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48 T R A N S P O RTAT I O N F I N A N C E Denver I-25: Combining Highway and SESSION 4: INNOVATIVE CONTRACTING AND Rail Financing in a Single Initiative IMPLICATIONS FOR TRANSPORTATION FINANCE Heather Dugan Max Inman, Federal Highway Administration (Moderator) Greg Henk, HBG Constructors, Inc. (Discussant) Heather Dugan used the Denver I-25 project to address Pete K. Rahn, New Mexico State Highway and the combination of highway and rail financing in a single Transportation Department multimodal project. The Colorado legislature passed a John Walsh, South Carolina Department of Transportation bill to provide needed funding and project-delivery mech- Kirk Wineland, Baltimore/Washington International anisms, and state and federal agencies signed agreements Airport to work together to accomplish the project. Dugan used the project as an example of how multi- modal projects can create difficulties because of the lack New Mexico of a standard process across modes and modal agencies (i.e., between the Federal Highway Administration and Pete K. Rahn FTA). Dugan then enumerated a number of lessons learned from this project: Pete K. Rahn provided the first case study presentation in this session, on the NM-44 project. The state had an Multiple funding sources can work together, but aggressive plan to build a significant number of four- there are challenges that must be overcome. lane facilities for economic development. The legisla- To do so, financial staff must be involved early in ture, however, did not approve the highway plan. The the project development process. state faced two unattractive options: Federal agencies also must be involved early on. Remove $214 million from the State Transportation Improvement Program (STIP) for NM-44 or Massachusetts Route 3 North: Resolving Labor Build 5-mile increments for the next 27 years. Issues in a DesignBuildOperateMaintain Project The solution that the state arrived at was to use a combination of traditional and nontraditional mecha- Edward J. Corcoran II nisms to advance the project. Tools considered by the state for this project included the following: Edward J. Corcoran II presented the third case study-- that of the Massachusetts Route 3 North project--that Advance construction, focused on the resolution of labor issues in a design Developer financing via a "63-20" corporation buildoperatemaintain project. Corcoran identified the (enabled by Internal Revenue Service Ruling 63-20, which following key labor questions: allows for the creation of nonprofit financing conduits and use of such entities for an array of publicprivate Does innovative project delivery displace state jobs? projects), Does innovative project delivery create labor Pledge of future federal revenue, agreement issues? Soft match provisions, and Does the magnitude of the project preclude A federal lands match waiver. smaller contractors from competition? Innovative contracting components included the fol- Corcoran noted that this project required significant lowing: negotiation with labor unions to resolve the various labor concerns. Extremely fast design and construction, Construction management, Long-term warranty, and Discussion A combination of low bid criteria with qualification- based request for proposals. Mary Richards The project was a remarkable 15 months from con- Mary Richards led the group through a wide-ranging cept to contract. Through the contracting and financing question-and-answer period about the three showcased methods chosen, the state built four lanes of highway projects and the lessons learned from each. for the cost it would have taken to build only two lanes.