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Suggested Citation:"V. AIRTRAIN JFK SYSTEM." National Academies of Sciences, Engineering, and Medicine. 2012. Competition Requirements of the Design/Build, Construction Manager at Risk, and Public-Private Partnership Contracts—Seven Case Studies. Washington, DC: The National Academies Press. doi: 10.17226/14639.
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Suggested Citation:"V. AIRTRAIN JFK SYSTEM." National Academies of Sciences, Engineering, and Medicine. 2012. Competition Requirements of the Design/Build, Construction Manager at Risk, and Public-Private Partnership Contracts—Seven Case Studies. Washington, DC: The National Academies Press. doi: 10.17226/14639.
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Suggested Citation:"V. AIRTRAIN JFK SYSTEM." National Academies of Sciences, Engineering, and Medicine. 2012. Competition Requirements of the Design/Build, Construction Manager at Risk, and Public-Private Partnership Contracts—Seven Case Studies. Washington, DC: The National Academies Press. doi: 10.17226/14639.
×
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Suggested Citation:"V. AIRTRAIN JFK SYSTEM." National Academies of Sciences, Engineering, and Medicine. 2012. Competition Requirements of the Design/Build, Construction Manager at Risk, and Public-Private Partnership Contracts—Seven Case Studies. Washington, DC: The National Academies Press. doi: 10.17226/14639.
×
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Suggested Citation:"V. AIRTRAIN JFK SYSTEM." National Academies of Sciences, Engineering, and Medicine. 2012. Competition Requirements of the Design/Build, Construction Manager at Risk, and Public-Private Partnership Contracts—Seven Case Studies. Washington, DC: The National Academies Press. doi: 10.17226/14639.
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20 costs, termination costs, and other shut-down costs. A termination by DTP does not entitle DTP to any un- earned profits, unabsorbed overhead, opportunity costs, or other damages as a result of owner default. MWAA has the right to terminate the contract prior to full notice to proceed, but must compensate DTP for any costs due for work performed pursuant to any lim- ited notices to proceed and any costs due according to the CA or CA Supplement. In the event of an owner- induced termination with no DTP default, MWAA and DTP work together to establish a close-out plan within 60 days of the notice for termination. Should MWAA terminate the work owing to DTP default, DTP bears the cost for the remainder of the work, including any additional contractors hired by MWAA. Contractor Proposed Changes in Standards or Requirements If DTP perceives the need for a change order it must 1) detail the facts and circumstances underlying the need for the change order, 2) provide information sup- porting any proposed changes in the contract price, and 3) provide information detailing the proposed change’s impact on the project schedule. Should MWAA deem the change reasonable, the owner adjusts the contract price accordingly. If MWAA determines the scope and extent of the change prior to performing the changed work, it can negotiate a new fixed-price lump-sum agreement with DTP. If MWAA cannot perceive the extent of the change before its execution, MWAA can compensate DTP on a time and material basis. The contract also includes provisions for DTP- initiated VECPs. MWAA encourages DTP to voluntarily propose value engineering changes, accompanied by proof of cost savings and an outline of changes to the contract and project schedule. In the event that MWAA accepts a VECP, the net cost savings is distributed as 30 percent to DTP and 70 percent to MWAA. Inclusion of Disadvantaged Business Enterprises In the contract’s supplemental exhibits, MWAA de- tails the plan to include DBEs in the project, establish- ing 10 percent DBE participation. The contract requires DTP to make good faith efforts towards including DBE participation in the project. Once DTP identifies DBE subcontractors or suppliers participating in the project, the contributions of those DBE participants are con- verted to monetary measurements to determine the adherence to the 10 percent performance goal. Dispute Resolution DTP and MWAA established a Conflict Resolution Plan as part of the Project Management Plan for the Dulles Metrorail Project. The plan consists of the fol- lowing steps: 1. Negotiations (field level with DTP and MWAA repre- sentatives). 2. Elevated negotiations (DTP and MWAA senior repre- sentatives). 