Transcript Wawszkiewicz_Thompson_Session_63(OTEC-PBP)

Portsmouth Bypass P3 Project
Performance Based Delivery
October 29, 2014
Presenters
Shawn Thompson, PE, CQE
CH2M HILL
Mike Wawszkiewicz, PE
Ohio DOT
2
Presentation Outline
» Project Background
» Design-Build-Finance-Operate-Maintain (DBFOM) Model
‒ Delivery Structure/Roles
‒ Payment Structure
» Maximizing Asset Performance/Availability
‒
‒
‒
‒
‒
Availability Payments
Handback
Maintenance Performance Obligations
Noncompliance Event/Deductions
Unavailability Deductions
» Outcome and Upcoming Schedule
» Questions?
3
Portsmouth Bypass (PBP) - Overview
» Last Segment in Ohio on Appalachian System
‒ Economically depressed area
» Originally a Design-Bid-Build Project
‒ Three phases
‒ Various levels of design completed
» Bypass Scope
‒
‒
‒
‒
16 mile, 4 lane, limited access highway
Bypasses 26 miles of US 23 and US 52
5 interchanges and various RR crossings
16 minute time savings
Project Background
DBFOM Model
Performance/Availability
Outcome/Next Steps
4
Key Characteristics of the Project
» Reference Design
‒ Not contractual
» Significant Earthwork
‒ ~25M Cubic Yards of excavation, mainly rock
‒ ~20M Cubic Yards of embankment
» 20 Bridges and 17 Retaining Walls
‒ Two horizontally curved bridges over US 23
‒ Long bridge over Little Scioto River with 100’
tall piers
» High Fill Embankments (> 180’) and Deep
Culverts (> 170’)
Project Background
DBFOM Model
Performance/Availability
Outcome/Next Steps
5
Public-Private-Partnership (P3) Timeline
The Portsmouth Transportation Study, initiated in 1999,
recommended a new 16-mile freeway
Due to funding constraints, ODOT proposed building the Bypass
as a DBB in three phases over 13 years
As a P3, the project can be built in a single phase and delivered
eight years earlier
The project is of significant regional importance,
providing needed infrastructure that allows the area to
compete for new jobs in a region with 50% higher
unemployment than the rest of Ohio
Project Background
DBFOM Model
Performance/Availability
Outcome/Next Steps
6
P3 Project Scope
» DBFOM Approach
» ~4 year Design and Construction
Period (DCP)
‒ Starts Spring 2015
» 35 year Operations & Maintenance
(O&M) Period
‒ O&M Period begins at
Substantial Completion
» Availability Payment Mechanism
» Competitive, Fixed Price
» Appropriate Risk Transfer to
Private Sector
RFQ
RFP
2Q 2013
1Q 2014
Financial
Close
Design &
Construction
1Q / 2Q
2015
2015
through
4Q 2018
Project Background
DBFOM Model
Performance/Availability
Outcome/Next Steps
7
Financing Approach
» Transportation Infrastructure Finance and Innovation Act (TIFIA)
‒ Critical to obtaining value for money
‒ Authorization to use TIFIA rural rate provided significant savings
‒ Status of TIFIA rural rate was unknown during Delivery Options Analysis
‒ Baseline TIFIA Term Sheet
‒ DOT coordination on behalf of the Proposers
Project Background
DBFOM Model
Performance/Availability
Outcome/Next Steps
8
Performance-Based Methodology
» Basic Configuration
‒ Mandatory features defining the Project’s operational characteristics
» Applicable Standards
‒ NOT using ODOT CMS or most ODOT manuals – AASHTO as baseline
‒ NOT dictating means and methods
» Guiding Principles – Project Management Plan (PMP)
‒
‒
‒
‒
Design Quality Management Plan (DQMP)
Construction Quality Management Plan (CQMP)
Maintenance Management Plan (MMP)
Operations Management Plan (OMP)
» Performance Criteria to be Measured and Monitored During O&M
Project Background
DBFOM Model
Performance/Availability
Outcome/Next Steps
9
PBP Is A First-Of-Its-Kind Project
ODOT
Quality
Oversight
» Department’s First DBFOM PublicPrivate Agreement (PPA)
‒
‒
‒
‒
PPA
PPA
DBFOM
