Performance Metrics for Public–Private Partnerships (2021)

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28 This chapter will discuss six case examples chosen to provide a deeper dive into the mechanics of P3 performance metrics. Using structured interviews with project participants permits the analyst to collect not only the “what, when, where, and how” data but, more importantly, the “why” data that provide the background and rationale for decisions made in each particular case. Case examples come from the interviews and represent current practices and procedures from the highway agencies listed in Table 10. Case example projects were selected according to the following criteria: • A cross-section of states across the country. • Varied project types, P3 types, and financing types. • Construction of asset is complete, and the project is in or has completed its O&M concession period. • Available concession agreements and other material that document P3 performance metrics and handback criteria. • Available project participants to rate the effectiveness of post-construction maintenance and handback criteria. Presidio Parkway US-101 Tunnels Owner Agency: California Department of Transportation (Caltrans) Project Title, Location: Presidio Parkway, San Francisco, Calif. Value: $1.2 billion (Design & Construction costs $899 million) Type of P3: DBFM (maintenance period: 25 years for bridges, flexible pavement for 5 years) Introduction The Presidio Parkway project, also known as the Doyle Drive project, is a unique corridor that provides access to the Golden Gate Bridge in San Francisco, Calif. The 1.5-mile long Presidio Parkway corridor was originally built in 1936 to usher traffic through the Presidio military base to connect San Francisco and the Golden Gate Bridge. The project is located in a high-seismic hazard zone, and the original main structure was not built to withstand projected earthquakes. Seismic retrofit was completed in 1995, which was intended to last 10 years. The overall project, sequenced as two different phases, provides a new roadway, new structures, including bridges and tunnels, and a depressed roadway section. Figure 11 shows an aerial view of the P3 project’s alignment. Rationale for Using P3. This information was not available at the time of the interview. C H A P T E R 4 Case Examples

Case Examples 29   Procurement Process. The project was procured through a typical two-step solicitation with a best-value selection process. Post-Construction Performance Metrics Table 11 contains a summary of key performance metrics for this project. Table 12 includes a description of the metrics indicated in Table 11. Figure 12 shows the entrance to the tunnels constructed for the project. Lessons Learned Caltrans is generally satisfied with the effectiveness of the O&M performance metrics. The only issue has been the requirements for vegetation control missing a component that regulates lane closures by setting criteria for timing and allowable length of closure during vegetation control activities. The primary challenge that has been difficult to manage is related to the DB project criteria for the constructed product. In some cases, it did not include provisions to support routine and nonroutine access to components of structures. For example, the final project does not include access points for inspection of certain structural members after a seismic event. Additionally, in some cases, the DB contract design criteria are not in line with the expected life of the con- cession. This conclusion was reached as components of the project were replaced earlier than expected. This created the need to determine whether or not the replacement costs were com- pensable changes to the O&M concession agreement. Handback Requirements. There are no handback requirements on this project. Figure 11. Presidio Parkway plan view. Project Agency Project Type Value Concession Period P3 Type Finance Type US-101, Presidio Parkway Caltrans Tunnel 25 years DBFM APP US-36 Express Lanes CDOT Highway/Managed Lanes $497 million 50 years DBFOM Hybrid IH-595 Corridor Roadway Improvements FDOT Highway/Managed Lanes $1.83 billion 35 years DBFOM APP Rapid Bridge Replacement Program PennDOT Bridges $1.2 billion 25 years DBFM APP SH-130, Segments 5 and 6 TxDOT Toll Road $1.3 billion 50 years DBFOM RR SH 895, Pocahontas Parkway VDOT Toll Road $597.4 million 99 years DBFOM RR $1.2 billion Table 10. P3 project case example summary.

30 Performance Metrics for Public–Private Partnerships Metric Contract Definition Time Recurrence Interval Adjustment Project Element O&M Non- compliance Event Classification Cure Period Recurrence Interval Non- compliance Adjustment Flexible Pavement Alligator cracking > 30% B 90 days 5 days - Cracking > 0.25 in. B 90 days 5 days - Rutting > ½ in. depth C 30 days 5 days - Pot holes > 0.5SF and/or 1.5 in. deep C 1 day 1 day - Ride quality: IRI < 95 C 90 days 5 days - Rigid Pavement Cracking > 0.25 in. B 90 days 5 days - Pot holes > 1SF and/or 1 in. deep C 1 day 1 day - Rutting > ½ in. depth C 90 days 5 days - Ride quality: IRI < 95 C 90 days 5 days - Spalls > 4 in. B 90 days 5 days - Level slabs at joint > ½ in. C 90 days 5 days - Structures Restore after damage E 1 day 4 hours $3,000 Table 12. Details of Presidio Parkway key performance metric application. Feature of Work Effectiveness Flexible pavement Effective - Alligator cracking > 30% Effective - Cracking > 0.25 in. Effective - Rutting > ½ in. depth Effective - Pot holes > 0.5SF and/or 1.5 in. deep Effective - Ride quality: IRI < 95 Effective Rigid pavement Effective - Cracking > 0.25 in. Effective - Pot holes > 1SF and/or 1 in. deep Effective - Rutting > ½ in. depth Effective - Ride quality: IRI < 95 Effective - Spalls > 4 in. Effective - Level slabs at joint > ½ in. Effective Bridges – Decks same as rigid pavement Effective Tunnel systems Effective - Mechanical: Maintain performance above 98% up time Effective - Fire protection: Maintain performance above 98% up time Effective - Electrical: Maintain performance above 98% up time Effective - SCADA: Maintain performance above 98% up time Effective - Air quality: Maintain CO levels < 35ppm for 60-minute period Effective Guard rails Effective Attenuators Effective Fence Effective Signs Effective Drainage systems Effective Barrier wall Effective Toll equipment/buildings Effective Lighting Effective Vegetation control Marginally Effective Sound barriers Effective ITS operations Effective Incident response Effective Embankments N/A Earth/rock cuts N/A N/A = not in scope. Table 11. Presidio Parkway key performance metrics.

