dd p3 wkshp procurement schedule key issues 0709
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SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
DOYLE DRIVEConcept for P3, Procurement Schedule
and Key Issues
Geoffrey S. Yarema and Fredric W. KesslerNossaman LLP
July 6, 2009
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Overview
Public-private partnership (P3) authority in CaliforniaConcept for Doyle Drive P3• Screening for optimal Doyle Drive delivery
method• Doyle Drive as availability payment
concession• Other P3 options for Doyle Drive
Preliminary procurement scheduleReview of key issues
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P3 Authority in California
Senate Bill 4 (SBX2 4) amended Streets and Highways Code Section 143Authorizes Caltrans and regional transportation agencies (RTAs) to implement transportation projects through a P3 delivery methodTransportation projects include highways, streets and railNo limit on number of projectsDeadline of June 1, 2017 to execute P3 agreements
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P3 Authority in California
P3 Procurement Process under SBX2 4Caltrans/RTA screening and project nominationCTC approval of nominated projects
• Improved mobility• Improved operation or safety• Air quality benefits• Address known forecast demand
CTC approval of best value evaluation criteria and (for Caltrans projects only) certification of useful life determinationFurther CTC role and timing of involvement remain open
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P3 Authority in California
P3 Procurement Process under SBX2 4 (cont.)RFQ/RFP process and proposal submission Evaluation and selectionPublic hearing by procuring agency on P3 agreement60-day review and comment by Legislature and PIACConsideration of comments and execution of P3 agreement
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Screening for Optimal Doyle DriveDelivery Method
Caltrans and SFCTA currently engaged in screening processScreening compares which delivery method best achieves objectives:
Conventional project deliveryP3
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Screening for Optimal Doyle DriveDelivery Method
Caltrans/SFCTA objectives:Cure seismic safety risk as fast as possibleOn-time and within-budget delivery Minimize integration, interface and coordination risks of multiple contractsOptimize cash flow managementObtain life cycle cost efficiencyAssure compliance with requirements of cooperating stakeholders
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Screening for Optimal Doyle DriveDelivery Method
P3 would involve private party in project financing, design, construction and long-term operations and maintenanceWorking assumption for screening:
Wrap contracts 5-8 scope into a P3Place project O&M under a P3Use availability payment type of P3
Screening process is testing this working assumption
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Screening for Optimal Doyle DriveDelivery Method
Screening begins with evaluation of P3 suitability under the following criteria:
Institutional preparednessStakeholder concerns/requirementsProject size and complexityLocal political supportProject maturityRisk allocationMarket interest
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Screening for Optimal Doyle DriveDelivery Method
Screening includes evaluating: Value for money – financial comparison of (1) planned multiple design-bid-build contracts and pay-go financing with (2) concession and private financial support for portion of projectSchedule impacts if use P3Design approach, use of performance specificationsCaltrans retention of certain O&M functions
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Doyle Drive asAvailability Payment ConcessionAvailability payment concession structure to implement Doyle Drive
This approach was used on the I-595 project in Florida (reached financial close in March 2009)
Concessionaire Lenders
OperatorD-B Contractor
Government
Equity Investors
Avai
labi
lity
Paym
ent
Con
cess
ion
• Must be earned• Capped at amount bid
(adjusted for inflation)Availability Payments
Milestone Payments
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Doyle Drive asAvailability Payment ConcessionPublic owner:
Pays developer• To finance, design, construct, operate and
maintain project• Based on project availability and performance
over an extended period
Uses technical specifications to assure performance, facilitate innovation and life cycle cost efficiencies
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Doyle Drive asAvailability Payment ConcessionDeveloper:
Arranges debt and equity financing for some or all project capital costsMay be responsible for capital replacements Maintains project and manages traffic for a fixed termMay be responsible for maintenance and traffic management during constructionMay receive “tax ownership” and therefore depreciation benefitsReceives scheduled payments from public owner during the contract term as compensation for services and financing Hands project back in pre-agreed condition at the end of the contract term
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Doyle Drive asAvailability Payment ConcessionInvolves two types of payments:
Milestone payments – Payment made by the owner to the developer once the developer reaches a construction milestoneAvailability payments – Deferred unitary payment encompassing financing costs, O&M expenditures, and return on equity• Paid periodically (e.g., monthly, quarterly) after
substantial completion• Amount may be adjusted by changes in an
index (e.g., CPI)
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Doyle Drive asAvailability Payment Concession
Availability payments (cont.):• May be adjusted downward based on the
developer’s performance:– Unpermitted closures– Quality, safety or environmental standards are not
met– Other adjustment factors
• Encourages developer to manage its maintenance program to avoid traffic disruption at busy times
• Potential reduction in the availability payment provides the developer with incentive to perform
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Other P3 Options for Doyle DriveCaltrans and SFCTA considering other P3 structuresE.g., Design-Build-Finance
Caltrans retention of O&M functions remains under active considerationCan private sector really perform O&M at less expense compared to Caltrans’ economies of scale?Will design and construction quality suffer if private party does not shoulder O&M responsibility?
