San Francisco awards $500m transit deal

Originally envisioned as an availability payment-based public-private partnership, the 3.2-mile Oakland Airport link will be delivered under a design-build contract with Flatiron and Parsons. A $70m commitment of federal stimulus funds is said to have ‘revived’ the project.

The mass transit agency for San Francisco has awarded a contract to build a 3.2 mile automated rail line between its train system and the Oakland International Airport, triumphing over two unsuccessful attempts to award the $500 million project.

The board of the San Francisco Bay Area Rapid Transit District voted 7-1 to award the so-called Oakland Airport Connector to a joint-venture between engineering and construction companies Flatiron and Parsons.

The project is structured as a design-build contract, meaning the two companies will be awarded a fixed amount of money in return for building the project by a set date. The two companies bid $361 million as the price of delivering their project design. Additionally, Doppelmayr Cable Car, their partner for the train sets, will receive a 20-year operations and maintenance contract with the district. That brings the total price of project delivery to $440 million.

Oakland Airport Connector:
finally on its way

The $440 million proposed by Parsons and Flatiron was about $40 million below the district’s price affordability target of $480 million. Including contingency reserves and financing costs, the project’s total cost rises to about $492 million. Even at that level, though, the project will still beat the total project cost estimate of $552 million, the district said in a statement, adding that “a competitive bidding environment led to lower than projected costs”.

Flatiron and Parsons beat three other bidders, one of which, Kiewit Pacific Company, was disqualified because its proposal did not meet all the requirements necessary to be evaluated, according to an agenda for the district’s board meeting.

At the time the district began to solicit the project in May, it had about $430 million of public funding incorporated into its work plan. That money came from a mix of federal, state and local sources, including $70 million of stimulus funding which would expire if the project was not awarded by year’s end.

The deadline led to a scramble to find the fastest way to award the project. Both because of its speed and ready-to-go financing, a design-build approach made more sense than a public-private partnership, said Tuyen Mai, a director at Jeffrey Parker & Associates, the district’s financial advisor on the deal.

Mai added that the stimulus money “revived” the project, which had stalled when a previous procurement attempt became too expensive for the district.

In September 2006, the district shortlisted three bidders to deliver the Oakland Airport Connector in return for availability payments. Under this arrangement, the private sector would have financed the Oakland Airport Connector and  received periodic payments from the district in return for running the project after it was complete (thereby making it “available” to the public).

But the deal fell apart after the only remaining bidder, a group that included now-defunct investment bank Babcock & Brown, Parsons, Flatiron and Canadian manufacturer Bombardier, could not agree with the district on an affordable level of availability payments.

Before that, the district had also considered offering the project as a design-build contract with an operations and maintenance agreement, but the procurement was never pursued, Mai said.

San Francisco Bay Area Rapid Transit District officials in charge of the project did not return requests for comment before press time.