Case Examples 31   Summary Overall, this project’s metrics seem to have been well developed and provide the necessary standards against which Caltrans is making the required periodic payments associated with the concession agreement, with a minimum of controversy. The need to vet the design criteria within the context of the expected life of the concession agreement seems to be an important finding, which may require future research. US-36 Express Lanes Owner Agency: Colorado Department of Transportation (CDOT), High Performance Transportation Enterprise (HPTE) Project Title, Location: US-36 Express Lanes, Denver, Colorado Value: Phase 2: Design and construction costs $497 million Type of P3: DBFOM (50-year term). Payment is a modified hybrid approach, with toll revenues covering debt/equity costs and returns and a quasi-AP payment for maintenance. Operations are performed by CDOT. Introduction The Colorado Department of Transportation (CDOT), led by its High-Performance Trans- portation Enterprise (HPTE), procured its first transportation P3 project for Phase 2 of the Figure 12. Presidio Parkway tunnels. Table 12. (Continued). Tunnel Systems Mechanical: Maintain performance above 98% up time C 1 day 1 day $1,000 Fire protection: Maintain performance above 98% up time D 1 day 1 day $1,000 Electrical: Maintain performance above 98% up time D 1 day 1 day $1,000 SCADA: Maintain performance above 98% up time C 1 day 1 day $1,000 Air quality: Maintain CO levels < 35ppm for 60-minute period D 1 hour 1 hour $1,000 to $2,000 Drainage Systems Clear obstructions 2 days 1 day - Hyphens = no data. Metric Contract Definition Time Recurrence Interval Adjustment Project Element O&M Non- compliance Event Classification Cure Period Recurrence Interval Non- compliance Adjustment

32 Performance Metrics for Public–Private Partnerships US-36 Express Lanes Project. The Concessionaire (Plenary Roads Denver Ltd.) was selected to design, build, finance, and maintain the project. Summary of the Scope of Work The P3 project included the addition of new express lanes, reconstruction of existing pave- ment structures, widening of shoulders, replacing and/or rehabilitating bridges, adding Bus Rapid Transit improvements along the corridor, and installing ITS and tolling elements along with other work. In addition to the new and/or reconstructed elements of the project, the concession includes taking over existing assets (including express lanes) on other sections of US-36 and I-25. In general, the scope also included bringing the existing assets up to a specified standard. Rationale for Using P3. Although Phase 1 of the project was procured under a DB contract, funding constraints limited CDOT’s ability to complete the overall project. The Concessionaire did receive a certain amount of milestone payments during construction, therefore reducing the capital cost financing requirements, and CDOT did make periodic payments over the term for O&M-related activities. Procurement Process. The project was procured through a typical two-step solicitation with a best-value selection process. Post-Construction Performance Metrics. Table 13 contains the key performance metrics that were of interest to the agency and its perception of their effectiveness. Lessons Learned From CDOT/HPTE’s perspective, the project has gone well overall, and CDOT/HPTE are generally pleased with the Concessionaire’s performance. As with most Managed Lanes proj- ects, there was an internal agency debate during the contract drafting related to the performance metrics, proper thresholds, and delineation of responsibilities between the Concessionaire and CDOT. Because the project has now been in the O&M phase for several years, evaluation of the practicality and reasonableness of the Performance Metrics as envisioned and defined in the Project Agreement (PA) versus the experiences in the real-life application can provide some early findings and lesson learned. Several key points were made in the interview: 1. The cure time for some of the performance metrics defined in the PA are too long. 2. In several cases, the maintenance threshold(s) could be higher and/or better defined. For example, the snow and ice control metrics require bare pavements (i.e., all snow and ice removed/controlled) within 2 hours of “clear skies” appearing. The clear skies measurement is rather subjective and could be better defined. 3. Clarity on certain metrics could be better defined. For example, pavement markings have a threshold for replacement. The Concessionaire has chosen to do spot repairs of the markings as opposed to wholesale restriping. 4. The PA includes a provision for payment to the Concessionaire for snow and ice control. This payment is based on a set amount, with yearly adjustments indexed for inflation. These set amounts are paid regardless of the amount of inclement weather. Although the Concessionaire Feature of Work Effectiveness Rigid pavement Effective Bridges Effective Attenuators Marginally Effective Table 13. CDOT US-36 key performance metrics.

Case Examples 33   has a level of risk that the weather could be worse and the payments are not sufficient to cover the costs, the contrary is also true. CDOT/HPTE has questioned the value for the money of this approach. No non-compliance points have been assessed as of this date in the maintenance period. Handback Requirements. Handback requirements are developed to ensure that the proj- ect, when given back to the DOT, is in good overall condition. CDOT/HPTE’s approach in this project is to require the Concessionaire to establish and submit a Residual Life Method- ology plan to the HPTE for review and acceptance no later than the first day of the fifth full calendar year before the PA expiration date. The Concessionaire must prepare a Handback Plan that contains the methodologies and activities to be undertaken or employed to meet the handback requirements and obtain acceptance from HPTE. The plan must include the full details of all the testing and measurements required to establish the residual useful life. The residual life approach, the detailed inspection process required, the establishment of a hand- back reserve account, and bringing assets up to the specified standards are generally in line with other P3 projects. Summary The interviewee felt that the performance metrics developed for the project generally suc- cessfully ensured the project requirements were met. With the exceptions noted above, he further noted that the metrics and their associated non-compliance points were effective in maintaining the level of service and upkeep of the roadway. As with most P3 projects, the performance requirements and the resultant project performance are generally higher than on other CDOT roadways. The approach for payment of general maintenance activities in the General Purpose Lanes, as well as the snow and ice control, is a unique approach for a P3. Further research on approaches to maintenance responsibility delineation on managed lanes projects would be worthwhile for owners to better understand the approaches’ ability and the pros and cons of each. The inclusion of existing assets in general also makes this a project worth studying more in-depth as other owners debate the best approach to the inclusion of these assets in projects like this. IH-595 Corridor Roadway Improvements Owner Agency: Florida Department of Transportation (FDOT) Project Title, Location: IH-595 Corridor Roadway Improvements, Fort Lauderdale, Florida Value: $1.83 billion (Design & Construction costs $899 million) Type of P3: DBFOM (maintenance period: 25 years for bridges, flexible pavement for 5 years) 35-year term Introduction The Fort Lauderdale metropolitan area is among the fastest-growing regions in the state of Florida. Congestion on I-595 had reached a point where the need for added capacity had become critical. FDOT projected that waiting for sufficient state and federal funding might take as long as 15 years, by which time the added capacity in the current project would once again be exceeded. Therefore, it became one of the first DOTs in the nation to seek approval to use avail- ability payments as a means to bring private capital to fund the project. A project map is shown in Figure 13.