Performance criteria
Developer has freedom to choose
Payment tied to facility performance and
adherence to contract requirements
Developer
IQF
After Substantial Completion
DBT
Operations
Maintenance
DBFOM Model
Project Background
Performance/Availability
Outcome/Next Steps
10
Developer Owns Risk/Reward
ODOT
Quality
Oversight
PPA
16 mile greenfield,
limited access, 4-lane
freeway
Side street
improvements
5 new interchanges
Design-Build-Finance
Developer
1 bridge
IQF
19 bridges
16 ramps
After Substantial Completion
DBT
Operations
Maintenance
DBFOM Model
Project Background
Performance/Availability
Outcome/Next Steps
11
Design-Build Team Drives Delivery
ODOT
Quality
Oversight
» Developer’s Lead Contractor
‒ Component of Statement of Qualifications
used by Department to short-list Proposers
‒ Assembles a prequalified DBT
‒ Develop detailed design
‒ Determine specifications with Applicable
Standards as baseline
‒ Complete construction work
‒ ~4 year DCP
PPA
Developer
IQF
After Substantial Completion
DBT
Operations
Maintenance
DBFOM Model
Project Background
Performance/Availability
Outcome/Next Steps
12
Independent Quality Firm Accepts
Conforming Work
ODOT
Quality
Oversight
» Developer’s IQF
‒ Component of Statement of
Qualifications used by Department to
short-list Proposers
‒ Provides quality assurance
‒ Accepts conforming work
‒ Reports nonconforming work
‒ Delivers project record
» May Not Be Same During O&M
‒ Verifies and accepts renewal work
PPA
Developer
IQF
IQF
After Substantial Completion
DBT
Operations
Maintenance
DBFOM Model
Project Background
Performance/Availability
Outcome/Next Steps
13
Private Sector O&M Responsibility
ODOT
Quality
Oversight
» Developer Maintains O&M
‒ 35-year Operating Period
‒ In coordination with DBT, determines asset
lifecycle strategies
‒ ODOT to keep minor roles (e.g., snow/ice control,
incident/emergency management)
‒ Self reports non-conformances with performance
requirements
‒ Routine (mowing, MOT, etc.) and
renewal (pavement resurfacing,
IQF
bridge rehabilitation, drainage, etc.)
PPA
Developer
After Substantial Completion
DBT
Operations
Maintenance
DBFOM Model
Project Background
Performance/Availability
Outcome/Next Steps
14
Quality Oversight Team Protects
Department Interests
ODOT
Quality
Oversight
» ODOT Hires a Quality Oversight Team
‒
‒
‒
‒
Serve as the Department’s agent
Must not ‘direct’ the Developer
Perform submittals compliance review
Validate IQF’s project records
PPA
‒ 16 miles of R&D
‒ Safety recalls
Developer
IQF
After Substantial Completion
DBT
Operations
Maintenance
DBFOM Model
Project Background
Performance/Availability
Outcome/Next Steps
15
How Is The Developer Compensated?
» Milestone Payments – During the Construction Period
‒ Appalachian Development Highway System (ADHS) funds paid at 70% complete, 80% complete,
and Substantial Completion
‒ Substantial Completion milestone is subject to deductions regime for non-compliance
» Availability Payments – During the Operating Period
‒ Begin only after Substantial Completion is reached
‒ Mitigates cost and delay risk
DBFOM Model
Project Background
Performance/Availability
Outcome/Next Steps
16
How Is The Developer Compensated?
» Bypass Will be a Non-Tolled Facility
» Availability Payments
‒ Monthly payments subject to “unavailability” and “non-compliance” deductions
‒ Payment deductions are tracked in Monthly Performance Reports generated by the
Developer and reviewed by IQF and the Department
‒ Equity investors and debt providers are at-risk if payments or portions of payments are
not earned
PPA Understanding
NoDBFOM
Learning
Model
Curve
Performance/
COMPLIANCE
VALIDATION
Availability
Outcome/Next
Why CH2M HILL?
