Dd P3 Wkshp Procurement Schedule Key Issues 0709

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Dd P3 Wkshp Procurement Schedule Key Issues 0709

  1. 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. 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 2
  3. 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 3
  4. 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 4
  5. 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 5
  6. 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 6
  7. 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 7
  8. 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 8
  9. 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 9
  10. 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 10
  11. 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 11
  12. 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 12
  13. 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 13
  14. 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) 14
  15. 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 15
  16. 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? 16
  17. 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 17
  18. 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 18
  19. 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) 19
  20. 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? 20
  21. 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)? 21
  22. 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? 22
  23. 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 23
  24. 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? 24
  25. 25. SOUTH ACCESS TO THE GOLDEN GATE BRIDGE – DOYLE DRIVE Questions? 25
  26. 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 26

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