It was an event of such shocking proportions that the collapse of the I-35W Mississippi River Bridge – which killed 13 people and injured 145 – remains fresh in the memory, despite having occurred in August 2007. The tragedy became a symbol of US infrastructure failings, especially once the Federal Highway Administration (FHA) arrived at the conclusion that almost 70,000 US bridges had the same structural deficiencies as the one in Minnesota.
Furthermore, the FHA determined that billions of dollars would be required to replace bridges built some 40 or 50 years ago and now nearing the end of their shelf lives (the average life of a US bridge is 42 years). Given fiscal constraints at the federal and state level, it was natural to ask how much of the slack could be taken up by the private sector.
An encouraging sign of the potential for private sector involvement came towards the end of last year with the announcement that the East End Crossing PPP/P3 – Indiana’s part of the Ohio River Bridges project, a bi-state transaction being undertaken with Kentucky – had reached commercial close.
Sceptics will say five years is a long time to wait for a sign of potential; realists will say take a look at the context of caution towards P3s in the US and don’t underestimate the importance of successful pathfinder projects. And, thus far, the East End Crossing has been a striking success.
In the words of law firm Nossaman – which has been advising the Indiana Finance Authority (IFA) on the project – commercial close capped “an extraordinary procurement on an expedited pace, throughout which IFA met each and every interim schedule deadline, making IFA’s East End Crossing procurement among the fastest P3 procurements in the US”.
The project was structured on an availability payment basis, with the state taking traffic and revenue risk in exchange for the private partner making the asset available in good condition. Those involved in the deal say the risk transfer element in particular should make the East End Crossing P3 a template that other states will probably wish to replicate.
There are at least a couple of other reasons for optimism arising from the deal. Firstly, those involved cite the impressive level of bi-state cooperation. In theory, having two states involved made the project more likely to suffer delays. Instead, the swift execution to date will give encouragement to other bi-state projects underway in the US such as the Illiana Expressway (Illinois/Indiana) and the Columbia River Crossing (Washington/Oregon).
Secondly, observers note the strong level of interest in the project, including from European participants. Faced with struggles in their domestic markets, it would be little surprise should European developers take a keener look at the US. The presence of French heavyweight Vinci in the winning consortium appears particularly noteworthy.
The new year has dawned with a welcome boost for US P3s. Can momentum develop both in the bridges sector and in the US P3 market more generally in 2013? The answer will be keenly awaited.