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66 Highway agencies regularly provide incentives to other par- is easy," he said. In other words, the railroadhighway agree- ties with whom they interact. Highway agencies regularly pay ment process generally breaks down because of a lack of com- incentives to contractors to expedite projects. These incentives munication, a lack of understanding, cost disputes, liability have been standardized by various contract models, such as disputes, and other issues unrelated to engineering or speci- incentives for early completion, "lane rentals," and "A+B" bid- fications. Once the parameters of the other issues are agreed ding, which involves the contractor bidding both the cost of to, the engineering details and construction specifications are construction and the time of construction. Highway agencies readily apparent in the design manuals, calculations, and pro- also will pay slightly above appraised value for rights-of-way if fessional practices that have long existed in civil engineering. the property acquisition affects the project schedule. Highway Although disputes over bridge size or span length were occa- agencies also provide incentives to design agencies to provide sionally cited by all parties, disputes over bridge design or prompt submittals. Many states also adopt a "prompt pay- specifications seldom were listed as an impediment to the ment" policy to contractors in the belief that it provides the agreement process. In short, specifications and policies were contractors reliable cash flow, which in the long-term results not frequently cited as impediments, although institutional in lower bid prices for the department. practices and institutional attitudes frequently were. No similar provisions were found to be in use by highway A caveat to the statement that specifications are not an agencies to provide incentives to the railroads. impediment is that highway agencies that do not frequently Although the Washington DOT is the only example found deal with railroads can be surprised by the more robust design that involves a state agency funding a review position at a rail- standards insisted on by railroads. For instance, differing road, it is common for state highway agencies to fund posi- from highway agencies, the railroads tions at environmental resource agencies for reviews. At least 34 state transportation agencies pay for one or more positions · Generally do not accept mechanically stabilized earth walls, at resource agencies, according to a study conducted for the which are common in highway construction; AASHTO Environmental Center for Excellence (3). It reports a · Require shoring around excavation in railroad embank- steady increase in this practice, as highway agencies seek more ments; and "streamlining" opportunities. · Require more robust 100-year bridge designs for railroad One example of incentivizing a railroad involves the Capitol bridges as opposed to lesser standards for highway bridges. Corridor in California. More than 98% of the trains are oper- ated on time by Amtrak over the Union Pacific Railroad (UP). Arguably, relaxing these construction specifications could Over the years, the Capitol Corridor Joint Power Authority save the highway agency money in the construction phase. learned how to effectively incentivize the railroad and conse- However, the railroads have adopted these standards for their quently has the highest percentage of on-time passenger trains own projects as part of an engineering philosophy to ensure in the country, even eclipsing Amtrak trains in the northeast corridor. UP can potentially earn $2.4 million from incentives that bridges and embankments last indefinitely under the annually. greater loads and stresses caused by trains. Unlike highway agencies, the railroads generally design for longer service life and reduce their need for maintenance on the densely used Issues Involving railways. These specifications imposed on highway projects Specifications, Policies, are the same specifications imposed on their own projects to and Institutional Changes cope with their operating environment. Highway networks In earlier sections, model processes and model agreements have many alternate routes and significant redundancy when were described. Those model processes and model agreements maintenance occurs. Railroad networks have fewer alternate included most of the changes in specifications, institutional routes and less redundancy, therefore they design projects to practices, or policies that are required to streamline the proj- reduce the frequency of maintenance. ect review process. In addition, several potential federal reg- ulatory and policy changes were noted. In each description Suggested New of a model practice, it was stated what institutional or legal Specifications, Policies, changes were necessary to implement the model process. In and Procedures the large majority of cases, there were no legal impediments to the model process. Instead, impediments generally were Although no changes in statute or regulation are required to attributable to the organizational structures and processes adopt the model processes and practices, some changes in spec- adopted by the highway agency or the railroad. ifications, policies, and procedures could be helpful toward The lack of specification changes necessary to streamline facilitating greater railroadhighway cooperation and toward the agreement process was referenced by one of the five engi- procedurally supporting the cooperative, partnering processes neering firms interviewed for this project. "The engineering envisioned in the model processes. This section identifies what
