mdot ~ public-private partnerships (p3’s) · 2018. 10. 8. · p3 definition • fhwa defines...
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MDOT ~Public-Private Partnerships (P3’s)Metro Region – Freeway Lighting P3
P3 Definition• FHWA defines Public-Private Partnerships (P3’s) as contractual agreements
formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation project.
P3 Advantages• Ability to shift specific risks to the private sector
• Ability to use private funds to advance projects
• Schedule and Price certainty over the term
• Ability to refocus our resources and efforts
• Innovation
P3 – Project Screening• Initial Screening Items and Project Evaluation
• Potential that private partner could provide value
• Market Interest
• Financial Feasibility
• Project Scope
• Risk Allocation
P3 Procurements – Steps
• Request for Letters of Interest (RFLOI)
• Request for Qualifications (RFQ)
• Shortlist (typically 3-5 teams)
• Site Visits and One-on-One Meetings
• Request For Proposals (RFP)
• ITP, Project Agreement, Schedules, etc
• One-on-One Meetings
• Commercial Close
• Financial Close
P3 – Unique Procurement• Multiple Specialty Areas
• Financial• KPMG provides these services for us through the Governor’s Office
• Legal• It is recommended that legal counsel be procured to help develop the contract language.
• Engineering• Depending on the project, a multitude of specialty areas will need to review contract language
• Contract Services• Plan to have conversations with contract services, both professional services and construction
contracts.
• FHWA• FHWA will need to be involved throughout the process (finance, legal and engineering)
• Insurance • Plan to discuss required insurances and minimum requirements at length
Freeway Lighting P3 - Schedule
• Request for Letters of Interest – posted July 25, 2013
• MDOT received 12 responses on August 12, 2013
• Request for Qualifications developed – posted March 6, 2014
• Received 9 proposals
• MDOT short-listed 4 firms – announced short-list May 16, 2014• Short-listed firms – DTE Energy, Freeway Lighting Partners,
Citelum, Energy Systems Group
Freeway Lighting P3 - Schedule
• Developed Request For Proposals (RFP) –
• Multiple meetings held with the bidders
• Final Version of the RFP – posted February 27, 2015
• Technical Submittals and Bids – due on March 27, 2015• Announcement of Preferred Proposer – May 26, 2015• Commercial and Financial Close – August 24, 2015
Freeway Lighting P3 – Key Terms• Project Company will Design, Build, Finance, Operate & Maintain
• 14,870 freeway lights • Consisting of all freeway lights within limited access Right of Way
• 15 year term
• Energy Savings Payment• Project Company will be incentivized to provide energy efficient equipment
• Lane Rentals are included in the Contract
• Non-Compliance points assessed if not in compliance with Contract• Example – 10 days to correct a non-operating light
• Example – 7 days to correct a group of non-operating lights
• First point is $450 per occurrence
• If not remedied, increased to $1,000
So Why a P3 Contract Structure?
• Significant upfront capital costs required to improve the existing system
• Energy costs can be significantly reduced if re-lamped to something more efficient• Estimated $21M in Construction Costs to convert lamps to LED• Use of energy savings can help reduce the overall payment
• Allows shift of MDOT staff functions to focus on other electrical infrastructure
• Shift the Risk• New technologies are always being developed
• Allows use of emerging tech more quickly
• Shifts risk of failure onto the project company
• Allows the possibility of energy savings to offset some of the contract cost
• Theft Prevention
Freeway Lighting P3 – Risk Sharing• Theft
• Project Company – first $150,000
• 50/50 share up to $250,000
• Department – any costs over $250,000
• Damage to Infrastructure
• Vehicle damage – Department responsible for costs associated with damage caused by errant vehicles
• Department will then pursue reclamation from insurance company
$77.26 $46.03
$21.86
Capital Improvement Costs O&M Costs Power Costs
Freeway Lighting P3 – Cost & Payment Structure• Project Company will Design, Build, Finance, Operate & Maintain
• Payment Structure• Milestone 1 - $6,000,000, paid once lights are operating at 90%
• Milestone 2 - $6,000,000, paid upon Substantial Completion – 100% operational
• After Substantial Completion – Operate & Maintain• Quarterly Service Payments (est =$2.1 w/o power)
• Plan to use a mix of Federal and State funds • Total Cost of P3 contract = $145M (includes energy)
• Lights operating between 70-80% (current scenario)• Expected costs = $140M
• Based on average costs expended over the last 8 years
• Lights operating at 100%, using High Pressure Sodium lights• Estimated costs = $183M
Freeway Lighting P3 – Technical Requirements• Technical Requirements – Schedule 16
• Development of the Project Management Plan (PMP)
• Design Requirements
• Non-Tunnels – AASHTO Roadway Lighting Design Guide / IES RP-8
• Tunnels – AASHTO Roadway Lighting Design Guide (Chp 5) / IES RP-22
• Non-Lighting Elements – need to adhere to MDOT Standards, AASHTO, etc
• Must develop a Maintenance Management Information System (MMIS)
• Traffic Management Plan
Freeway Lighting P3 – Non-Compliance Points • These are all defined within Schedule 3 – Payment Mechanism
• $450 per occurrence
• If the root cause of the problem is substantially the same
• Deduction is increased to $1000, indexed
• Mitigation Period – timeframe is dependent on the type of failure
• Remedy Period – timeframe is dependent on the type of failure
Freeway Lighting P3 – Handback Criteria• Handback Criteria for specific elements – Exhibit C of Schedule 16
• A complete condition survey and inspection must be completed within 1 year of handback
• Required to supply a 60 day supply of parts and materials – quantity based upon a 60 day typical period for repairs as documented in the MMIS
• Handback requirements are variable dependent on the component
• Luminaires (including ballast/driver) – 5 years
• Posts/Standards – before term require inspections, during term – 10 years & inspection
• High Mast – before term require inspections, during term – 15 years & inspection
Lessons Learned from the 1st P3
• Document and Version Control
• Need for the full team to be on-board at the development of the RFQ
• Identify and include as much information that we have readily available
• RFQ should provide detail on the planned structure of the P3 agreement as well as the expected closing process
• Risk workshops and updates to the financial model and engineering estimates should be done often and reflect the current risk profile of the contract
• Updated term sheets should be readily available to inform management when asked
Next Steps and Potential P3 project
• The Governor’s Office is working on specific P3 legislation – two bills introduced
• HB 4940
• SB 627
• Requests for Letters of Interest developed for Pump Stations
• Responses received November 24th
• 16 responses received
• Evaluation of responses, risk assessment and estimates are being developed to present to Leadership.
P3 Resources
• FHWA has a very informative website:
• https://www.fhwa.dot.gov/ipd/p3/toolkit/
• MDOT’s Innovative Contracting website:
• www.Michigan.gov/ic
• Other State DOT’s and agencies have good information – Virginia and California
• Google is great
Questions?
Charlie Stein, PEInnovative Contracting Unit517-373-7339steinc@Michigan.gov
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