3. Independent expert. 4. Submission of certified claim (recommendation by MWAA representative; DTP has 30 days to agree or seek further action). 5. Mediation. 6. Legal proceedings. Any false claims entitle MWAA to full recovery of any costs incurred in the dispute resolution process. During the dispute resolution process, both DTP and MWAA are contractually obligated to maintain their legal commitments and roles and responsibilities for the project. Schedule-Related Issues The DB contract has a robust scheduling specifica- tion (Division 01322) that identifies how baselines will be developed and updated. The commercial terms also include daily liquidated damages (staged at $25,000 to $100,000 per day at various points and capped at $60 million) and an early completion incentive per month for each month that substantial completion is achieved earlier than the agreed-upon substantial completion date. The incentive amounts are displayed in Table 4. Table 4. Dulles Metrorail Early Completion In- centives Month Incentive Value First $1,000,000 Second $2,000,000 Third $3,000,000 Fourth $2,000,000 Fifth $2,000,000 The incentive schedule is additive—therefore a sub- stantial completion 3 months in advance would trans- late to a $6,000,000 incentive. The incentive is not to exceed $10,000,000, so there is no additional monetary incentive for reaching substantial completion more than 5 months in advance. Project Performance At the time of this digest, Phase 1 of the project was well into construction and, by reports from the project personnel interviewed, there had been no significant claims. Phase 1 of the project appeared to be on sched- ule as well. It appeared that the delivery system for Phase 2 of the project would be design/build, but that had not been finalized. V. AIRTRAIN JFK SYSTEM Project Overview AirTrain JFK is a light-rail transport system de- signed to provide easier access from New York City to John F. Kennedy International Airport (JFK Airport). The AirTrain system consists of three service loops

21 comprising 8.1 mi of railway: a 1.8-mi Central Terminal Area loop, a 3.3-mi Howard Beach extension, and a 3-mi Jamaica Station extension. The AirTrain comes under the jurisdiction of the Port Authority of New York and New Jersey. The Port Authority composed the contract documents and conducted the request for proposals. The Port Authority awarded the contract in May 1998 to the Air Rail Transit Consortium (ARTC), a consor- tium comprised of Slattery Skanska, Inc;, Koch Skan- ska, Inc.; Perini Corporation; and Bombardier Transit Corporation. The Port Authority secured project funding and chose to pursue a DBOM agreement. The project fund- ing came primarily from a $3 passenger facility charge (PFC), a local tax for all outbound users from JFK air- port. The PFC funds secured financing of $1.2 billion, and the Port Authority secured the remaining $0.7 bil- lion by issuing revenue bonds. ARTC assumed respon- sibility for the project’s preliminary engineering, design completion, construction, installation, testing, demon- stration, and operations and maintenance (O&M). The contract stipulated a 5-year O&M period with optional 1-year contract extensions for up to 10 additional years. Procurement Scope of Work The request for proposals encompassed three phases: 1) preliminary engineering; 2) design completion, con- struction, procurement, installation, testing, and dem- onstration; and 3) contractor O&M (COM). The Port Authority provided written technical provisions and limited contract drawings to proposers to provide a foundation for the AirTrain’s design. Further, the Port Authority provided proposers with existing site and subsurface information from prior site investigations or projects; few new site investigations were performed by the Authority. The technical provisions stipulated that the contractor design, build/erect, install, and test: • Trackway. • Passenger stations. • Vehicles. • Trackwork. • ATC system. • Communications system. • Supervisory control and data acquisition system. • Traction power system. • Operations, maintenance, and storage facilities. The technical provisions also stipulated that the con- tractor operate and maintain the system, including the use of a Port Authority–furnished fare collection sys- tem. The contract documents required the proposer to cer- tify the design of the AirTrain system according to the RFP’s basic design criteria and contract drawings and agree to construct, operate, and maintain the system according to the detailed specifications, contract draw- ings, and approved contractor