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18 SESSION 3 Procurement Caitlin Ghoshal, WSP, Moderator Panelists Lysa Scully, Port Authority of New York and New Jersey Bo Kemp, Faegre Baker Daniels Consulting Caitlin Ghoshal introduced the panelists and noted that the nature of the P3 can change the procurement process significantly. Lysa Scully stated that LaGuardia Airport is in the midst of replacing all three main airport terminals; building a 6-mile roadway network; and constructing bridges, a parking garage, and airfields, among other efforts. Eighty five percent of the program is due to be complete by 2022. The project was under review as early as 2008, and a $35 million program management agreement was put in place to evaluate design. Scully stated that the decision was made to move forward in three phases: Terminal B, then Terminal C, and then the AirTrain. In 2012, PANYNJ decided to pursue a P3. Scully noted that the governor of New York was a strong advocate for enhancing the airport and that this helped PANYNJ to recruit local champions. Scully noted that before securing funding, PANYNJ conducted a VFM exercise. She added that doing Stage 1 design was essential to setting the standard for what a developer would be constructing and designing to and the obstacles and impediments it would face. PANYNJ considered many factors, including acceleration of the project, spreading risk, O&M upkeep, making sure that any agreement would include parameters for fair and reasonable costs for airlines and other partners, and a cap on increased costs to them. Scully reviewed the procurement process, beginning with an RFI and followed by an RFQ, which produced a short list of bidders. PANYNJ drafted an RFP and then engaged with the short-listed firms through many collaborative meetings to refine the RFP. Scully noted that the approach to the meetings was, in hindsight, too siloed, and there was not as much back-and-forth dialog as there should have been. However, everyone involved was under tremendous scrutiny, and it was critical to ensure that there was no undue influence on the decision-making process. Sheri Ernico asked whether PANYNJ used performance penalties to ensure the project could be executed on schedule. Scully responded that there are liquidated damages and performance penalties in the contract for both PANYNJ and the developer, as well as a guaranteed maximum price.
19 Margaret McKeough asked how the process was staffed while day-to-day operations were maintained. Scully responded that the procurement process was not as intensive as the post-procurement process and project delivery. Bo Kemp highlighted the process of putting a P3 in place for the Gary/Chicago International Airport. In 2011, the City of Gary was on the brink of financial disaster and was under control of the State of Indiana. Mayor Karen Freeman-Wilson came into office as control was given back to the city and had to determine how to improve financial stability and jobs. At the time, the airport had no commercial passenger operations. Kemp stated that Mayor Freeman-Wilson was open to any possible options along the P3 continuum. Kemp described the structure of the P3 deal, including 80% of incremental profit from airport development going to the airport and 20% to the developer, and the opposite for land development. The city sought a developer with development, design, and airport management experience that would be integrated and aligned with the cityâs desired outcomes. Kemp noted the importance of communicating to the public in a way that does not deter the developer from working with the city and of communicating the cityâs options for getting out of the deal if it is not working to the publicâs advantage. The city put in place a 10-year airport management contract that will be reassessed every 5 years thereafter and a 5-year land management deal that is also reassessed every 5 years thereafter. Kemp stated that the city created an ad hoc committee with public and private individuals representing the public, the city, the region, and the airport board, among other stakeholders. The first job of the committee was to determine whether to pursue a P3 and to report back to the public on the findings and the successes and failures of other P3s. The second job was to determine for the airport what a P3 should look like. After the findings were presented to the public, the committee was sanctioned to move forward and issue an RFI to obtain more information on what an RFP should look like. Kemp noted that through the RFI process, the city engaged with financial advisors, designers, architects, and others, and ultimately selected two proponents, one of whom was awarded the contract in January 2014. Kemp described the deal, which involves a $100 million investment over 40 years, including $25 million in the first 36 months, $2.5 million in new development, $15,000 in the first 3 months for workforce/community development, and $300,000 in workforce development over 3 years. Kemp noted that the amount of undeveloped space surrounding the airport and access to Class I rail, ports, and highways within 1.5 to 2 miles of the airport were very appealing to developers. He stated that airport performance has been increasing and that the airport has opened a customs facility. Ghoshal asked what determined the structure of the project. Kemp responded that the city had a vision of pairing economic investment and workforce development from the start. The public cared about passenger service and jobs, and the investment needed a tie-in to development to be appealing.
20 Ghoshal noted that the mandate for the ad hoc committee was significant and asked whether staff were added to support the effort. Kemp responded that cities are chronically understaffed and may lack the right skill sets for P3 decision-making. He stated that it was critical to bring in advisors, including experts on airline space, lawyers, bankers, Port Authority members, and others. Kemp added that when dealing with distressed communities, a significant level of communication is required to overcome public skepticism. The city held 28 community meetings to talk through the issues. It was also cited as important that the ad hoc committee represented and reflected the make-up of the community and that the committee meetings were open. Scully stated that PANYNJ relied on advisors, lawyers, program managers, and others. It is not possible to staff up permanently for these projects, because those staff would eventually have to be let go. She added that the project design phase led to requirements and provisions for work, which led to development of O&M and design manuals. This allowed for alternative designs to the original concept and a shorter project time frame. She noted that all experts who supported the project had moved on to different projects and that career employees are critical for successfully getting through a transition. Ghoshal asked how stakeholders were engaged in the LaGuardia process. Scully responded that PANYNJ was very focused on keeping stakeholders, including regulators, involved and advised. She noted that her predecessor had been engaging with community residents about the need for a project as early as 2007 and that by the environmental assessment phase, no one spoke publicly on record against the project. LaGuardia has six community teams whose members attended 12 evening community meetings per quarter. Kemp added that the city had to work individually with stakeholders to get their support. Ghoshal asked how political champions were identified and fostered. Scully responded that timing worked in favor of the LaGuardia project. The year 2014 was an election year, and the decline and disinvestment in airports was a high-priority topic at the time. She added that the airport has always been very involved in the community and has authorization for funds to invest in the community (e.g., for labor force development and scholarships at a local aviation college). There is also a requirement for 30% minority/women-owned business enterprises for all projects on the employment and services/contract side. LaGuardia is exceeding this requirement and thereby further fostering goodwill in the community. Kemp noted that many communities cannot meet such standards for minority/women-owned business enterprises. He stated that it is important to be very thoughtful about this issue, especially when bringing in a nonlocal vendor to meet those requirements. Roger Johnson stated that LAWA established requirements for inclusivity, the workforce, and enhanced apprenticeship in P3 agreements, scored them as part of the evaluation process, and included them in performance requirements (applying penalties if the requirements were not met). LAWA also established workforce requirements in the zip codes around the airports.
21 Ghoshal asked when and how the evaluation and selection processes were designed. Scully responded that for the LaGuardia projects, these processes were structured before the RFP was released and that the technical evaluation was conducted before the cost evaluation. She added that with the paid stipend, PANYNJ retained IP rights to the proposals. Kemp responded that the City of Gary laid out the evaluation structure as part of the RFI and leading into the RFP. He added that the city leveraged the negotiation process to filter out bidders who were not suitable and that having a secondary group of candidates to go back to (i.e., using one bidderâs idea as leverage with another) was a key part of the negotiation process.