34 Performance Metrics for Public–Private Partnerships Summary of the Scope of Work The I-595 Corridor Roadway Improvements project consists of the reconstruction of the I-595 mainline and all associated improvements to frontage roads and ramps from the I-75/ Sawgrass Expressway interchange to the I-595/I-95 interchange, for a total project length along I-595 of approximately 10.5 miles and a design and construction cost of approximately $1.2 billion. Figure 14 shows the braided ramps that were part of the project. The project was awarded to I-595 Express, LLC, a subsidiary of ACS Infrastructure Develop- ment, which was awarded the contract to serve as the Concessionaire to design, build, finance, operate, and maintain (DBFOM) the project for a 35-year term. The major project components include: • Three at-grade reversible express toll lanes, serving express traffic to/from the I-75/Sawgrass Expressway from/to east of SR-7, with a direct connection to the median of Florida’s Figure 14. I-595 braided ramps. To Naples U ni ve rs ity D riv e Pi ne Is la nd R oa d N ob H ill R oa d Hi at us R oa d Fl am in go R oa d Da vi e Ro ad Broward Boulevard Sunrise Boulevard Davie Boulevard Griffin Road To Miami To West Palm Beach To Miami SW 1 36 A ve nu e Project Limits Port Everglades FLL Airport Griffin Road Peters Road Figure 13. I-595 Corridor Roadway Improvements.

Case Examples 35   Turnpike. These lanes will be operated as managed lanes with variable tolls to optimize traf- fic flow. They will reverse directions at peak travel times (eastbound in the a.m./westbound in the p.m.). • Continuous connection of the SR-84 frontage road between Davie Road and SR-7. • The addition of auxiliary lanes on I-595 along with combined ramps, cross-road bypasses, and grade-separated entrance and exit ramps to minimize merge, diverge, and weaving movements. • Widening/reconstruction of 2.5 miles of Florida’s Turnpike mainline and improvements to the I-595/Florida’s Turnpike interchange. • Construction of the New River Greenway, a component of the Broward County Greenway System. • Thirteen sound barriers providing noise abatement for 20 communities. • Implementation of Bus Rapid Transit Express Bus service within the corridor. • Provision of a transit envelope within the corridor to accommodate potential future transit options currently under evaluation. Rationale for Using P3. The DBFOM project delivery was chosen as a result of initial find- ings that the project would take up to 20 years to complete if funded in the traditional way. FDOT chose to deliver the project using DBFOM for the following reasons: • Reap considerable cost savings over the life of the project. • Reach the required traffic capacity 15 years sooner than they would have with traditional methods. • Expedite project delivery. • Maximize efficiency to deliver more projects. • Minimize impact on the traveling public. • Allocate risks to the party best able to manage risks. Procurement Process. FDOT established an aggressive schedule for the procurement of the DBFOM Concessionaire. The time period from the initial Request for Qualifications to the Contract Award was less than 13 months; this involved constant and continued collaboration of legal, financial, and technical department and consultant staff. Communication between FDOT and the short-listed Concessionaire teams included one-on-one meetings throughout the process to ensure comprehensive contract documents and a competitive bidding process. The formal procurement phase for this project began on October 1, 2007, when FDOT issued the Request for Qualifications (RFQ) to those interested in preparing a proposal. On November 5, 2007, the Statements of Qualifications (SOQ) were received from six Concessionaire teams, which were shortlisted to four teams on December 3, 2007. The Draft Request for Proposal (RFP) Technical Requirements Distribution was on December 11, 2007, with the Final RFP issued on April 18, 2008. On September 5, 2008, the technical and financial proposals were received from the remaining short-listed proposers. FDOT issued the Notice of Intent to Award Contract to ACS Infrastructure Development on October 24, 2008, and the contract execution was finalized on March 3, 2009. Post-Construction Performance Metrics. The performance metrics listed in Table 14 were chosen to represent roadway, bridge, or ancillary elements that affect the public. Table 15 includes a description of the metrics indicated in Table 14. In Table 15, the cost of non-compliance is expressed by the severity of the O&M violation classification.

36 Performance Metrics for Public–Private Partnerships Table 14. I-595 key performance metrics. Feature of Work Effectiveness Flexible pavement — years 0–3 after substantial completion Effective - Cumulative length cracking > 30 feet for cracks > 0.125 in. in 0.1-mile lot - - Cracking pavement condition rating > 7.0 - - Settlement/depression < 0.5 in. - - Rutting > 0.25 in. depth - - Pot holes < 0.5SF and 1.5 in. deep - - Ride quality RN > 3.5 - Note: similar metrics for post-3 years and total operating period - Rigid pavement — years 0–3 after substantial completion Effective - Spalling >1 in. for 10 feet or >3 in. - - Rigid slab cracked in more than 3 pieces - - Pot holes < 0.5SF and 1.5 in. deep - - Ride quality RN > 3.5 - Note: similar metrics for post-3 years and total operating period - Bridges — maintain in accordance with FDOT design criteria or approved Concessionaire criteria Effective Guard rails — maintain in accordance with FDOT design criteria Effective Attenuators — maintain in accordance with FDOT design criteria Effective Fence — maintain in accordance with FDOT design criteria Effective Signs — maintain in accordance with FDOT design criteria Effective Drainage systems — maintain in accordance with FDOT design criteria Effective Barrier wall — maintain in accordance with FDOT design criteria Effective Toll equipment/buildings – maintain in accordance with approved Concessionaire criteria Effective Lighting — maintain in accordance with Division II, Section 6, Technical Requirements Effective Vegetation control — standard for concrete surfaces only Effective Sound barriers - maintain in accordance with FDOT design criteria or approved manufacturers criteria Effective ITS operations — Quarterly average roadway clearance duration (in minutes) must be no more than 90% of FDOT District Four’s ITS performance measures Effective Incident response — Quarterly average roadway clearance duration (in minutes) must be no more than 90% of FDOT District Four’s ITS performance measures Effective Embankments NQM Earth/rock cuts NQM Hyphens = no data; NQM = no quantifiable measure. Metric Contract Definition Time Recurrence Interval Project Element O&M Violation Classification Cure Period Recurrence Interval Flexible Pavement Cumulative length cracking > 30 feet for cracks > 0.125 in. in 0.1-mile lot B 90 days 5 days Cracking pavement condition rating > 7.0 B 90 days 5 days Settlement/depression < 0.5 in. B 7 days 1 day Rutting > 0.25 in. depth B 90 days 5 days Pot holes < 0.5SF and 1.5 in. deep C 24 hours 5 days Ride quality RN > 3.5 B 90 days 5 days Rigid Pavement Spalling >1 in. for 10 feet or >3 in. B 7 days 1 day Rigid slab cracked in more than 3 pieces B 90 days 5 days Pot holes < 0.5SF and 1.5 in. deep C 24 hours Hourly Ride quality RN > 3.5 B 90 days 5 days Bridges Integrity of bridge structure B 5 days 24 hours Bridge repairs — routine B 180 days 10 days Bridge repairs — urgent C 90 days 5 days Bridge repairs — emergency E 30 days 24 hours Drainage Systems Maintain in accordance with FDOT design criteria B 7 days 24 hours Table 15. Details of I-595 key performance metric application.

