Virginia moves forward with P3 reform

Virginia Governor Terry McAuliffe has introduced bipartisan legislation that, if passed, will reform the state’s public-private partnership (PPP; P3) process, simplify its transportation funding formula, focus resources on bridges and pavements, and create a more independent Commonwealth Transportation Board (CTB).

Reforming and restoring “integrity” to the state’s P3 process has been one of McAuliffe’s priorities, which he announced soon after assuming office in January 2014.

According to a statement, released recently by the Governor’s office, the proposed bill would require private sector partners of P3 projects to disclose the risk transferred to the commonwealth. The Transportation Secretary would also be held accountable by confirming that delivery of a specific project using the P3 method was in the public interest.

“This would prevent situations like the US 460 P3 deal, where procurement changed over the course of the project, yet no one was held accountable,” according to the statement.

US Route 460 is a 55-mile, $1.4 billion project originally conceived as a P3 which later became a design-build project. As a result, the state spent $300 million for construction mobilisation activities before securing the necessary permits.

“The P3 programme was the wrong procurement to deliver the US 460 project in south-eastern Virginia, which cost taxpayers $300 million with nothing to show for it,” McAuliffe said.

Last March, McAuliffe suspended the project until the permits had been granted. In June, the Virginia Department of Transportation (VDOT) issued a press release stating that VDOT, the Federal Highway Administration and the US Army Corps of Engineers were “working at a steady pace to evaluate the environmental impacts of five Route 460 alternatives”. Earlier this month, VDOT announced that a preferred alternative route had been identified that would be the least environmentally damaging.

In addition to changing the P3 procurement process, the proposed legislation would improve transparency by revoking the Governor’s authority to terminate members of the CTB without cause.

It also simplifies the old transportation funding formula of 40-30-30. “Under the old system, funds were given directly to the localities. Funds were broken up into many small buckets, which took years to build up enough money in one locality to do anything significant,” according to the statement.

The new law would change that formula as follows: 40 percent of funds would go towards the rehabilitation of structurally-deficient bridges and deteriorating pavement; 30 percent of funding would go to projects of statewide importance, which will be determined by the CTB using a new scoring system introduced under House Bill 2 (HB2); and 30 percent would go to a construction district grant programme, which will require localities to compete for funding.

“The changes we are promoting will help get funds to local communities who haven’t seen funds in four years and the legislation will restore integrity to the public private transportation act process and help keep this programme effective for key projects in the future,” said the bill's sponsor, House Delegate and Chairman of the House Appropriations Committee, Chris Jones.