In the wake of the significant transportation funding legislation passed at the end of November 2013, Pennsylvania’s Department of Transportation wasted no time issuing a request for qualifications (“RFQ“), seeking statements of qualifications from potential concessionaires to replace hundreds of structurally deficient bridges through a public private partnership (“P3”). PennDOT has also issued four addenda to the RFQ. Additionally, PennDOT prepared lists and maps of the structurally deficient bridges for consideration by potential concessionaires. These efforts have created new construction opportunities for contractors.
In 2012, Pennsylvania passed legislation authorizing the use of P3s on transportation projects. The P3 law created the Public-Private Transportation Board, which must approve all P3 projects. The Rapid Bridge Replacement project was approved by the Board on Sept. 27, 2013. Shortly thereafter, on November 6, 2013, PennDOT hosted an industry forum to educate potential, private-sector stakeholders on the scope and requirements, and to seek input on certain issues associated with the procurement. In addition, PennDOT participated in the Fall Seminar of the Associated Pennsylvania Constructors (APC), a trade association of contractors, consulting engineers, material suppliers, manufacturers, and others with an interest in Pennsylvania’s road and bridge construction industry. At the Seminar, Bryan Kendro, PennDOT’s Director of Office of Policy & Public-Private Partnerships, moderated a panel discussion on the P3 model, which addressed the legal issues and identified examples of P3 modeling from other states, including the I-495 “HOT Lanes” project in Virginia. This firm is a member of the APC, participates in its programs, and provides legal seminars to its membership.
Pennsylvania has the third-largest number of bridges in the United States, and has the largest number of bridges classified as “structurally deficient.” Approximately, 4,500 or 18 percent of the Commonwealth’s bridges are structurally deficient while the national average is only 7.3 percent. Id. The average age of bridges in Pennsylvania is over 50 years old. Id.
The goal of PennDOT’s Rapid Bridge Replacement project is to replace at least 500 geographically dispersed, structurally deficient, bridges across the Commonwealth in less than 5 years. The project contemplates creating efficiencies through economies of scale, innovation, and optimal risk allocation that will allow PennDOT to deliver more bridges at a lower whole life cost than a traditional design, bid, build procurement. PennDOT is seeking innovative solutions from the concessionaire to deliver quality bridges on a large scale as quickly as possible, while providing good value and minimal inconvenience to the public. In addition, PennDOT hopes to improve the connectivity of the Commonwealth’s transportation network, while minimizing the impacts on the traveling public. PennDOT plans to remove weight restrictions on the new bridges, which PennDOT believes will increase the efficiency of freight and commercial transportation and benefit the Pennsylvania economy as a whole.
The P3 Model
PennDOT seeks a partner that will design, build, finance, operate, and maintain the bridges for an extended period of time, probably between 25-35 years. PennDOT chose the P3 model for this project because it will:
- Allow PennDOT to replace structurally deficient bridges more quickly by allowing future funding to be moved forward to get projects completed today at current costs instead of several years or even decades later.
- Generate savings for PennDOT and Pennsylvania’s taxpayers in the short-term and over the life of the bridges. P3 projects generate efficiencies of scale in the design and construction phase and, over the long term, can generate maintenance savings.
- Allow PennDOT to use these savings to address other infrastructure needs.
- Minimize impact on the travelling public by coordinating these projects with other programmed projects.
An important reason for using the P3 model is to obtain private financing through the concessionaire to help pay for the project. Accordingly, PennDOT intends to make “availability” payments to the concessionaire for 25-35 years after substantial completion of defined portions of the project, as well as the project as a whole. The availability payments will be based on the concessionaire’s ability to keep the bridges properly maintained and available for use, with PennDOT able to make deductions for poor performance. PennDOT also anticipates making progress payments according to the achievement of specific events relating to construction of the project. PennDOT intends to use state and federal funds to fulfill its payment obligations. The details regarding payments will be specified in a future request for proposals (“RFP”). The P3 model’s financing and continuing maintenance obligations fall outside the traditional public construction delivery model and present new challenges for contractors seeking to participate.
The deadline for the statements of qualification from prospective concessionaires is 1:00 p.m. on January 31, 2014. PennDOT anticipates short-listing up to four proposers by March 3, 2014. PennDOT then intends to circulate a draft RFP to the shortlisted proposers in March 2014, with a final RFP planned for June 2014. The deadline for proposals is planned in September 2014, with selection of the successful concessionaire in October 2014 and commercial closing of the financing in December 2014.
We will continue to monitor and report on these exciting P3 developments in Pennsylvania and throughout the country. Please let us know if you have questions.
Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers, and sureties.
Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors, and material men.