as TIFIA;
  • Equity: public-private partnerships and infrastructure investment funds;
  • Value capture: developer fees and exactions, special district and tax increment financing and joint development;
  • Grants and other philanthropic sources: federal transportation and community and economic development grants and foundation grants and investments; and
  • Emerging tools: structured funds, land banks, redfields to greenfields, and a national infrastructure bank. 

Four innovative models should also be considered when developing financing plans for TOD infrastructure, according to the report:

1. Anchor institution partnerships: partnering with nonprofit or private entities (such as universities, hospitals and corporations) that have a strong nexus with their location because of real estate holdings, capital investment, history or mission;

2. Corridor-level parking management: setting parking prices and managing parking demand across a transit corridor or system for parking structures and off-street spaces;

3. Land banking: land assembly and acquisition that makes it easier and more affordable to acquire right-of-way for TOD infrastructure; and

4. District energy systems: reducing energy use, encouraging renewable energy and facilitating compact development.

In addition to the clear benefit of providing local or state agencies with multiple funding sources and the ‘life cycle’ benefits from grouping projects together, the report also speaks to ‘softer’ community benefits.  It notes that the use of integrated transportation and land use planning expands transportation choices and can reduce transportation costs, giving more freedom and mobility to low-income individuals, senior citizens, disabled persons and others who cannot or choose not to drive a car.  Further, TOD development can help improve air quality and reduce greenhouse gasses. 

The full text of the report is available on the EPA 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.

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.

20th Annual CCPPP Conference Looks to the U.S.

The 20th annual conference of The Canadian Council of Public-Private Partnerships (CCPPP) was held in Toronto on November 26-27, 2012.  Drawing industry leaders from within and outside of Canada, the conference this year reflected the maturity of the Canadian market and the interest of P3 players looking beyond its borders for future opportunities, particularly participating in the growing U.S. P3 market. 

One of the keynote speakers was Michigan Governor Rick Snyder, who championed the proposed $3.5 billion Detroit-Windsor bridge and expressed appreciation for Canada’s leadership on the proposed project and in the P3 sector generally.  With the Canadian government indicating that it will take the lead in procuring and financing the project, Governor Snyder stated that he hopes to see the project come to market within the next couple of years.

A well-attended session discussed recently closed US P3 projects:  California’s Presidio Parkway Project (awarded to a Hochtief consortium in 2011); Florida’s I-595 Project (awarded to an ACS consortium in 2009); and Denver’s Eagle Project (awarded to a Fluor consortium in 2010).  The panelists discussed the complexity of bringing these projects to financial close and US-specific issues.

Many attendees felt that, while the Canadian P3 market continues to generate a steady pipeline of P3 projects, the US infrastructure market is well-poised to attract many of the seasoned Canadian P3 players.  SNC-Lavalin, an experienced Canadian P3 developer, was recently shortlisted and submitted a bid on the East End Crossing Project.  Other seasoned Canadian P3 participants, such as Bilfinger Berger and Hochtief, were also members of shortlisted consortia for the project, and the Presidio Parkway Project was awarded to Hochtief.  Canadian P3 players have also expressed interest in potential upcoming P3 projects such as Los Angeles County Metropolitan Transportation Authority’s Accelerated Regional Transportation Improvements Project and the Travis Country Courthouse project in Texas. 

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.