Case Examples 37   Lessons Learned The following bullet items are drawn from a presentation that reviewed the performance of this project after construction was completed and the O&M period had commenced: • “Be flexible in the procurement, contracting, and finance processes. • Secure government and community stakeholders’ support. • Secure outside experts with P3 experience. • Be transparent and have an interactive process. • Be flexible, clear, consistent, and persistent. • Establish a project-specific business plan. • Performance-based O&M program is critical. • Proper balance of performance and prescriptive requirements. • Audits to verify project performance” (Lampley et al. 2011). Handback Criteria The project utilizes a handback system based on the joint development of a Handback Evalu- ation Plan, which delineates a series of activities designed to demonstrate that the project’s condition at handback is in a “good and operable condition.” The following is an excerpt from the concession agreement that describes the process: The Concessionaire will guarantee that the Project will be handed back to the Department in a good and operable condition and all elements of the Project within the O&M Limits will comply with the Hand- back Requirements and in the desired maintenance condition. The Concessionaire shall develop a capital replacement plan for the equipment, systems, assets, etc., that are to be replaced, overhauled, refurbished, or rehabilitated over the Term. That plan will help ensure that the equipment, systems, assets, etc. remain safe, modern, and efficient to operate and maintain and retain their asset value. The Concessionaire shall rehabilitate any asset that has reached the end of its design life, cannot be maintained to perform within the specified performance requirements, exhibits a measurably higher failure rate, or ceases to be eco- nomical to maintain due to excessive deterioration or obsolescence. The approach at handback is for the Concessionaire and the Department to work jointly to agree on the capital investments that will have to be done before the expiration of the Term. For this purpose, it is proposed to provide as-built drawings of the Project opening and to carry out specific inspections during the last 5 years prior to the handback to guarantee that the initial functionalities are working at the desired level. (FDOT 2009). One of the key aspects of the I-595 concession handback program is the use of residual life at handback as a means to define the desired performance outcome. The Handback Plan is used to fill in the details as to the outputs that will be used to achieve the residual life outcome for each feature of work on the project. Summary The project was found to be quite successful and acts as a model for other FDOT P3 deliveries. Rapid Bridge Replacement Project—PennDOT Owner Agency: Pennsylvania Department of Transportation (PennDOT) Project Title, Location: Rapid Bridge Replacement Project (RBRP), Pennsylvania Value: $1.2 billion (Design & Construction costs $899 million) Type of P3: DBFM (maintenance period: 25 years for bridges, flexible pavement for 5 years)

38 Performance Metrics for Public–Private Partnerships Introduction Pennsylvania is among the nation’s leaders in state and locally owned bridges (approximately 32,000) and total lane-miles maintained (just over 250,000). The Pennsylvania Department of Transportation’s (PennDOT) RBRP is a public–private partnership (P3) that encompasses the design, construction, financing, and routine life-cycle maintenance of 558 replacement bridges over 5 years. Because the RBRP project was a multi-location project spread across the entire Commonwealth of Pennsylvania, it had to accommodate some of the most diverse geographies of any state (mountains, valleys, rivers/streams, or Karstic conditions). Addi- tionally, Pennsylvania’s governmental structure and PennDOT’s organization required the successful Development Entity (DE) (i.e., Concessionaire) to coordinate with 67 counties that collectively formed 11 PennDOT Engineering Districts, each with respective preferences regarding transportation infrastructure. In order to navigate the unique conditions surrounding this first-of-its-kind project, the project team utilized the opportunity created by P3 delivery to seek out innovation in both contractual and construction applications. The RBRP identified bridges of similar size and design (predominantly single-span bridges or culverts), which allowed the opportunity for similar designs and economies of scale, optimizing the ability to complete the design and construction of individual bridges more quickly. PennDOT estimates that replacing the structures using conventional contract procedures would have taken 8 to 12 years, whereas a P3 project would compress the schedule to approximately 5 years. At $1.2 billion over a 28-year term (including 25 years of maintenance), it is the largest multi- asset, multi-location P3 project of its kind in the United States. Summary of the Scope of Work This P3 was awarded by the Pennsylvania Department of Transportation (PennDOT) to the consortium of Plenary Walsh Keystone Partners (PWKP). The Commonwealth of Pennsylvania is taking advantage of the new P3 tool, signed into law in 2012, to address the state’s roughly 4,500 bridges in poor condition. The project is an initiative to replace and maintain 558 aging bridges throughout Pennsylvania. Replacing the bridges will provide motorists with new, modern structures and allow PennDOT to remove them from their list of bridges in poor condition. The bridges are primarily cross- ings on smaller state highways, many in rural areas, rather than interstate bridges or large river crossings. The project was awarded to PWKP in 2015. Afterwards, commercial and financial close design and construction activities started immediately. The project was scheduled to be completed by December 2018. The scope of the project encompassed the design, construction, financing, and life-cycle maintenance of 558 bridges shown in Figure 15. The selected Concessionaire (called the DE) is responsible for the replacement and installation of the 558 bridges (441 single-span bridges, 120 culverts, and 27 multi-span bridges) as well as the 25-year bridge maintenance and eventual handback (durations specified in the contract) of assets such as vegetation, flexible pavement, guiderail attached to the structure, and general bridge deck and structural maintenance. Other scoped work included the coordination and delivery of environmental clearance documents and design plans as well as providing assistance with utility and right-of-way (ROW) coordination for each bridge. The 558 bridges were divided into two groups. Work on the 87 early completion bridges started in 2015. For these early completion bridges, PennDOT provided NEPA, ROW, utility

