Public-Private Partnerships
Currently APTA is working on a project looking at all the states and their procurement laws to determine where public-private partnerships are plausible and where they are not.
The FTA has no formal assistance program to help transit agencies with public-private partnerships, but has held a number of workshops on the topic.
According to the FTA, the Denver RTD Eagle P3 project is a great example of successful public private partnerships because during recent spirals in the economy, this project sustained itself.
The Eagle P3 Partnership
RTD’s Eagle P3 project includes the east corridor into Denver International Airport (DIA), the Gold Line to Wheat Ridgeland Arvada, and segment 1 of the Northwest Rail Line.
The project is being delivered and operated under a concession agreement. The concessionaire selected through a bid process is Denver Transit Partners (DTP), which includes Fluor Enterprises, Uberior Investments and Laing Investments. Other firms involved include Ames Construction, Balfour Beatty Rail, Hyundai-Rotem USA, Alternative Concepts Inc., Fluor/HDR Global Design Consultants, PBS&J, Parsons Brinckerhoff, Interfleet Technology, Systra and Wabtec.
DTP will design build finance operate maintain (DBFOM) these lines over a 34-year period, the total contract length. Bill Van Meter, FasTracks Team assistant general manager Planning Department says, “I think because these concessionaires to bid on the job, they really have skin in the game.” He says, “If they don’t meet defined metrics on operating performance, they can be penalized by up to 25 percent of the availability payments, so it’s in their interest to build this line and operate it to a very high level.”
WHY PPP?
The public-private partnership route was a financial strategy to get projects underway. But at this point, Van Meter says, “The more we got into it, we just felt it was a good procurement process and we get a lot of innovation and risk-sharing with the private sector.”
Phil Washington, RTD general manager, says, “You’re moving the project forward sooner than you would be able to without this private sector financial involvement.”
He calls it the three-legged financing stool and says he thinks it’s the process that’s going to be used in this country for megaprojects. “This three-legged financing stool is the private sector with that one leg of that stool, in our case to the tune of about $486 million,” Washington says. “Then you add the local investment, i.e. sales tax to the tune of about $500 million and then you add the federal involvement of the $1.03 billion full funding grant agreement.”
LESSONS LEARNED
It didn’t come without its share of challenges. RTD recently published a “lessons learned” report for the procurement. “A lot of those challenges are defined in there,” Van Meter says.
One of the lessons learned was to have very high-level support before you get into it because of the tough decisions along the way. “Our board of directors had to make some tough decisions and they stood up for it,” says Van Meter. “These companies, they’re risking a lot of their company and a lot of their money based on this, so they want to make sure there are good financial guarantees from the agency to go through with it, that we’re not going to pull the plug at some later time. Those all involve some major decisions that we had to get our board to buy into.”
Washington says it’s important with a PPP, to understand the allocation of risk between the public agency and the concessionaire. “Understand how to put together the risk allocation matrix,” he explains. “Who takes on what risk; who takes on the risk of the ridership; who takes on the fare risk? Put these risks in some type of matrix and decide who does what and how you cross those things out.
“That was a big one for us in terms of this procurement,” he stresses.
A Detailed Process
FasTracks Team Senior Manager, TOD and Planning Coordination Bill Sirois says that after the award was made, both teams complimented them on the process because of the fact that RTD set a schedule and most importantly, stuck to it. “We were able to take a little bit more time at the front end and then kind of got our ducks in a row.” He also said that allowed them to make some big decisions from a scheduling standpoint. “I think that was a real important piece of why we were successful.”
