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Dd P3 Wkshp Procurement Schedule Key Issues 0709
1. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
DOYLE DRIVE
Concept for P3, Procurement Schedule
and Key Issues
Geoffrey S. Yarema and Fredric W. Kessler
Nossaman LLP
July 6, 2009
2. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Overview
Public-private partnership (P3)
authority in California
Concept 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 schedule
Review of key issues
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3. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
P3 Authority in California
Senate Bill 4 (SBX2 4) amended Streets and
Highways Code Section 143
Authorizes Caltrans and regional transportation
agencies (RTAs) to implement transportation
projects through a P3 delivery method
Transportation projects include highways,
streets and rail
No limit on number of projects
Deadline of June 1, 2017 to execute P3
agreements
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4. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
P3 Authority in California
P3 Procurement Process under SBX2 4
Caltrans/RTA screening and project nomination
CTC 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
determination
Further CTC role and timing of involvement remain
open
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5. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
P3 Authority in California
P3 Procurement Process under SBX2 4 (cont.)
RFQ/RFP process and proposal submission
Evaluation and selection
Public hearing by procuring agency on P3
agreement
60-day review and comment by Legislature and
PIAC
Consideration of comments and execution of P3
agreement
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6. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Screening for Optimal Doyle Drive
Delivery Method
Caltrans and SFCTA
currently engaged in
screening process
Screening compares
which delivery method
best achieves
objectives:
Conventional project
delivery
P3
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7. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Screening for Optimal Doyle Drive
Delivery Method
Caltrans/SFCTA objectives:
Cure seismic safety risk as fast as possible
On-time and within-budget delivery
Minimize integration, interface and coordination
risks of multiple contracts
Optimize cash flow management
Obtain life cycle cost efficiency
Assure compliance with requirements of
cooperating stakeholders
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8. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Screening for Optimal Doyle Drive
Delivery Method
P3 would involve private party in project
financing, design, construction and long-
term operations and maintenance
Working assumption for screening:
Wrap contracts 5-8 scope into a P3
Place project O&M under a P3
Use availability payment type of P3
Screening process is testing this working
assumption
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9. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Screening for Optimal Doyle Drive
Delivery Method
Screening begins with evaluation of P3
suitability under the following criteria:
Institutional preparedness
Stakeholder concerns/requirements
Project size and complexity
Local political support
Project maturity
Risk allocation
Market interest
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10. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Screening for Optimal Doyle Drive
Delivery 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 project
Schedule impacts if use P3
Design approach, use of performance
specifications
Caltrans retention of certain O&M functions
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11. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Doyle Drive as
Availability Payment Concession
Availability payment concession structure to
implement Doyle Drive
This approach was used on the I-595 project in
Florida (reached financial close in March 2009)
Government
Availability Payment
• Must be earned
Milestone Availability • Capped at amount bid
Concession
Payments Payments (adjusted for inflation)
Equity Investors Concessionaire Lenders
D-B Contractor Operator
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12. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Doyle Drive as
Availability Payment Concession
Public 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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13. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Doyle Drive as
Availability Payment Concession
Developer:
Arranges debt and equity financing for some or all project capital
costs
May be responsible for capital replacements
Maintains project and manages traffic for a fixed term
May be responsible for maintenance and traffic management
during construction
May receive “tax ownership” and therefore depreciation benefits
Receives 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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14. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Doyle Drive as
Availability Payment Concession
Involves two types of payments:
Milestone payments – Payment made by the
owner to the developer once the developer
reaches a construction milestone
Availability 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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15. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Doyle Drive as
Availability 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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16. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Other P3 Options for Doyle Drive
Caltrans and SFCTA considering
other P3 structures
E.g., Design-Build-Finance
Caltrans retention of O&M
functions remains under active
consideration
Can 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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17. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Preliminary Procurement Schedule
Activity 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 December 2009
Determination
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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18. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Preliminary Procurement Schedule
Schedule Drivers for Start of Procurement
CTC guidelines
Completing value for money analysis
Preparing project report and business case for CTC
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19. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Preliminary Procurement Schedule
Schedule Drivers for Completing Procurement
Completing Presidio Trust agreements
CTC submission periods and hearings
Preparing and internally approving revised design and
construction specifications, new O&M specifications
FHWA review and approval of specifications and RFP
Completing local funding agreements
Statutory hearing and 60-day review by Legislature and
PIAC
Schedule to complete contracts 3 and 4 (February 2011),
switch traffic and demobilize (June 2011)
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20. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
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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21. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
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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22. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
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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23. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
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
method
While Caltrans would place primary weight on
pricing, proposers’ technical solutions and
construction schedule would be important factors
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24. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
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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25. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Questions?
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26. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE
Contact Information
Geoffrey S. Yarema
NOSSAMAN LLP
gyarema@nossaman.com
213.612.7842
Fredric W. Kessler
NOSSAMAN LLP
fkessler@nossaman.com
213.612.7829
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