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67 new specifications, administrative rules, or procedures could the highwayrailroad partnering process could be more contribute to an enhanced environment of partnering in the easily accommodated by the states if they had available highwayrailroad process. funding. Analogous to this eligibility is the eligibility of costs for ongoing coordination of activities between high- Planning and Coordination Eligibility Policy way agencies and metropolitan planning organizations, and the eligibility of staff positions funded at federal environmen- Most highwayrailroad projects are sponsored by state high- tal resource agencies. In both cases, general staff activities way agencies and the majority of those projects are federally are eligible for federal reimbursement in order to encour- funded. State highway budgets have become seriously strained age the ongoing coordination of highway activities with in recent years. As a result, limited state funds are used for outside entities. activities that are not federally eligible, such as conducting · Similarly, the travel costs associated with the annual or basic highway maintenance, plowing snow, and conducting quarterly highway agencyrailroad coordination meetings routine administrative functions not specifically linked to an could be made federally eligible. Again, the ability to cover eligible federal project or activity. If states had abundant funds, these costs with federal funds could encourage the conduct they could spend them flexibly on project coordination and of these valuable process-improvement sessions. partnering activities. However, as state funds are severely lim- · The cost of creating and sustaining a central repository like- ited, many states are constrained in their project-development wise could be made federally eligible. activities to those activities and procedures that are eligible for federal reimbursement. The federal reimbursement eligibility is currently limited Accounting Rules Requirements to preliminary engineering and planning activities that are A related change that could assist the partnering process is the tied to a specific project. If federal "construction" funds are development of a joint recommendation from the Class I rail- used for a planning activity and a specific project is not con- roads, representative state highway agencies, and the Federal structed as a result, the state highway agency could be com- Highway Administration on eligible reimbursement costs pelled to repay the federal funds. The federal "repayment" under the Federal Acquisition Regulation (FAR). The FAR can be virtually automatic in that the federal agency can sim- (48 CFR 153) governs how cost-accounting is to be con- ply withhold a like amount of funding from the state's cur- ducted on federal aid projects. The rules are not written rent annual federal apportionment. Although it happens specifically for railroad cost recovery. At least one of the Class rarely, such repayment is a real possibility and serves as a I railroads said the cost-accounting rules are cumbersome for serious factor on the states' considerations and approaches the railroads and have led to delays and uncertainty. Devel- to project-coordination activities. The types of federal funds that states may typically use for highwayrailroad projects oping FAR rules specific to the highwayrailroad agreement but are not eligible for general coordination or "partnering" process could further expedite the billing and reimbursement would include the largest federal categories, such as the processes. Surface Transportation Program, Bridge Program, National Similarly, the railroads that participate in streamlined Highway System Funds, Interstate Maintenance Program, agreements could review their accounting procedures to and the Highway Safety Improvement Program. These funds ensure they are clearly segregating the project review costs. generally make up the largest categories of a state's construc- Avoidance of inflated overhead costs from other depart- tion program. ments and divisions for the project review and partnering Other categories of federal funds are eligible for general process would provide assurances to the state highway agen- types of planning activities and coordination. However, they cies. During the course of the interviews, state officials com- are not eligible for project-specific coordination. Funds such plained of receiving vague or seemingly inflated invoices as State Planning and Research and Surface Transportation from railroads for project-coordination activities. Costs of Program planning set-aside funds can be used for ongoing meals, travel, overhead, and other expenses were not clearly planning, research, or coordination activities. delineated, some state officials said. They said such undocu- Discussion by state and federal agencies of eligibility for the mented costs not only delayed payments but also under- general highwayrailroad coordination process could poten- mined a sense of trust. tially assist this same process. Activities under the model processes that could benefit from funding eligibility could Cost of Capital Calculation include the following: Although largely deregulated, the Class I railroads are subject · Paying for the position of highway agencyrailroad liaison. to decisions and rule making by the Surface Transportation The costs of staff, office, overhead, and travel attributable to Board (STB). One important determination by the STB is in