Case Examples 39   clearance, and permits, whereas the developer was responsible for the final design. For the remaining 471 bridges, the developer was responsible for NEPA, right-of-way plans, permits, and final design. This approach of dividing the bridges into two groups was considered an inno- vative approach because, for the first group, much of the preliminary development work (NEPA, permit, etc.) was already performed by the agency that allowed the Contractor to start with design and construction phases immediately. As of March 30, 2020, 556 out of 558 bridges have been completed. Rationale for Using P3 • Accelerate replacement of poor-condition bridges. • Expedite project delivery. • Maximize efficiency to deliver more projects. • Minimize impact on the traveling public. • Allocate risks to the party best able to manage risks. Procurement Process. Best-value selection of the Concessionaire (Developer/Contractor team) was based on cost, financial capability to carry out the project, background, experience in managing comparable projects, and understanding of the project. According to contract docu- ments, the weight was 90% pertaining to financial price score and 10% to technical proposal score. Financial price score was the sum of the net present value of all availability payments and milestone payments as set forth in the contract documents. Post-Construction Performance Metrics. The performance metrics listed were chosen to represent roadway, bridge, or ancillary elements that affect public safety, environmental impacts, and longevity of the asset. The performance criteria for each element reflect the importance of regularly monitoring an element’s performance, identifying when action is required to maintain the element’s performance level, recognizing the severity and risk of a performance deficiency, and recognizing how maintaining the appropriate level of performance can impact the long- term performance of the asset. Table 16 shows the distribution of performance metrics used in the project. Table 17 includes a description of the metrics indicated in Table 16. In Table 17, the cost of non-compliance is expressed in number of non-compliance points. Each non-compliance point during the maintenance period (post-construction) is $2,000. A detailed explanation can be found in PennDOT’s Rapid Bridge Replacement Final Technical Provisions. Figure 15. RBRP locations.

40 Performance Metrics for Public–Private Partnerships Lessons Learned The following was provided by PennDOT regarding the agency’s lessons learned: • Asset Selection – Ensure all teams utilize the same consistent criteria for selecting assets. – Consider complexities beyond design and construction (utility, permitting, ROW, traffic impacts) when selecting assets. – Use a multi-discipline approach to develop selection criteria. • Asset Categorization and Prioritization – Identify/categorize assets based on complexity. – Ensure that the most complex elements are started early in the project to minimize schedule impacts. • Exercise Patience – Ensure that ample time is set aside for thorough project scoping, documentation, and review by subject matter experts. – Understand that coordination among stakeholders to develop the project scope and perfor- mance requirements may initially result in conflicting opinions. • Risk Allocation – Perform a risk assessment during contract development to understand the risks and which party (owner or DE) is best equipped to manage them. – Consider and evaluate increased owner, stakeholder, and outside agency demands and risks associated with DE innovations. Feature of Work Effectiveness Flexible pavement Effective - Fatigue cracking > 0.25 in. average width or alligator cracking - - Transverse cracking > 0.5 in., 1-foot length unsealed - - Rutting > in. depth in each wheel path - - Pot holes > 1 SF and/or 1 in. deep - - Edge dropoff > 2 in. - - Ride quality > 0.25 in. drop in 10 feet - Rigid pavement Marginally Effective - Concrete paving joints > 0.5 in. elevation or 2 in. separation - - Pot holes > 1 SF and/or 1 in. deep - - Ride quality > 0.25 in. drop in 10 feet - - Edge dropoff > 2 in. - Bridges Effective - NBIS > 7 for 98% of structures - - NBIS > 6 for remaining 2% of structures - - NBIS > 7 for superstructure - Guard rails Effective Attenuators Effective Fence NQM Signs NQM Drainage systems - Opening > 90% clear of obstructions Marginally Effective Barrier wall NQM Toll equipment/buildings N/A Lighting N/A Vegetation control - Handback to the Dept. upon achieving 70% growth and is 1 year past final Marginally Effective Sound barriers N/A ITS operations N/A Incident response N/A Embankments NQM Earth/rock cuts N/A Hyphens = no data; N/A = not in scope; NQM = no quantifiable measure. Table 16. PennDOT RBRP key performance metrics.

Case Examples 41   • Create a multi-discipline team to determine performance criteria required for the project. • Retain responsibilities of managing the Construction Quality Acceptance Firm. • Ensure contract language outlines roles, responsibilities, and expectations for all key personnel. • Non-compliance – Establish criteria for design, construction, and management activities. – Establish criteria with reasonable cure periods and penalties to ensure best outcome for safety, quality, and schedule. • Clearly define roles and responsibilities of the owner’s project team. • Clearly communicate expectations of personnel who are providing project support. • Establish a process to capture lessons learned early in the project. • Concessionaire (called the “Development Entity” by PennDOT) Performance – Require analysis of complex/high-risk activities and development of a schedule that can be monitored from project start. – Ensure that the Concessionaire fully understands the importance of its role in public outreach. Metric Contract Definition Time Time Recurrence Interval Project Element Non- compliance Points Hazard Mitigation (hours)1 Permanent Cure (days)2 Recurrence Interval (days)3 Flexible Pavement Fatigue cracking > 0.25 in. average width or alligator cracking 3 24 30 7 Transverse cracking > 0.5 in., 1-foot length unsealed 3 24 30 7 Rutting > in. depth in each wheel path 4 24 30 7 Pot holes > 1SF and/or 1 in. deep 5 24 7 7 Edge drop off > 2 in. 3 24 30 7 Ride quality > 0.25 in. drop in 10 feet 4 24 30 7 Rigid Pavement Concrete paving joints > 0.5 in. elevation or 2-in. separation 3 24 30 7 Pot holes > 1 SF and/or 1 in. deep 5 24 30 7 Ride quality > 0.25 in. drop in 10 feet 4 24 30 7 Edge drop off > 2 in. 3 24 30 7 Bridges4 Integrity of bridge structure 5 24 7 24 hours Expansion joints 4 24 7 24 hours Railing 3 24 7 24 hours Skid resistance of deck 5 24 30 7 Ride quality 4 24 30 7 Structural steel elements 5 24 7 7 Drainage Systems Opening > 90% clear of obstructions 3 24 30 7 1 Time to hazard mitigation is the amount of time to respond to an issue when it is reported the first time. 2 Time to permanent cure is the number of days available to the developer to rectify the noncompliance issue. 3 Recurrence interval is the time interval at which the noncompliance issue will be evaluated, and if not rectified, the noncompliance penalty (cost) accrued again. 4 For bridge structures, the basis for assessment is the NBIS ratings. At the substantial completion, the bridge needs to be rated 8 or higher according to NBIS rating. At the time of handback, bridge needs to maintain an NBIS of 7 or higher for 98% of bridges and an NBIS rating of 6 or higher for the remaining 2%. For the superstructure, an NBIS rating of 7 or higher needs to be maintained. Table 17. PennDOT RBRP key performance metric application.