deliverables. Addition- ally, the proposer had to certify, in accordance with the contract drawings and specifications, all structures, facilities, equipment, and labor associated with the pro- ject. Process Overview The Port Authority of New York and New Jersey sent an RFP to several prequalified firms inviting them to submit DBOM proposals for the AirTrain JFK. The Port Authority required bidders to submit five separate, written proposal packages: 1) Proposal Forms, 2) Man- agement Proposal, 3) Price Proposal, 4) Technical Pro- posal, and 5) Operations and Maintenance Proposal. An Evaluation Team comprised of Port Authority employees and hired consultants evaluated each pro- posal according to the selection/award criteria (see the next section) before submitting them to the Selection Committee. The evaluation process consisted of the fol- lowing steps: initial screening of proposals, nonprice evaluation, price evaluation, establishment competitive range, negotiations followed by best and final offers (BAFO), BAFO evaluation, and contract award. The Selection Committee assigned numerical scores to each proposal by calculating the Net Present Value (NPV) for each proposal. The Selection Committee combined the two NPV calculations (NPV1 and NPV2) to compute the Final Net Present Value (NPVT). NPV1 represented the Port Authority’s required payments to the proposer over the life of the project, including payments for the base LRT system, O&M costs, and any additional costs in- curred by special requests by the Port Authority. NPV2 represented the payments to be paid by the Port Au- thority to parties other than the proposer for scope items that the proposer excluded from the proposal. The Port Authority maintained the discretion for valuing the payments in the NPVT calculation. The Port Authority included several disclaimers in the RFP, including: • Liability or commitment for providing passenger facilities charges or other revenues to assist in the Air- Train’s development and operation. • Obligations to select a proposer for competitive ne- gotiations or even to carry out competitive negotiations if the Port Authority deems it better to terminate nego- tiations. • Obligation to award or execute a contract pursuant to the procurement process. • Obligation to reimburse a proposer for any costs associated with the proposal process. • Obligation to issue a notice to proceed upon award or execution of a contract. The contract also states that the Port Authority has the discretion to disregard provisions in its own request for proposal if it deem it appropriate in the procurement process.

22 Selection and Award Criteria After identifying the responsive proposals, the Selec- tion Committee reviewed the required forms included in Package One (Proposal Forms). The Port Authority re- quired that no cost or price information appear in Pack- age One or any of its required forms. After review of Package One, the Selection Committee reviewed the four subsequent proposal packages, consisting of the four major “Group Criteria”: Management, Price, Tech- nical, and Operations and Maintenance. Within the “Group Criteria” the selection committee considered several subcriteria. The contract documents do not stipulate weights for each of the criteria or subcriteria, merely stating that the Selection Committee has the authority to assign a group percentage value based on the selection criteria totaling 100 percent and that the weights would be assigned in terms of relative impor- tance, with the management proposal having the most importance and the O&M proposal having the least importance. Table 5 shows the group criteria (listed in order of importance) with the subcriteria for each group crite- rion. Table 5. AirTrain JFK Selection Criteria Group Criteria Subcriteria Management 1) Financial and Legal In- formation 2) Proposer’s Organizational Structure and Resources 3) Proposer’s Approach 4) Proposer’s Experience Price 1) Phase I Preliminary En- gineering Lump Sum Price 2) Phase II Final Design and Construction Lump Sum Price 3) Phase III Contractor Op- erations and Maintenance (COM) Lump Sum Price 4) Fixed Prices for Options Technical 1) System and Vehicle Per- formance Characteristics 2) System and Subsystem Design and Other Features Operations and Maintenance 1) Technical Adequacy Group Criterion 1: Management.