Portsmouth Bypass P3 Project Performance Based Delivery October 29, 2014

Portsmouth Bypass P3 ProjectPerformance Based Delivery

October 29, 2014

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Presenters

Shawn Thompson, PE, CQECH2M HILL

16 years experienceDesign Manager on $200M I-71/670 Columbus CrossroadsServes as a Technical Lead on PBP Procurement Team (Owner’s Advisory Role)

Mike Wawszkiewicz, PEOhio DOT

16 years experienceSenior Project Manager - Division of Innovative DeliveryProject Manager of the PBP Procurement Team

Presentation Outline

» Project Background» Design-Build-Finance-Operate-Maintain (DBFOM) Model

‒ Delivery Structure/Roles‒ Payment Structure

» Maximizing Asset Performance/Availability‒ Availability Payments‒ Handback‒ Maintenance Performance Obligations‒ Noncompliance Event/Deductions‒ Unavailability Deductions

» Outcome and Upcoming Schedule» Questions?

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Portsmouth Bypass (PBP) - Overview

» Last Segment in Ohio on Appalachian System‒ Economically depressed area

» Originally a Design-Bid-Build Project‒ Three phases‒ Various levels of design completed

» Bypass Scope‒ 16 mile, 4 lane, limited access highway‒ Bypasses 26 miles of US 23 and US 52‒ 5 interchanges and various RR crossings‒ 16 minute time savings

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Project BackgroundDBFOM Model Performance/Availability Outcome/Next Steps

Key Characteristics of the Project

» Reference Design‒ Not contractual

» Significant Earthwork‒ ~25M Cubic Yards of excavation, mainly rock‒ ~20M Cubic Yards of embankment

» 20 Bridges and 17 Retaining Walls‒ Two horizontally curved bridges over US 23‒ Long bridge over Little Scioto River with 100’

tall piers

» High Fill Embankments (> 180’) and Deep Culverts (> 170’)

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Public-Private-Partnership (P3) Timeline

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P3 Project Scope

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RFQ RFP Financial Close

Design & Construction

2Q 2013 1Q 2014 1Q / 2Q 2015

2015 through4Q 2018

» DBFOM Approach» ~4 year Design and Construction

Period (DCP)‒ Starts Spring 2015

» 35 year Operations & Maintenance (O&M) Period

‒ O&M Period begins at Substantial Completion

» Availability Payment Mechanism» Competitive, Fixed Price» Appropriate Risk Transfer to

Private Sector

Financing Approach

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» Transportation Infrastructure Finance and Innovation Act (TIFIA)‒ Critical to obtaining value for money‒ Authorization to use TIFIA rural rate provided significant savings

‒ Status of TIFIA rural rate was unknown during Delivery Options Analysis‒ Baseline TIFIA Term Sheet

‒ DOT coordination on behalf of the Proposers

Performance-Based Methodology

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» Basic Configuration‒ Mandatory features defining the Project’s operational characteristics

» Applicable Standards‒ NOT using ODOT CMS or most ODOT manuals – AASHTO as baseline‒ NOT dictating means and methods

» Guiding Principles – Project Management Plan (PMP)‒ Design Quality Management Plan (DQMP)‒ Construction Quality Management Plan (CQMP)‒ Maintenance Management Plan (MMP)‒ Operations Management Plan (OMP)

» Performance Criteria to be Measured and Monitored During O&M

Quality Oversight

DBT

IQF

ODOT

Developer

After Substantial Completion

PPA

Operations Maintenance

» Department’s First DBFOM Public-Private Agreement (PPA)

‒ DBFOM‒ Performance criteria‒ Developer has freedom to choose‒ Payment tied to facility performance and

adherence to contract requirements

PBP Is A First-Of-Its-Kind Project

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PPA

Project BackgroundDBFOM Model

Performance/Availability Outcome/Next Steps

Developer Owns Risk/Reward

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16 mile greenfield, limited access, 4-lane freeway

5 new interchanges

19 bridges

16 ramps

Side street improvements

1 bridge

Design-Build-Finance

Locally Maintained

DBFOMQuality

Oversight

DBT

IQF

ODOT


PPA


Developer



Quality Oversight

IQF

ODOT

Developer


PPA


Design-Build Team Drives Delivery

» Developer’s Lead Contractor‒ Component of Statement of Qualifications

used by Department to short-list Proposers‒ Assembles a prequalified DBT‒ Develop detailed design‒ Determine specifications with Applicable