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68 regards to the railroads' cost of capital. The STB uses the cost The state highway agencies are restricted in their ability to of capital figure in evaluating the adequacy of individual rail- negotiate the value of such properties because they operate roads' revenues each year. The figure is also used in maximum within the Uniform Relocation Assistance and Real Property rate cases, feeder-line applications, rail line abandonments, Acquisition Policies Act. The act balances the property owner's trackage rights cases, rail-merger reviews, and more generally rights to fair market value with the need to protect the fed- in the STB's Uniform Rail Costing System (4). eral taxpayer from states paying exorbitant prices to prop- Although the costs of providing highwayrailroad project erty owners. The act requires states to hire neutral appraisers reviews and agreements are a relatively small part of the Class to assess the value of rights-of-way before making an offer. The I railroads' operations, it would be consistent with the partner- appraisal is based on comparable market prices for compara- ing process to ensure that railroad costs and railroad income ble real estate transactions. Because there is not a widely traded from the project review agreements are accurately captured by market for railroad rights-of-way or air rights, it can be diffi- the STB in the cost of capital calculations. cult and subjective to determine the comparable fair-market value for such railroad property. Highway agencies reported several times during the research for this project that negoti- Long-Range Expansion Plans Notification ating such values became contentious and led to significant A consistent complaint from state DOTs was railroads requir- project delays. They complained of the railroads seeking ing additional track expansion to be accommodated in con- unreasonable compensation for such property or air rights. struction plans. This can result in greater bridge span lengths The railroads noted they had paid taxes for some of the prop- and other changes that can significantly affect the cost of erty for decades and were seeking value for the shareholders' highway projects. These requests often surprised state offi- past outlays. cials, because the existing number of tracks at a specific loca- A policy that could be reviewed is the appraisal process for tion had been stable for years, if not decades. As they prepared complex railroad properties. Research into how to appraise to improve the highway across such tracks, they were sur- air rights and other atypical properties could result in amended prised to learn that they had to accommodate significantly approaches for appraising, negotiating, and securing such more expensive requirements than they anticipated. properties, thereby reducing another source of project delay. Several state officials suggested it would be helpful if the New professional practices for valuing railroad air rights Class I railroads provided guidance as to their long-term plans could provide a basis for agreement by all parties. for railway expansion. The officials suggested that knowing how many tracks and how many sidings were anticipated could Highway Agency Project Design Processes help them as they planned the cost of highway improvements. The railroads countered that their business plans seldom It was stressed repeatedly by the railroads and by the engi- extended beyond five years, making it difficult to create mean- neering firms that represent them that plan development that ingful forecasts of expansions. They noted that their business is adheres to railroad standards is crucial to reduce delays. Despite reactive to shippers' needs. If a major customer goes out of busi- all good intentions and partnering agreements, in the end, ness, relocates, or expands in the future, it would have a major the set of plans sent to the railroad must meet the railroad's impact on the need for trackage and sidings. Such changes are acceptance. difficult, if not impossible, for the railroads to predict. In addi- An institutional practice and policy that may need to change tion, they said publicly providing such proprietary information to expedite project reviews is the incorporation of railroad would require them to share company plans with competitors. standards and railroad formats into all plans submitted to the At the same time, the Class I railroads are increasingly seek- railroads for review. Highway agencies for decades have had ing federal funds for expansion purposes. When state highway design manuals and design policies. What some state highway agencies and metropolitan planning organizations receive fed- agencies such as Texas, Washington, Ohio, and others have eral transportation funds, they are required to produce short- done is to create subsets of those design manuals that specifi- and long-range transportation plans that specify how they will cally address the necessary submittals and procedures for be developing their transportation systems. Requiring the rail- railroad projects. These institutional practices are devised to roads to produce similar information would be congruent with ensure that the most typical types of project impediments are past transportation policy. clearly anticipated and addressed in each submittal to the railroad. The four largest Class I railroads have produced substan- Complex Right-of-Way Appraisal Process tial volumes of standard drawings, standard contract lan- The value of railroad rights-of-way can be complex to appraise, guage, construction provisions, and other documentation to particularly for such values as air rights in dense downtowns. assist the designer and the project sponsor to anticipate the