—The Port Author- ity required the proposing team to show the efficacy of their composition and legal structure, their ability to guarantee work, the viability of their financial re- sources, and their compliance with bonding and insur- ance requirements. The proposer also had to prove the availability of skilled, experienced, and well-equipped design, construction, and O&M organizations; sufficient capability for technical work, production, and imple- mentation of the project; and sufficient contractual rela- tionships with subcontractors. Each proposer included Project Management Plans for Phases I and II of the project that show the pro- poser’s ability to organize subcontractors, interface with the Port Authority, manage the construction within the established criteria, maintain the project schedule within budget, and provide the necessary experience and personnel to successfully complete the project. The proposer had to provide project descriptions for any similar projects executed within 10 years of the pro- posal submission and descriptions of projects completed by any major subcontractor identified as a potential major contributor to the AirTrain JFK project. Group Criterion 2: Price.—The Pricing Package in- cluded the Contract Guaranty Agreements provided in the attachments to the RFP. The Selection Committee required all prices to be quoted in United States dollars, but would consider some payments in foreign currency if such arrangements showed significant cost savings for the overall project. The Price Proposal had to begin with an overall price summary of the fixed lump-sum prices (as identified in subsequent parts of the price proposal) reported in Year of Expenditure dollars, in- cluding escalation. The first subcriterion, Phase I Pre- liminary Engineering Lump-Sum Price, included a de- tailed summary of lump-sum costs associated with each summary work category for the project: facilities design, systems design, project management, and program con- trol. Additionally, the RFP required proposers to in- clude cash flow curves for each of the work categories in the engineering phase, a summary cash flow curve for the entire project, and a schedule to correlate the pric- ing with the project schedule for Phase I.24 The second subcriterion, Phase II Final Design and Construction Lump-Sum Price, required all costs asso- ciated with the design, construction, installation, and successful demonstration of AirTrain JFK. Proposers had to provide a lump-sum breakdown for each section of the project to correlate with the Work Breakdown Structure provided in the Management Proposal Ap- proach. The Port Authority divided the AirTrain project into five major Line Sections: Howard Beach Station to Federal Circle Station, Federal Circle Station to Cen- tral Terminal Area (CTA), CTA, Federal Circle Station to Jamaica Station, and Project-wide. The Port Author- ity required pricing information for each of 15 work categories for each section of the total project: guideway facilities, station facilities, other facilities, infrastruc- ture and site work, utilities, track work and other guideway equipment, power and supply distribution, automatic train control, communication supervisory control and data acquisition (SCADA) and security sys- tems, fare collection, vehicles, project management ad- ministration and engineering, design, construction management, and right-of-way and other environ- mental cleanup. In addition to cash-flow curves for each 24 A cash flow curve typically illustrates a contractor’s ex- pected or actual cumulative expenses for a project.

23 of the five major sections of the AirTrain project, the proposers had to provide a summary cash-flow curve for the entire project with a correlating project schedule. The third subcriterion, Phase III Contractor Opera- tions and Maintenance (COM) Lump-Sum Price, re- quired separate lump-sum prices for the first year and for each year between 2 and 5 years, because the transit system would not be fully operational until the second year. The proposers had to provide the following specif- ics: fixed price for the 1st year of COM services; fixed price for the first year COM fee; unit price adjustments for changes made in the first year of COM services; fixed price for COM services for the second year; fixed price for the COM fee for the second year; unit price adjustments for changes in COM services in the second year; Phase III COM Prices, Fixed COM fees, Unit Price Adjustments for changes in COM Services, Pay- ment/Performance Bonds, and Insurance Prices for Years 3 through 5; and a Capital Asset Replacement Program. Additionally, the Port Authority asked for fixed pric- es for bonds and insurance to include: Phase I and II payment and performance bonds; Phase III first year payment and performance bond; Phase III second year payment and performance bonds; Phase III payment and performance bonds for the annual costs of years 3 through 5; Phase III insurance for the first year; Phase III insurance for the second year; and Phase III insur- ance for the annual costs of years 3 through 5. The fourth subcriterion, Fixed Prices for Options, in- cluded pricing for optional vehicles to provide 25 per- cent additional capacity and COM prices for any year in the period of Years 6 through 15. Group Criterion 3: Technical.