Standards as baseline‒ Complete construction work‒ ~4 year DCP

DBT

12Project BackgroundDBFOM Model


Quality Oversight

DBT

IQF

ODOT

Developer


PPA


Independent Quality Firm Accepts Conforming Work» Developer’s IQF

‒ Component of Statement of Qualifications used by Department to short-list Proposers

‒ Provides quality assurance‒ Accepts conforming work‒ Reports nonconforming work‒ Delivers project record

» May Not Be Same During O&M‒ Verifies and accepts renewal work

IQF



Private Sector O&M Responsibility

» Developer Maintains O&M‒ 35-year Operating Period‒ In coordination with DBT, determines asset lifecycle

strategies‒ ODOT to keep minor roles (e.g., snow/ice control,

incident/emergency management)‒ Self reports non-conformances with performance

requirements‒ Routine (mowing, MOT, etc.) and

renewal (pavement resurfacing, bridge rehabilitation, drainage, etc.)

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DBT

IQF

ODOT

Developer


PPA




Quality Oversight

Quality Oversight Team Protects Department Interests » ODOT Hires a Quality Oversight Team

‒ Serve as the Department’s agent‒ Must not ‘direct’ the Developer ‒ Perform submittals compliance review‒ Validate IQF’s project records

‒ 16 miles of R&D‒ Safety recalls

Quality Oversight

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DBT

IQF

ODOT

Developer


PPA




How Is The Developer Compensated?

» Milestone Payments – During the Construction Period‒ Appalachian Development Highway System (ADHS) funds paid at 70% complete, 80% complete,

and Substantial Completion‒ Substantial Completion milestone is subject to deductions regime for non-compliance

» Availability Payments – During the Operating Period‒ Begin only after Substantial Completion is reached‒ Mitigates cost and delay risk



How Is The Developer Compensated?

» Bypass Will be a Non-Tolled Facility» Availability Payments

‒ Monthly payments subject to “unavailability” and “non-compliance” deductions‒ Payment deductions are tracked in Monthly Performance Reports generated by the

Developer and reviewed by IQF and the Department ‒ Equity investors and debt providers are at-risk if payments or portions of payments are not

earned

17PPA Understanding No Learning CurveCOMPLIANCE VALIDATION Why CH2M HILL?PPA Understanding DBFOM Model

Performance/ Availability Outcome/Next Steps

Public-Private-Partnership Math

» Availability Payment (AP) for any month (m) after Substantial Completion:

APm = MaxAPm – MPDm-1

‒ MPDm-1 = Monthly payment deduct for month (m-1) ‒ MaxAPm = Maximum Availability Payment for month (m):

MPDm = MNDm + MUDm

- MNDm = Monthly noncompliance deduction for month (m) - MUDm = Monthly unavailability deduction for month (m)

18PPA Understanding DBFOM Model Outcome/Next StepsPerformance/

Availability

What Happens At The End Of The PPA?

» Handback‒ Developer “hands back” project R/W

and assets to Department‒ Not looking for a new road‒ Residual vs. Useful

19PPA Understanding No Learning Curve

COMPLIANCE VALIDATION Why CH2M HILL?PPA Understanding DBFOM Model


How Handback Works

» Facilities to Be Functional ‒ Scheduled activities‒ Inspections/renewal work

‒ Bridge inspection manual‒ Independent assessment

‒ ‘Crystal Ball’ via Durability Plan to measure conditions

‒ Handback Reserve‒ Lower performing asset = Developer

pays more



TABLE 21-1Schedule of Handback Activities

Months to End of TermHandback Activity Start End Duration (Months)

Handback Schedule - 60 -Residual Life Methodology - 60 -Department Review 60 58 2Initial Handback Inspections 58 52 6Initial Handback Inspection Report 52 50 2Department Review 50 48 2Handback Work Period 48 0 48Calculation of Handback Reserve Amount 26 26 0Handback Period 24 0 24Second Handback Inspections 18 15 3Second Handback Inspection Report 15 12 3Calculation of Handback Reserve Amount 14 14 0Department Review 12 10 2Final Handback Inspections 3 0 3Final Handback Inspection Report 1 0 1End of Term 0 0

Department ‘Hammer’ To Avoid Delays, Inconvenience, And Reductions In LOS To Users

» Performance Measures‒ Encourage safe, effective, reliable asset

performance‒ Use existing measures and targets when

available‒ Tune performance to similar roads in Ohio

» Noncompliant Asset? ‒ Allow time to correct defects before

applying “incentives”