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69 railroads' requirements. The total volume of these reports However, a highway relocation project that significantly extends into hundreds of pages and includes considerable impacts railroad operations and rights-of-way could have detail beyond that appropriate for this report. Each railroad's many individual stages and multiple reviews. website includes draft agreements, standard drawings, and The performance measures suggested below include all design standards to simplify the design and review process. measures necessary for a complex project. A subset of these An institutional policy and practice change that could be measures could be selected for use on less complex projects. considered by the highway agencies is to develop their own The following are suggested performance measures related manual which is predicated on the standards and provi- to cycle times: sions provided by the railroads with which they most com- monly conduct business. These state manuals then could be · Time from project programming to time for first notifica- incorporated into the contracts of consulting engineers tion of railroad; who are selected to produce plans for railroadhighway · Time to process preliminary engineering agreement from projects. time sent to railroad; Interviews with the railroads, their consulting firms, and the · Whether railroad comments are returned within 60 days of state highway agencies indicated that the following types of Stage 1 or 30% plan completion; issues were among the most common ones that led to project · Whether railroad comments are returned within 60 days of review delay. Therefore, it would be an advisable practice to Stage 2 or 60% plan completion; and include in the state-specific manuals guidance to avoid delays · Whether railroad comments are returned within 60 days of and conflicts over these most typical issues: Stage 3 or 90% plan completion. · Horizontal and vertical clearance; The following are suggested performance measures related · Bridge type selection; to plan quality: · Accommodating the operating envelope (or window) and closures during construction; · Whether changes in bridge type, size, roadway line, or · Contractor control by railroad in regards to safety and rail- grade or drainage structures or limits are requested after road operations; initial coordination; · Shoring near embankment; · Whether project bid letting is delayed by requested railroad · Boring, tunneling, pipe, and wire beneath railways; changes; · Early flagging notice; · Whether expected completion date is delayed by railroad · Safety training of state and contractor staff; issues; and · Road master's control of construction; · Number of railroad interventions with contractor activi- · Control of equipment adjacent to track; ties related to safety or railroad operations. · Guarantee that all rights-of-way and property will be left in good condition; and The following is a suggested performance measure related · Ensuring that all utilities or other property in railroad to cost: rights-of-way are protected. · Total annual cost in hours, consultant costs, and overhead for administering railroad agreements. Suggested Institutional Performance Measures The suggested performance measures are intended to Earlier, model processes were identified, including ones to provide insight into the timeliness, quality, and cost of the continuously improve the project review process. Also, railroadhighway agreement process. As always with per- model agreements were provided to memorialize the model formance measures, the measures are intended to provide a processes, including those processes to continuously improve "dashboard" of the agreement process and not to provide performance. exhaustive details of each function. If the "dashboard" indi- Performance measures and other strategies for monitoring cates a problem with performance, the highway and railroad success are suggested in the model processes and the memo- liaisons can evaluate the causes and, if necessary, address them randum of understanding. Such performance measures should at the annual meeting or other joint forum. The intent of the vary based on the type and complexity of agreements. Rela- performance measures is to complement the continuous- tively simple projects, such as re-surfacing agreements or the improvement process by providing common data for the maintenance of safety appurtenances such as lights and gates, evaluation of current performance against past performance do not have lengthy and numerous stages of development. and desired performance.
