P3 solution called for to ease I-66 congestion

Concerns over procurement risks were recently highlighted in Virginia following the failed $1.4bn US Route 460 project, which cost the US state's taxpayers about $100m.

As the Virginia Department of Transportation (VDOT) considers the benefits and drawbacks of utilising a public-private partnership (PPP; P3) for the expansion of a 25-mile section of I-66 west of the Beltway, a local advocacy group calling itself Fix 66 has formed with the hope of swaying the debate in favor of a P3. 

East of the Beltway, I-66 consists of three lanes in each direction, but west of the Beltway traffic is currently squeezed into two lanes each way. This creates a bottleneck that contributes to hours of stop-and-go traffic for commuters every day.

The project aims to address the issues of congestion and mobility demands as well as steady population growth, employment growth in activity centers along the route, safety concerns, and lack of coordinated transit service and modal choices, according to VDOT.

The Virginia Office of Transportation Public-Private Partnerships (OTP3) issued a Request for Information (RFI) related to the planned expansion project in 2013, to which it received 19 responses from parties offering recommendations on how to improve the corridor.

In a presentation to the Commonwealth Transportation Board (CTB), entitled “Steps to a P3 procurement Transform66 Outside-the-Beltway Project” and delivered on Wednesday, VDOT commissioner of highways Charles Kilpatrick said his office met with five private sector teams between June 25 and July 1 who are interested in developing the project as a P3. Still, Kilpatrick said, at this point both P3 and design-build procurement remain on the table as viable options. 

Fix 66 hopes to convince VDOT to take the traditional procurement option off the table. Anthony Bedell, the group's spokesperson, worries that if the state manages the project on their own, it will end poorly.

“We've seen I-95 now, with the [high-occupancy tolling] HOT lanes going all the way from Springfield interchange to almost north of Stafford are working well, and [in both cases] it was done quickly, under budget and on time,” he said. “The product seems to have been delivered well. Why would we then start kicking around going back to the way it was when they built the old Springfield Interchange, which took 10 years and is still confusing to people to this day, and had mass cost overruns which then impacted other transportation projects that were needed down the road because they had to use the money that was designated for those to pay for the rest of the interchange?”

Beyond concerns surrounding finance and timelines, Bedell is among those in the Fairfax County community who are worried that a fully public I-66 expansion will not be as efficient in dealing with the issue of widening the highway's footprint as would a deal involving the private sector.

“I'm not an expert on this, as I am mostly focused on the policy, but I've been told there are significant differences on this. If the government did it, they would [force-relocate] 300 homes, and if the private sector did it, it would be eight homes,” he said. “Now that's still eight people whose homes and lives are going to be significantly impacted, so we have to be very sensitive to that. But certainly in that approach, if you take it from 300 down to eight with a private company, maybe there's a way to take it down to zero.” 

McAuliffe's office did not respond to a request for comment on this matter. 

Virginia Transportation Secretary Aubrey Lane said in a statement on Wednesday that at the behest of the McAuliffe administration, VDOT will not take any options off the table until all benefits and drawbacks have been properly considered. 

“The McAuliffe administration believes that all options for delivering large-scale transportation projects must be explored,” said Lane in a statement. “We must deliver the right project with the right financing. The only predetermined outcome in this process is to ensure that taxpayers are protected.”

Concerns over procurement costs and risks were highlighted in Virginia as a result of the failed $1.4 billion US Route 460 project, which saw state taxpayers pay about $100 million after another $150 million was recovered from the consortium that was contracted to develop the 55-mile stretch of highway. Originally, the US Route 460 expansion was procured as a P3, but then in the midst of pre-construction, the contract was altered so that it became a design-build project.

The Route 460 debacle led to the drafting of two new pieces of legislation, namely House Bill 2 – which was passed in April 2014 and created a scoring system that measures safety, congestion, accessibility, economic development, environmental quality and land use to rank the importance of proposed transportation projects – and House Bill 1886, which was introduced earlier this month and aims to create a steering committee populated by representatives of the General Assembly to determine the best delivery method for projects.

If the state should decide to initiate P3 procurement for the expansion, private partners would need to show that they can deliver three general purpose lanes, two HOT lanes that accommodate an unlimited number of HOV-3 and buses free of charge; construct three new park-and-ride lots and expand two others (with a combined total of 4,261 new parking spots to be created at a minimum); and provide funding for transit services including purchase of buses and capital for operations and maintenance of transit systems and programs (though the private partner would not have to operate transit services). Finally, including the construction period, the maximum lifespan of the contract would be 40 years.

To be eligible, a private partner would have to do all of this for less than $2.1 billion, which is about how much the state estimates it would cost to build, operate and maintain the project under the traditional procurement method. VDOT estimates that the maximum state contribution to the project, if it were procured under a P3 contract, would be roughly $600 million, according to a Transform66 draft term sheet dated June 2.

In his presentation to the CTB, Kilpatrick made a conditional recommendation that delivering the I-66 project as a P3 may be in the Commonwealth's best interest, according to a related press release.

“At this point we need to see the next card,” Kilpatrick said. “We are not 'all-in' on a public-private partnership at this point but we are interested in seeing if we can make something work.” 

His recommendation will be considered by the Transportation P3 Advisory Committee at their next meeting on August 17, and the preferred procurement method is set to be announced on December 15. 

Regardless of this decision, said the release, “a public finance option will continue to be developed to ensure competition and provide the Commonwealth with an option to deliver this project”.