Steps
17
Public-Private-Partnership Math
» Availability Payment (AP) for any month (m) after Substantial
Completion:
APm = MaxAPm – MPDm-1
‒ MPDm-1 = Monthly payment deduct for month (m-1)
‒ MaxAPm = Maximum Availability Payment for month (m):
𝑀𝑎𝑥𝐴𝑃𝑚 =
𝑑𝑚
𝑑𝑦
X 𝑀𝐴𝑃𝑦
MPDm = MNDm + MUDm
- MNDm = Monthly noncompliance deduction for month (m)
- MUDm = Monthly unavailability deduction for month (m)
PPA Understanding
DBFOM Model
Performance/
Availability
Outcome/Next Steps
18
What Happens At The End Of The PPA?
» Handback
‒ Developer “hands back” project R/W
and assets to Department
‒ Not looking for a new road
‒ Residual vs. Useful
PPA Understanding
NoDBFOM
Learning
Model
Curve
Performance/
COMPLIANCE
VALIDATION
Availability
Outcome/Next
Why CH2M HILL?
Steps
19
How Handback Works
» Facilities to Be Functional
‒ Scheduled activities
‒ Inspections/renewal work
‒ Bridge inspection manual
‒ Independent assessment
‒ ‘Crystal Ball’ via Durability Plan to
measure conditions
‒ Handback Reserve
‒ Lower performing asset = Developer
pays more
PPA Understanding
NoDBFOM
Learning
Model
Curve
Performance/
COMPLIANCE
VALIDATION
Availability
TABLE 21-1
Schedule of Handback Activities
Handback Activity
Handback Schedule
Residual Life Methodology
Department Review
Initial Handback Inspections
Initial Handback Inspection Report
Department Review
Handback Work Period
Calculation of Handback Reserve Amount
Handback Period
Second Handback Inspections
Second Handback Inspection Report
Calculation of Handback Reserve Amount
Department Review
Final Handback Inspections
Final Handback Inspection Report
End of Term
Outcome/Next
Why CH2M HILL?
Steps
Months to End of Term
Start
End
60
60
60
58
58
52
52
50
50
48
48
0
26
26
24
0
18
15
15
12
14
14
12
10
3
0
1
0
0
Duration (Months)
2
6
2
2
48
0
24
3
3
0
2
3
1
0
20
Department ‘Hammer’ To Avoid Delays, Inconvenience,
And Reductions In LOS To Users
» Performance Measures
‒ Encourage safe, effective, reliable asset
performance
‒ Use existing measures and targets when
available
‒ Tune performance to similar roads in Ohio
» Noncompliant Asset?
‒ Allow time to correct defects before
applying “incentives”
PPA Understanding
NoDBFOM
Learning
Model
Curve
Performance/
COMPLIANCE
VALIDATION
Availability
Outcome/Next
Why CH2M HILL?
Steps
21
Monthly Noncompliance Deduction
n
MND
m, y
 NCPV 
 NCPE x
x 1
‒ NCPV = unit value for each Non-compliance Point of $5,000 (subject to indexation)
‒ NCPm = number of Noncompliance Points accrued in month (m):
» Who Initiated the Defect Notification?
‒ If by Developer, Grace Period (if applicable) granted to correct deficiency
‒ If by Department, Noncompliance Points begin to accrue
PPA Understanding
NoDBFOM
Learning
Model
Curve
Performance/
COMPLIANCE
VALIDATION
Availability
Outcome/Next
Why CH2M HILL?
Steps
22
Noncompliance Events
»During DCP
‒ Affects Substantial
Completion payment
»During O&M
‒ Affects monthly
Availability Payment
»Points Based on Severity
of Noncompliance
‒ Focus on safety
»Cure Period Used To Assess Noncompliance Points
PPA Understanding
NoDBFOM
Learning
Model
Curve
Performance/
COMPLIANCE
VALIDATION
Availability
Outcome/Next
Why CH2M HILL?