—The first technical subcriterion, System and Vehicle Performance Charac- teristics, required proposals for vehicle performance, system performance, and system capacity. The second technical subcriterion, System and Subsystem Design and Other Features, required a system description de- tailing the technologies for vehicles, ATC, communica- tions, power, and SCADA. The technical provisions stipulated that the proposed light rail system apply developed technologies as much as possible, and provided the following criteria: • The equipment or technology must have been pre- viously used in a similar public transit project for at least 2 years and have well-documented reliability and maintainability characteristics. • The previous project referenced in the first crite- rion must have environmental and operating conditions comparable to AirTrain JFK. • The reliability and maintainability characteristics must be presented in relation to the overall system availability requirements; if the proposer offers an al- ternate design, that design must be shown to better accommodate the service availability requirement. • The proposer must provide documentation of the system’s satisfactory interface and interaction with other equipment. Group Criterion 4: Operations and Maintenance.— The Selection Committee considered the O&M packages using the subcriterion Technical Adequacy. The RFP required a general operations plan including operation plans and plan statistics for years 2001 through 2015, a rule book, and a plan for fare receipts, collection, count- ing, and security. Additionally, proposers had to pro- vide a maintenance plan and an organization and staff- ing plan to include an operations procedures manual. The proposal requirements did not stipulate criteria for the O&M contract to extend beyond the first 5-year pe- riod into the optional additional 1-year periods. Addi- tionally, the request for proposal did not stipulate any subcriteria by which the O&M proposals would be eval- uated. Key Contract Provisions Design Review During the contract period, the proposal documents stipulated deliverables required of the contractor. The Port Authority required design submittals and approv- als at 30 percent, 65 percent, 85 percent, and 100 per- cent of design completion. If the contractor chose to pro- ceed with any portion of the project without prior Port Authority approval, the contractor would be working on an “at-risk” basis. Operating Provisions In the event that the system did not reach a mini- mum service availability of 99 percent for any calendar month after the system demonstration, the contractor had to assemble a report based on design and O&M procedure review. If the system performed at service availability of 99.7 percent or above, the contractor re- ceived a bonus, whereas in months of service availabil- ity less than 99.3 percent, the contractor’s payment would be reduced. The contract also stipulated down- time limits with percentage deduction per percentage of downtime event. The contract required the contractor to be assessed $25,000 in liquidated damages for each day the AirTrain service was delayed from Jamaica Station and $50,000 a day for delays for the Howard Beach Sta- tion, with total liquidated damages not to exceed $40 million. In the event of a delay in service, the Port Au- thority reserved the right to cancel the remainder of the project. Additionally, before the receipt of final payment at the conclusion of the COM period, the contractor had to certify settlement of all claims or disputes dealing with subcontractors, material suppliers, or other per- sonnel at the expense of the contractor. For the O&M period, in the event that the AirTrain service availability fell below 98 percent for 6 consecu- tive months, the Port Authority could terminate the contract. If the Port Authority decided to terminate the contract for service availability or any other contract violation, the contractor had to provide a training pro- gram for all personnel tasked with taking over the op- erations of the facility.