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Preliminary Procurement ScheduleActivity Date
CTC* Project and P3 Approval September 2009
Issue RFQ September 2009
SOQ Due Date November 2009
Issue Draft RFP November 2009
SOQ Evaluation and Shortlisting December 2009
CTC Approval of Evaluation Criteria and Certification of Useful Life Determination
December 2009
Issue Final RFP January 2010
First Round of One-on-One Meetings with Shortlisted Proposers Winter 2010
Second Round of One-on-One Meetings with Shortlisted Proposers Spring 2010
Proposal Due Date May-June 2010
Proposal Evaluation and Selection June-July 2010
Public Hearing on Final P3 Agreement July 2010
Legislative and PIAC Review of Final Agreement and Public Comments August-September 2010
Consideration of Comments, Execution of P3 Agreement October 2010
Financial Close December 2010
*CTC role subject to promulgation of guidelines
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Preliminary Procurement Schedule
Schedule Drivers for Start of ProcurementCTC guidelinesCompleting value for money analysisPreparing project report and business case for CTC
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Preliminary Procurement Schedule
Schedule Drivers for Completing ProcurementCompleting Presidio Trust agreementsCTC submission periods and hearingsPreparing and internally approving revised design and construction specifications, new O&M specificationsFHWA review and approval of specifications and RFPCompleting local funding agreementsStatutory hearing and 60-day review by Legislature and PIACSchedule to complete contracts 3 and 4 (February 2011), switch traffic and demobilize (June 2011)
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Review of Key Issues
Value for money – To what extent will an availability payment concession produce value beyond the conventional design-bid-build delivery method?Project scope – Is the proposed scope attractive to the industry?Type of P3 agreement – Is the type of P3 agreement and project financing mechanism attractive to the industry?
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Review of Key Issues
P3 agreement term – What is the right length of term to secure financing and optimize value? Construction schedule – What are the best options to manage the schedule for construction completion under contracts 1-4 with the handover of O&M and start of construction work under a P3 agreement for the balance of the project (contracts 5-8)?
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Review of Key Issues
O&M scope – What is the appropriate scope of O&M to delegate to the private entity?
Are certain responsibilities more appropriate for Caltrans?What is the best allocation of O&M responsibilities regarding the improvements constructed under contracts 1-4?Is assumption of O&M for contracts 1-4’s permanent improvements attractive to the industry?
• What approach should be considered with respect to patent and latent defects?
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Review of Key Issues
O&M standards – What are the appropriate standards and specifications for O&M?Proposal evaluation – What is the most appropriate method to evaluate and score final proposals?
Caltrans is considering using a best value selection methodWhile Caltrans would place primary weight on pricing, proposers’ technical solutions and construction schedule would be important factors
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Review of Key Issues
PABs and TIFIA financing – Would it be worthwhile for Caltrans to arrange the availability of PABs and/or TIFIA?Presidio Trust - What oversight and/or coordination issues exist regarding the Presidio Trust and what are possible solutions?Technical specifications – What is the right approach to technical specifications for this project?
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Questions?
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Contact Information
Geoffrey S. YaremaNOSSAMAN LLP
[email protected] 213.612.7842
Fredric W. KesslerNOSSAMAN LLP