concession agreements the focus georgia conference

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Concession AgreementsThe Focus Georgia Conference

Thomas W. Pelnik III, P.E.Director, Innovative Project Delivery DivisionApril 26, 2007

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Overview

• Concession Agreements and

VDOT’s PPTA Program– Program Status / Summary

– Past, Present and Future

– Concessions• A fundamentally different way of doing business

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PPTA Program Status

• Summary of VDOT’s PPTA Portfolio

• Value of All Projects ~ $6 Billion

• Value of Completed Projects = $767 Million

• Value of Active Projects + $5 Billion

• Value of Active Proposals ~ $1.5 Billion

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VDOT Past and Present

• Vast majority of VDOT work by

design-bid-build

• Interstate outsourcing by 2009

• Public-Private Partnerships cannot

save us, but can help

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US Interstate Planning and Toll RoadsBureau of Public Roads, 1939

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US Interstate Planning and Toll RoadsBureau of Public Roads, 1939

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US Interstate Planning and Toll RoadsBureau of Public Roads, 1939

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Public-Private Transportation Act

• PPTA §56-556 et. seq.• Policy

– Encourage private investment

• Opportunities– Brownfields– Greenfields

• Potential Scope– DB– DBF– DBFOM– FOM– …

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Route 895 PPTA (2002)

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Route 895 PPTA (2002)

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Route 895, Richmond, VA

• Four lane, limited access toll highway

• ~ Nine miles

• DBF Contract, PPTA, $346M 1998-2002

• FOM Concession Agreement, PPTA, 2006-2105+ $500 million transaction June 2006

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DB Contract Incentives / Risks

• Design - construct - get out

– Design

– Constructability

– Schedule

– Inflation

– QC/QA

– Limited performance bond obligations

– Limited warranty obligations

• Lowest cost project delivery

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Concessions

• Lowest cost program delivery– Parallel interests with Owner– DB a phase prior to O&M

• Rewarded for managing life-cycle costs– Build quality at low cost, – Operate a well-maintained facility– Provide good customer service

• Business deal must make sense, but successful relationship is essential

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Concessions

• Not a sale of property – Commonwealth maintains ownership – Concession transfers rights for the use

or control of the facility to the lease holder

– Rights return to owner at end of term

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Looking Ahead

• Continue to require pertinent standards– AASHTO– FHWA– VDOT

• Consider opportunities for corridor management, and lessons learned from projects such as London M25

• Flexible framework accommodates change – Laws, policies and specifications

• No free money

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Conclusions / Recommendations

• You’ll get what you contract for

• Direct your program– Communicate your objectives– Know the value of your assets– Know the costs of your operations– Fair procurement– Time is money

• Each project is unique

• It’s not easy

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VDOT’s PPTA Program

http://www.virginiadot.org/business/ppta-default.asp

Concession AgreementsThe Focus Georgia Conference

Thomas W. Pelnik III, P.E.Director, Innovative Project Delivery DivisionApril 26, 2007