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70 Suggested Practices to requirements may vary from the roadway and bridge assump- Accommodate Design-Build tions which he/she assumed in the contract. Provisions for managing the timing and risk need to be incorporated. The project request for proposal (RFP) makes specific refer- Design-build projects involving railroads are similar to ence to identifying barriers to effectiveness and to proposed design-build projects that require more complex environmen- remedies. The RFP also makes a brief but specific reference tal approvals or permits. In these cases, outside agencies have to alternative project delivery techniques, such as the use of significant control over certain design and construction ele- design-build. This section provides a brief guidance on how to ments. These agencies' considerations need to be incorporated incorporate design-build into the railroad-agreement process. into the design, schedule, and construction of the projects. "Design-build," according to a report published by the Such examples include the following: AASHTO Joint Technical Committee on Design-Build (5), "is a project delivery method under which a project owner, · The need for environmental approval on alignments and having defined its initial expectations to a certain extent, impacts; executes a single contract for both architectural/engineering · Timing construction activities so that aquatic and terres- services and construction." trial resources are protected during certain annual cycles, Design-build is pursued instead of the traditional design- such as spawning runs or birthing seasons; and bid-build for several reasons. The need to accelerate project · Various permits for stream work or wetland impacts that delivery is a common reason. Another is the hope to encour- are required but cannot be obtained until after the contrac- age innovation between designers and contractors if they are tor has produced detailed plans. given more latitude to innovate. A third reason is a desire to save costs on the assumption that faster, more innovative Similarly, the design-build contract needs to include provi- construction with fewer design details may be more econom- sions to accommodate the timing, risk, and uncertainty caused ical. Complaints about design-build are that government by railroad reviews. Strategies, tactics, and contract provisions control is lessened. Common concerns are that design-build to do so can include the following: could lead to substandard construction, a lack of adherence to regulations, a lack of protection of right-of-way owners, · The highway agency requiring certain parameters as to less adherence to environmental constraints, or indifference bridge type and roadway alignment be determined before to common purchasing requirements by the contractor. In bidding the design-build project. The highway agency may more precise and prescriptive design-bid-build contracts, the need to coordinate in advance with the railroad as to type, highway agency produces a more detailed set of construction size, line, and grade of the structure and include those plans that include precise details as to how the contractor will parameters as given in the design-build contract. In many comply with numerous regulations or commitments. design-build cases, the highway agency has secured environ- In both instances, the contractor faces certain constraints. mental approval already before bidding the design-build Even in a loosely defined design-build contract, the contrac- contract. The environmental approval generally requires tor must comply with all environmental statutes, right-of- sufficient detail that approximately 30% plan completion is way laws, and utility relocations and generally must comply required. Those 30% plans, or Stage 1 plans, will need to with standard highway agency provisions, such as mainte- include an alignment, grade, and bridge type, which can be nance of traffic standards. Therefore, even in design-build, coordinated with the railroad for concurrence. The determi- the contractor has less-than-free-rein to operate and must nation of bridge type and alignment can be incorporated as accept the risk that assumptions he made about how he a controlling factor in the design-build bid documents. would address such requirements may be challenged during · The highway agency needs to ensure additional coordina- construction. tion with the railroad during project development by the Design-build is a variant but is not fundamentally different contractor. As with environmental and permit requirements from the design-bid-build process. A design is produced in that are included as restrictions on the contractors in design-build, but to a lesser degree of detail. It must result in design-build projects, certain restrictions regarding rail- the construction of pavements, bridges, drainage structures, road coordination will need to be included in design-build geometrics, lighting, signage, appurtenances, right-of-way projects involving the railroad. During the design process, acquisition, and environmental permitting, all of which must the contractor will need to include time for the review of comport with professional standards, statutes, and regulations. the 60% and 90% plans by the railroad. The railroad should What differs is the timing of the approvals and the shifting of reciprocate in the partnering environment by ensuring risk. In design-build, the contractor assumes additional risk as timely reviews to the contractor's submittals. Considering to the timing of the approvals and the degree to which railroad the advance coordination conducted by the highway agency