42 Performance Metrics for Public–Private Partnerships Handback Process The structure and timing of the handback of major features of work from the Concessionaire to PennDOT are shown in the timeline found in Figure 16, as follows: • Final acceptance (immediate): line painting, delineators, and signs not attached to the structure. • Early handback (gradual): PennDOT relieves developer of these items from the O&M require- ments at acceptance. – After 1 year—seeding growth, vegetation, and mowing. – After 5+ years—flexible pavement (must meet contractual warranty conditions). • Final (at 25 years): – Bridge and surrounding area in place. – Condition assessment conducted prior to handback. – Must meet a rating of 7 throughout the contract. – Must meet a rating of 7 for 98% at the end. Summary The project consisted of 558 individual bridge projects; 556 bridges had been completed as of March 20, 2020, and two were under construction and expected to be completed in the second quarter of 2020; 556 bridges are currently in the operations phase. Texas State Highway 130, Segments 5 and 6 (SH-130) Owner Agency: Texas Department of Transportation (TxDOT) Project Title, Location: SH-130 Texas State Highway 130, Segments 5 and 6 (SH-130) Value: $1.3  billion Figure 16. RBRP handback sequence and timing for a single bridge (Source: PennDOT 2021).

Case Examples 43   Type of P3: DBFOM (maintenance period: 50 years). Delivery method was Comprehensive Development Agreement (CDA), the term used to designate P3 delivery in Texas. The developer is responsible for toll revenue risk and for the toll collection. The CDA includes a toll-sharing provision (with TxDOT). Introduction This project is a 41-mile extension of State Highway 130 (SH-130) from Austin to Seguin, Texas. This is a state-owned toll road where the Concessionaire is responsible for designing, building, tolling, operating, and maintaining the project for a period of 50 years under a public– private partnership arrangement. The developer, SH-130 Concession Company, LLC, financed the project and acquired the right-of-way. The Comprehensive Development Agreement (CDA) contract was executed on March 22, 2007, the project substantial completion date was Octo- ber 23, 2012, and service commencement began on November 11, 2012. The final acceptance occurred on May 8, 2013. Segments 5 and 6 have speed limits posted at 85 mph, the highest speed limit anywhere in the country at this point. Summary of the Scope of Work Segments 5 and 6 of SH-130 form a 41-mile route through Travis, Caldwell, and Guadalupe counties to I-10 near Seguin. Segment 5 extends for 11 miles from north of Mustang Ridge to FM-1185 north of Lockhart. Segment 6 stretches from FM-1185 to I-10 northeast of Seguin and is 30 miles long. The project consisted of constructing two toll lanes and two discontinuous frontage road lanes in each direction. The O&M scope consisted of maintenance of all of the toll lanes (and bridges) and frontage roads, as well as other operational services such as sweep- ing, incident response, and winter maintenance. Figure 17 shows the overall project scope and location. Rationale for Using P3. The Austin-San Antonio corridor has witnessed significant growth and development in recent years, and Interstate-35 (I-35) connecting these cities has one of the highest congestion rates in the state. SH-130 was planned to provide congestion relief to com- muters by creating a workaround from I-35. The use of the CDA accomplished three primary objectives: (a) accelerating the project by integrating the design and construction processes; (b) transferring the budgetary and financial risk to the private sector for both the construction and traffic and revenue to the private sector; and (c) putting in place long-term contractual requirements to ensure high-level asset quality. Post-Construction Performance Metrics. Detailed metrics were prepared for the opera- tions and maintenance phase of the project. Table 18 provides a partial listing of the key per- formance metrics. If defects were to be detected and not rectified within the remedy period, then that would result in a number of non-compliance points. The accumulated noncompliance points would then result in liquidated damages assessed against the Concessionaire. A partial listing of these non-compliance points is provided in Table 19. The cost of non-compliance is expressed in number of non-compliance points. This cost was adjusted based on the CPI (Consumer Price Index) and was $7,000 per assessment of any single non-compliance point at the time the contract was signed. The current accumulation of assessed uncured non-compliance points resulted in liquidated damages of $12,500 per day when the contract was signed.