Steps
23
Monthly Unavailability Deduction
𝑞
𝑀𝑈𝐷𝑚 =
𝑈𝐷ℎ
ℎ=1
‒ UDz = Unavailability Deduction for each Hourly Unavailability Event (h) during Month (m)
‒ q = Total number of Hourly Unavailability Events in Month (m)
‒ h = An Hourly Unavailability Event in Month (m)
» Permitted Closures Not Assessed a Deduction
‒ Permitted maintenance closure
‒ Emergency/incidents, including 30 minutes after roadway back in service
PPA Understanding
NoDBFOM
Learning
Model
Curve
Performance/
COMPLIANCE
VALIDATION
Availability
Outcome/Next
Why CH2M HILL?
Steps
24
Unavailability Events - Conditions
» Hourly assessment ends when circumstances giving rise to Unavailability
Event no longer apply or the lanes affected by the event have been reopened to traffic, whichever is earlier
» Can assess one or more events for any closure not permitted
» Simultaneous events affecting Mainline travel lanes in same direction are
not additive; largest deduction shall be assessed
» Bypass divided into 3 segments and each day divided into two
unavailability periods: off-peak hours (A) and peak hours (B)
» If a closure of less than 60 minutes spans two consecutive hours, an
Hourly Unavailability Event for one hour is assessed
PPA Understanding
NoDBFOM
Learning
Model
Curve
Performance/
COMPLIANCE
VALIDATION
Availability
Outcome/Next
Why CH2M HILL?
Steps
25
Unavailability Deductions
» Modifications
‒ Use of shoulder as a replacement travel lane shall
reduce the deduction by 50%
‒ During a Holiday, the deduction shall be increased
by 150%
‒ During a Weekend, the deduction shall be
decreased by 50%
» Adjustments Allowed over Term
‒ Can be amended to reflect shifts in regional travel
patterns
‒ No amendments shall exceed the highest
Unavailability Deduction
PPA Understanding
NoDBFOM
Learning
Model
Curve
Performance/
COMPLIANCE
VALIDATION
Availability
Outcome/Next
Why CH2M HILL?
Steps
26
Successful Proposer
» Portsmouth Gateway Group (PGG)
Proposer
Base MAP
PWP Portsmouth
$25,935,390.00
Portsmouth Gateway Group
$25,884,800.00
Portsmouth Bypass Development Partners
$26,229,590.00
‒ Equity Investors: ACS Infrastructure Development,
Inc., Infrared Capital Partners Limited, and Star
America Fund GP
‒ Contractors: Design-Build Joint Venture – Dragados,
USA, Inc., The Beaver Excavating Company and John
R. Jurgensen, Co, Inc.
‒ Designers: ms Consultants, Inc.
» ODOT taking steps to execute contract and
move toward Financial Close
PPA Understanding
PPA Understanding
DBFOM Model
Performance/Availability
Outcome/
Next Steps
27
Savings & Next Steps
» Savings
‒ Base Maximum Availability Payments (MAPs): ~20% below the ODOT “Shadow Bid”
estimate
‒ Design and Construction Costs: More than 10% below the 2013 FHWA Cost Estimating
Workshop results
‒ Time: Original Design-Bid-Build approach anticipated a 13-year design and construction
schedule to complete the Bypass
» Upcoming Milestone Dates
‒ Financial Close in the 1st Quarter of 2015
‒ Bypass open to traffic in the 4th Quarter of 2018
PPA Understanding
DBFOM Model
Performance/Availability
Outcome/
Next Steps
28
In Summary…
» PBP is a performance-based approach to 35-year O&M
‒ Asset lifecycle strategy risk is the responsibility of Developer
» Selection based on lowest first-year maximum AP, but actual APs subject
to deductions
» Grace and cure periods encourage proactive behavior by Developer
» Defect remedy preserved through Noncompliant “hold points”
» Safety/operational efficiency of PBP optimized
» Inspections and reserve will ensure a good road at Handback
“I would rather earn 1% off a 100 people’s efforts than 100% of my own efforts.”
- John D. Rockefeller
PPA Understanding
No
Learning
Curve
DBFOM
Model
COMPLIANCE
VALIDATION
Performance/Availability
Outcome/
Next
Steps
Why
CH2M
HILL?
29
Portsmouth Bypass P3 Project
Questions?