24 As a part of the COM agreement, the contractor had to assemble and provide an Operating Rule Book, Stan- dard Operating Procedures Manual, Training Pro- grams, System Maintenance Plan, Preventative Main- tenance Schedule, Plan for Unscheduled Corrective Maintenance, Integrated Materials Procurement, and Inventory Control Program. Additionally, for each ele- ment of the system, the contractor had to provide an operations instruction manual, repair and maintenance manual, workshop manual, illustrated parts catalog, diagnostic test equipment manual, and special tools manual. The contractor also ensured that all necessary tools and equipment needed for operations O&M of the sys- tem were available in addition to a capital asset re- placement program, computer-based facilities manage- ment system, and safety and security program. At the conclusion of the COM period, the contractor had to train all personnel tasked with assuming the O&M of the AirTrain. Absent from the contract documents, however, are general condition provisions for the facil- ity upon the termination of the O&M period. The con- tract does not specifically stipulate terms for the trans- fer of the AirTrain from ARTC to the Port Authority regarding the physical state of the tracks, facilities, and rail cars. Operations Performance Requirements The system had to accommodate the estimated base- line ridership plus 10 percent more than the estimates provided in the RFP. The goal for the system was to ultimately accommodate 110 percent of the estimated ridership for the year 2023. The Technical Provisions stipulated that the Central Control Facility be able to accommodate up to two additional on-airport stations and a 20 percent increase in track capacity without de- stroying the basic system structure nor interrupting regular daytime service (6:00 a.m. to 11:00 p.m.). The train must operate 24 hours a day, 365 days a year. In times of degraded service, the provisions state, the system must have the ability to operate at 70 per- cent capacity with no longer than twice the allowable headway at no more than 40 minutes delay for any pas- senger using the AirTrain service. The system availability requirements were measured using three performance factors: on-time performance, fleet availability, and station availability. The Port Au- thority took the three service availability measure- ments and calculated their weighted average, or Route Daily Availability measurement, for the day. The con- tractor is responsible for providing the data to the Port Authority to monitor system performance. Project Performance Procurement Issues The Port Authority received proposals from five dif- ferent consortiums. Table 6 shows the proposer consor- tiums and member companies. Table 6. AirTrain JFK Proposer Consortiums Consortium Name Consortium Members AirRail Transit Consor- tium Bombardier, Koch, Perini, Slat- tery-Skanska, STV JFK Link Fluor Daniel, GEC Alsthom, Morse Diesel JFK Express Transit (JET) Parsons, Siemens, Matra, Schia- vone, Defoe, Halmar Raytheon- Ansaldo Raytheon (Civil Infrastructure) and Ansaldo (Trains) Sky Rail Sys- tems Yonkers, Granite, Turner, ICF- Kaiser, ABB Daimler-Benz The Port Authority reviewed the initial proposals and directed the consortiums to submit revised propos- als at lower prices. After reviewing the second propos- als, the Port Authority’s Selection Committee short- listed two consortiums, JFK Link and ARTC, and ulti- mately selected ARTC. In an effort to further reduce the design and construction prices submitted, the Port Au- thority discussed risk-allocation issues with ARTC. Upon conclusion of these discussions, the Port Author- ity agreed to establish a $129 million contingency fund to alleviate contingency pricing associated with 1) traf- fic management during construction of the elevated track along a 2-mi stretch of the Van Wyck Expressway; 2) hazardous materials encountered during construc- tion; 3) work days lost due to any labor disruptions dur- ing the construction period (union wage/conditions con- tracts would expire during the scheduled contract period); and 4) unanticipated subsurface or geotechnical conditions. Any justified costs associated with, in par- ticular, items 1, 2, and 4, would be paid on a reimburs- able basis up to the $129 million ceiling. If costs were kept below this ceiling, then the Authority would retain 60 percent of the savings while ARTC would receive 40 percent. Table 7 shows the final contract amount (ex- cluding the contingency fund). Table 7. AirTrain JFK Contract Award Amounts Contract Phase Award Amount (millions) Early Action (Cut and Cover Tunnels) 99 DB 930 O & M (5 years) 105 Total 1,134 Prior to the JFK AirTrain project, PFC had only been used for terminal improvement projects or runway expansions. No precedent existed for using the PFC to improve access to JFK airport. In addition to requiring approval through the Uniform Land Use Review Proce- dure, the Port Authority needed funding approval from the Federal Aviation Administration (FAA) because the

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TRB’s Transit Cooperative Research Program (TCRP) Legal Research Digest 39: Competition Requirements of the Design/Build, Construction Manager at Risk, and Public-Private Partnership Contracts—Seven Case Studies explores the use of various project delivery methods, including design-build, construction management at risk, and a number of options considered public-private partnerships, through the examination of seven separate construction projects in various parts of the United States.

The examinations of the seven selected projects are designed to show how particular, and often unique, problems were addressed in each project by utilizing a wide variety of procurement and delivery methods.

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