44 Performance Metrics for Public–Private Partnerships Figure 17. SH-130 Segments 5 and 6.

Case Examples 45   Metric Contract Definition Time Time Recurrence Interval Project Element Non- compliance Points Hazard Mitigation1 (hours) Permanent Remedy [Cat 1] (days)2 Permanent Repair3 [Cat 2] (months) Obstructions and Debris Obstructions and debris 6 2 N/A N/A Pavement Pavement ride quality 6–7 24 28 6 Pavement condition score needs to be > 90 7 24 7 - Ruts on mainline need to remain below 0.25 in. in 97% of road and no more than 0.5 in. 6–7 24 7 - Pot holes 7 24 7 - Bridges4 Inspection and assessment according to NBIS 6–7 24 28 6 Structural components such as bearings, expansion joints 6–7 24 28 6 Incident Response Respond to incidents as per contract 4 1 - - Propose and implement temporary or permanent remedy to incident 7 24 28 - Drainage Systems Pipes and channels: drainage components are mainly inspected visually 6–7 24 28 6 Drainage treatment devices 6–7 24 28 6 Traveled way is free from water 6–7 24 28 6 1 Take necessary actions to mitigate hazards to users within the time period given. 2 Permanently remedy the Category 1 defect within the period. 3 Time to undertake and complete permanent repair of Category 2 defect within the time interval. 4 For bridge structures, the basis for assessment is the NBIS ratings. For deck, superstructure, and substructure, an NBIS rating of 7 or higher needs to be maintained. Hyphens = no data; N/A = not applicable. Table 19. TxDOT key performance metric application. Feature of Work Effectiveness Obstructions and debris — Visual inspection and number of obstructions/debris - Pavement Highly effective - Pavement condition score needs to be > 90 - - Ruts on mainline needs to remain below 0.25 in. in 97% of road and no more than 0.5 in. - - Ride quality — IRI = 100 for concrete pavements and below threshold values on 98% of the roadway - - Pot holes and surface failure - Drainage Highly effective - Pipes and channels — Drainage components are mainly inspected visually - - Drainage treatment devices - - Traveled way is free from water - Bridges Highly effective - Inspection and assessment according to NBIS; all components, deck, superstructure, and substructure need to have a rating of 7 or better - - Structural components such as bearings, expansion joints - Guard rails — Based on visual inspection Effective Attenuators — Based on visual inspection Effective Fence — Based on visual inspection Effective Signs — Based on visual inspection Effective Barrier wall — Visual inspection and structural assessment if warranted Effective Toll equipment/buildings — Based on visual inspection and defect measurement Effective Lighting — Nighttime testing, visual inspection Effective Vegetation control — Physical measurement of length of grass Effective Sound barriers — Based on visual inspection Effective Embankments — Based on visual inspection by geotechnical engineer Effective Incident response — 1-hour response time met in 98% of incidents Effective Hyphens = no data. Table 18. TxDOT key performance metrics.

46 Performance Metrics for Public–Private Partnerships Lessons Learned The Concessionaire filed for bankruptcy in 2016, 3 years into the operations phase, as it could not meet loan payments. A major reason for this was that the actual traffic volume was well below projected values and, to this date, remains below the projected volumes. The large loans made it difficult for the Concessionaire to meet loan payment obligations. Through the bankruptcy process, creditors took ownership control of the company from the prior owners. The company with the same name, SH-130 Concession Company, LLC, exited from bank- ruptcy in 2017 and has been operating the project ever since. One unique characteristic of this project is that the federal government owns approximately one-third of the equity in the current company by virtue of the conversion of its Transportation Infrastructure Finance and Innovation Act (TIFIA) loan to equity during the bankruptcy process. Had the State of Texas taken the financial risk of this project instead of the private sector, the financial obligation asso- ciated with the underperforming traffic would have been substantial. The project has also experienced difficult subgrade conditions due to faulty initial design and construction that caused extensive cracking and heaving of the pavement. The Concessionaire completed a $90 million-plus repair on sections of the road that was successfully completed in 2019. In several locations, the Concessionaire had to remove and replace up to eight feet of subgrade embankment to rectify the heaving problems. The cost of repairs was borne by the Concessionaire. Handback Requirements Handback requirements are developed to ensure that the project is in good condition when turned back to the DOT. The Texas DOT’s approach in this project was to require the developer to establish and design a methodology for calculation of the residual useful life at the beginning of the contract. The methodology would include all of the testing and measurements required to establish the residual useful life. The owner also provided residual useful lives at handback for various components of the asset as part of the technical requirements. During the last 6 years of the concession period, the Concessionaire will perform three extensive inspections and establish the residual use life of asset components. In addition, the Concessionaire is required to establish a reserve budget to be used for bringing asset condi- tions to the required level to ensure sufficient useful life at the end of the concession period. Based on the results of these inspections, the cost of rectifying and repairing and renewing all major components is estimated, and the Concessionaire will implement needed repairs according to these inspections. Summary The interviewee thought that the performance metrics developed for the project successfully met project needs. The interviewee further observed that these metrics and their associated noncompliance points were highly effective in maintaining the level of service and upkeep of the roadway. If anything, it was thought that the metrics on this project were stricter than in other Texas DOT projects. One observation was that the metrics established do not always have a direct relationship to safety, life-cycle maintenance, and traffic. The agency thought that since the time of this contract, those kinds of metrics have improved further in other contracts to make them more performance based. SH-895 Pocahontas Parkway Owner Agency: Virginia Department of Transportation (VDOT) Project Title, Location: SH-895 Pocahontas Parkway, Richmond, Virginia

Case Examples 47   Value: $597.4 million (eligible project costs, including refinancing, con- struction of the Richmond Airport Connector (RAC), and instal- lation of an electronic tolling system). Type of P3: 63-20 DB; DBFOM Introduction The Virginia Department of Transportation (VDOT) has long been a leader in the United States in alternative delivery and particularly transportation public–private partnerships (P3). Virginia’s Public–Private Transportation Act (PPTA) of 1995 opened the door for a series of P3s that have helped deliver major assets in Virginia that likely would not have been delivered, or at least delivered on the accelerated schedule that the P3 procurement approach has facili- tated. The first project procured under the PPTA was the Pocahontas Parkway (Route 895). The Pocahontas Parkway is an 8.8-mile tolled highway, 7 miles south of Richmond, Virginia. The four-lane road connects Chippenham Parkway at I-95 in Chesterfield County with Inter- state 295 south of the Richmond International Airport in Henrico County. Construction began in fall 1998, and the Parkway was opened to traffic in stages beginning in May 2002. The facility includes a high-level bridge over the James River and an interchange at Laburnum Ave. and the Richmond Airport Connector Road. Summary of the Scope of Work The Pocahontas Parkway is significant for a variety of reasons beyond the fact that it was the first project under the Virginia PPTA: • It was one of the first P3s in the United States. • It originated from an unsolicited proposal. • Its financing was done under a 63-20 non-profit corporation (unlike more traditional P3s). • It has gone through a series of “assumptions” by several Concessionaires. It also is an important case example in reviewing the evolution of performance metrics in P3s given the length of time that the project has been in operations as well as the various changes in Concessionaires over the life of the project. Figure 18 shows the original Parkway and the addition of the Richmond Airport Connector, located southeast of Richmond, Virginia. Rationale for Using P3. The following were the rationale for selecting P3 on this project: • Maximizing the use of public–private partnerships. • Expediting delivery of the project (both the Parkway and RAC). • Experimenting with innovative financing, in particular the “European” model of private equity (i.e., regular refinancing of debt to leverage cash flows and produce returns to equity holders). • Allocation of short- and long-term risks. • SEP-15 approval from FHWA resulted in an expanded federal definition of “eligible costs.” • Operations and maintenance obligations rest with the private sector. Procurement Process The Virginia PPTA of 1995 was passed and allowed for solicited and unsolicited private sector proposals. VDOT received an unsolicited proposal from Fluor-Daniel/Morrison-Knudsen (FD/MK) for the first portion of the Parkway. VDOT called for any competing proposals but received none. A Comprehensive Agreement was executed in 1998. Project funding was anticipated to be provided largely through toll revenue-backed debt instruments. The Parkway was constructed