Monthly Noncompliance Deduction

‒ NCPV = unit value for each Non-compliance Point of $5,000 (subject to indexation)‒ NCPm = number of Noncompliance Points accrued in month (m):

» Who Initiated the Defect Notification?‒ If by Developer, Grace Period (if applicable) granted to correct deficiency‒ If by Department, Noncompliance Points begin to accrue



n

1x

xym, NCPENCPVMND

Noncompliance Events

»During DCP‒ Affects Substantial

Completion payment

»During O&M‒ Affects monthly

Availability Payment

»Points Based on Severityof Noncompliance

‒ Focus on safety

»Cure Period Used To Assess Noncompliance Points



Monthly Unavailability Deduction

‒ UDz = Unavailability Deduction for each Hourly Unavailability Event (h) during Month (m)‒ q = Total number of Hourly Unavailability Events in Month (m)‒ h = An Hourly Unavailability Event in Month (m)

» Permitted Closures Not Assessed a Deduction‒ Permitted maintenance closure‒ Emergency/incidents, including 30 minutes after roadway back in service



Unavailability Events - Conditions

» Hourly assessment ends when circumstances giving rise to Unavailability Event no longer apply or the lanes affected by the event have been re-opened to traffic, whichever is earlier

» Can assess one or more events for any closure not permitted» Simultaneous events affecting Mainline travel lanes in same direction are

not additive; largest deduction shall be assessed» Bypass divided into 3 segments and each day divided into two

unavailability periods: off-peak hours (A) and peak hours (B)» If a closure of less than 60 minutes spans two consecutive hours, an

Hourly Unavailability Event for one hour is assessed

25PPA Understanding No Learning Curve

COMPLIANCE VALIDATION Why CH2M HILL?PPA Understanding DBFOM Model


Unavailability Deductions

» Modifications‒ Use of shoulder as a replacement travel lane shall

reduce the deduction by 50%‒ During a Holiday, the deduction shall be increased

by 150%‒ During a Weekend, the deduction shall be

decreased by 50%

» Adjustments Allowed over Term‒ Can be amended to reflect shifts in regional travel

patterns‒ No amendments shall exceed the highest

Unavailability Deduction



Successful Proposer

» Portsmouth Gateway Group (PGG)‒ Equity Investors: ACS Infrastructure Development,

Inc., Infrared Capital Partners Limited, and Star America Fund GP

‒ Contractors: Design-Build Joint Venture – Dragados, USA, Inc., The Beaver Excavating Company and John R. Jurgensen, Co, Inc.

‒ Designers: ms Consultants, Inc.

» ODOT taking steps to execute contract and move toward Financial Close

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PPA Understanding

PPA Understanding DBFOM Model Performance/AvailabilityOutcome/Next Steps

Proposer Base MAP

PWP Portsmouth $25,935,390.00

Portsmouth Gateway Group $25,884,800.00

Portsmouth Bypass Development Partners $26,229,590.00

PPA Understanding DBFOM Model Performance/AvailabilityOutcome/Next Steps

Savings & Next Steps

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» Savings‒ Base Maximum Availability Payments (MAPs): ~20% below the ODOT “Shadow Bid”

estimate‒ Design and Construction Costs: More than 10% below the 2013 FHWA Cost Estimating

Workshop results‒ Time: Original Design-Bid-Build approach anticipated a 13-year design and construction

schedule to complete the Bypass

» Upcoming Milestone Dates‒ Financial Close in the 1st Quarter of 2015‒ Bypass open to traffic in the 4th Quarter of 2018

In Summary…

» PBP is a performance-based approach to 35-year O&M‒ Asset lifecycle strategy risk is the responsibility of Developer

» Selection based on lowest first-year maximum AP, but actual APs subject to deductions

» Grace and cure periods encourage proactive behavior by Developer» Defect remedy preserved through Noncompliant “hold points”» Safety/operational efficiency of PBP optimized » Inspections and reserve will ensure a good road at Handback

“I would rather earn 1% off a 100 people’s efforts than 100% of my own efforts.”- John D. Rockefeller

29PPA Understanding No Learning CurveCOMPLIANCE VALIDATION Why CH2M HILL?PPA Understanding DBFOM Model Performance/Availability

Outcome/Next Steps

Portsmouth Bypass P3 Project

Questions?

Documents

Portsmouth Bypass P3 Project Performance Based Delivery October 29, 2014