48 Performance Metrics for Public–Private Partnerships in part using funds generated by tax-exempt bonds issued by the Pocahontas Parkway Associa- tion (PPA) in 1998. PPA was a non-profit, non-stock corporation without members, commonly referred to as a 63-20. It was established for the sole purpose of financing the construction of the Parkway. The Parkway’s total development costs were funded through tax-exempt revenue bonds ($354 million) issued by PPA, a State Infrastructure Bank (SIB) loan ($18 million), and federal funding for roadway design ($9 million). VDOT provided operations and maintenance services and assumed subordinate loans for these services. The project was completed and opened to traffic in 2002. In 2004, the Parkway’s expected revenues were only 42% of predicted levels, and the PPA could not generate the revenues to repay VDOT for maintenance costs or make bond payments or profits to investors. Transurban USA (TUSA) proposed to VDOT the assumption of risks and responsibilities in the original Concession Agreement executed in 1998 as well as the delivery of the Richmond Airport Connector road. This resulted in an Amended & Restated Comprehensive Agreement (ARCA) in 2006 that obligated TUSA to pay off the state’s $18 million debt and established a revenue sharing arrangement between TUSA and VDOT when the rate of return on their private invest- ment exceeded 6.5%. Revenues were anticipated to be sufficient by 2006 to cover the operations and maintenance costs. In 2012, TUSA wrote off its $130 million investment, and in 2013, it notified the various European banks that provided financing that their $300 million loans would not be repaid. TUSA viewed this as a short-term financial loss but a success from a business perspective, as it helped establish a long-lasting relationship with the VDOT. In 2014, VDOT contracted out the operations and maintenance to DBi Services. Macquarie Capital became a 50% shareholder as TUSA transferred its interest to the senior lender in May 2014. The Pocahontas Parkway had been owned by Macquarie and was a consortium Figure 18. Pocahontas Parkway project layout.

Case Examples 49   comprising TPG and Citigroup. The Macquarie unit acquired TPG and Citigroup’s stake in August 2015 for approximately $400 million. In October 2016, after an open sales process, Globalvia was named the preferred bidder to assume responsibilities for the Pocahontas Parkway. Financial close was reached in late 2016, with a concession period ending in 2015. Although the Parkway has changed hands several times over the course of 18 years, leading some to wonder whether the Parkway and/or public–private partnerships are a failure, it is in fact a positive example of contracts functioning exactly the way they were intended to and all parties staying within their established roles. The end result is that Virginia has a well-maintained and well-operated toll facility that meets all established operational and maintenance standards. The private sector, with the financial risks, was held solely responsible for their debts. The facility still retains value as a trial facility for international companies seeking to maintain a presence and create a relationship with VDOT. The Parkway and RAC function as the integrated road- ways within a larger established transportation network. Post-Construction Performance Metrics. The original contract with FD/MK did not con- tain detailed technical requirements as later PPTA project contracts would. Instead, during the late 1990s, there was greater reliance on the Green Book and VDOT’s Road and Bridge Speci- fications. There was no long-term warranty on pavement, as that had been determined during construction of the Route 288 project to be difficult to value. The contract instead specified the pavement design, rideability was established as a performance measure, and tests ensured that standards were met. The contract also specified a set of conditions to establish pavement rehabilitation schedules and requirements. Lessons Learned Even if a PPTA project “goes bankrupt,” as happened effectively twice, following the contract roles and responsibilities effectively kept the risk to VDOT to nil. Technical requirements and performance issues are now established features of the VDOT P3 procurements. Handback Criteria The VDOT P3 Risk Management Guidelines provide the following guidance with respect to handback: The operations phase of a P3 project is characterized by a highly challenging period of change at the startup of operations followed by many years of operations and ended by a series of planned activities that ensure the facility is handed back to the Agency in accordance with the requirements of the CA [Comprehensive Agreement]. Towards the end of the operations phase, risks associated with asset condition will become more important as both Agency and Concessionaire prepare for handback. As well as ensuring asset condition at handback, preparations will also be made for a transition of general operations from the Concessionaire back to the Agency. The CA typically contains requirements for a transition plan that includes meetings between the Concessionaire and Agency and the transfer of certain documentation. (VDOT 2015) Summary This project demonstrated that the concession agreement could be structured in a manner in which even Concessionaire bankruptcy could be weathered without major impact to the DOT. Summary of Case Examples This chapter reviewed the details of six P3 projects in California, Colorado, Florida, Pennsylvania, Texas, and Virginia. Four illustrated the experience with DBFOM, and two provided details on DBFM. Three used availability payments as the financing mechanism,

50 Performance Metrics for Public–Private Partnerships two were revenue risk arrangements, and one illustrated a hybrid approach that combined the availability payments and revenue risk. In all six projects, the performance metrics used were generally perceived to be effective for the purposes of which they were developed. The following are findings drawn from the analysis of the example projects: • Two projects (Texas and Virginia) suffered through and recovered from the Concessionaire going bankrupt. Both were revenue risk projects. In both cases, the DOT had structured the concession agreement in a manner that minimized the bankruptcy risk to the agency. • Most of the project interviews emphasized the need to maintain a high degree of flexibility during both project development and procurement to allow risk to be allocated in a manner that is most appropriate for both the agency and the Concessionaire. • Performance metrics are a means to quantify post-construction performance risk, and although the interviews conducted for the six examples showed the current suite of metrics to be effective, every interview indicated that the setting of standards and conditions is key to a given metric’s effectiveness and that in almost every project there were one or more where the established standards were judged to be higher than required. • Future research that produces guidance for establishing appropriate levels of performance for the suite of P3 metrics based on empirical analysis of actual P3 project performance data would add value to P3 body of knowledge.