the usd 1.1 billion pennsylvania rapid project ... and maintained at an average cost of $1.6 million...
TRANSCRIPT
PROJECT HIGHLIGHTS
•Thefirstmulti-assetPPPtobeundertakenintheUSusinga“bundled”approach;
•ThefirstPPPtransactioninthestateofPennsylvania;
•ThelargestroadwayprojectinPennsylvania’shistory;
•Thebundlingofassetsisexpectedtoreducethetotalcostoftheprojectby20%;
•Constructionwilloccuratamuchfasterratethanwhatwouldhavebeenachievedusingatraditionalprocurementprogram;
•ThelargesteverPrivateActivityBond(PAB)issuanceinthehistoryoftheFederalPABprogram(attimeofissuance)(seetheFinancialBreakdownsectionofthisnotefordetails);
•US$721.5millionparvaluerepresentsthelargesteverallocatedPABissuanceforaPPPtransaction.
Image courtesy of Plenary Group (https://plenarygroup.com)
August 2017
PROJECT OVERVIEW
The USD 1.1 billion Pennsylvania Rapid Bridge Replacement (RBR) Project is the first multi-asset public-private partnership (PPP) project to be undertaken in the US, using a “bundled” contract approach to replace 558 structurally deficient (SD) bridges across Pennsylvania.
TheprojectisbeingdeliveredasaDesign-Build-Finance-Operate-Maintain(DBFOM),availabilitypayment,PPPconcession,betweenthePennsylvaniaDepartmentofTransportation(PennDOT)andthePlenaryWalshKeystonePartners(PWKP)consortium.TheconsortiumwasawardedthecontractinOctober2014.
TheRBRProjectcouldhavesignificantapplicationsinotherUSstates,helpingtoboostthegradeofAmerica’sinfrastructureandaddressthebacklogincivilinfrastructuremaintenance.Pennsylvaniahasover4,500SDbridges,thesecondhighestfigureinthecountryafterIowa.Roughly20%ofPennsylvania’sbridgesareSD,whilethenationalaverageis9.1%.TheRBRProjectwillmakeasubstantialcontributiontoreducingthelargebacklogofSDbridgesinthestate.
PWKPismanagingthefinancing,designandconstructionofthereplacementbridgesandwillthenberesponsiblefortheirmaintenancefor25yearsafterconstruction.Constructionisexpectedtotakeapproximatelyfouryearsfromcommercialclose.
Theprojectwillinvolvethefulldemolitionandreplacementofall558replacementbridges,whichareprimarilysingleandmulti-spanbridgesonsmallerstatehighways,manylocatedinruralareas.Thebridgesintheprojectareofasimilarsizeanddesign,allowingforprefabrication,massproduction,equipmentreutilisationandstandardisation.
SHOWCASE PROJECT: Pennsylvania Rapid Bridge Replacement Project
GLOBAL INFRASTRUCTURE HUB | 02
Multi-assetPPPsarealreadybeingusedinmanyjurisdictionstoreplaceandmaintainexistingcivilinfrastructure,suchasstreetlightingandschools.ManyoftheseassetshavenottraditionallybeenconsideredsuitableforPPPdeliveryduetotheirinabilitytoprovidevalueformoneyasanindividualassetorasmallbundle.Bybundlingmultipleassetsintoasingleprojectonalargerscale,investorshavetheopportunitytoparticipateinabroaderrangeofinfrastructuresectors,suchaslocalroadandwaterinfrastructure,andcommunityfacilities.
WHY USE THE PPP APPROACH?
TheCommonwealthofPennsylvaniadecidedtotakeadvantageoftwolegislativechangestobringitsSDbridgesintoastateofgoodrepair:Act88(2012),whichauthorisespublic-privatetransportationprojectsinthestate,andAct89(2013),whichincreasedannualstatehighwayfundingbyrestructuringthestate’sgastaxandincreasingavarietyoffees.ThereasonsforusingaPPPapproachasopposedtoatraditionalprocurementmethodareoutlinedbelow.
Key Advantages:
•Costreductionof20%comparedtooriginalPennDOTestimatesusingatraditionalprocurementmethod;
•EstimateddateofcompletionforallbridgesisyearsinadvanceofPennDOT’soriginalestimateusinganon-PPPapproach;
•Accesstoinnovativedesignsolutions,suchasprefabricationofstandardisedconstructionmaterials;
•Greaterincentivestodelivertheprojectontimeandwithinbudget;
•Efficientservicedeliverylinkedtoavailabilityandmilestonepayments;
•Minimisationoftransactioncoststhroughasingleprocurementprocess;and
•Consistentriskallocation,enablingmoreefficientcontractadministrationandallocationofresources.
Bundlingthebridgestogetherinamulti-assetPPPcontractisexpectedtoreducethetotalcostofreplacingthebridgesby20%,andatarateofreplacementmanyyearsinadvanceofwhatthestatewouldhavebeenabletoachieveunderanon-PPPapproach.PennDOTestimatedthatitwouldtakeupto20yearstoreplaceallofthebridgesusingatraditionalprocurementandconstructionprogram.Thebatchingoftheprojectswillallowthebridgestobereplacedandmaintainedatanaveragecostof$1.6millioneach,versus$2millioneachifcompletedbyPennDOT.
Thebridgesselectedaseligiblefortheprojecthavesimilarcharacteristics;mostimportantly,theyarerelativelysmallandcanbedesignedandconstructedtostandardsizes.Thesimilarityofthebridgesallowsforstreamlineddesign,prefabrication(massproduction)ofstandardisedcomponentssuchasbeams,andthereplacementscanbedonerelativelyquickly.AllofthesefactorsmakebundlingtheprojectsasonePPPcontractthemostefficientandcosteffectivewaytodeliverthebridgeprojects.
PROJECT TIMELINE
Key dates in the procurement timeline are shown below:
December 2013 RequestsForQualification(RFQ)outforPennsylvaniabridgesPPP.
January 2014RFQdeadlineextensionforPennsylvaniabridgesPPP.
March 2014FourshortlistedonPennsylvaniabridgesPPP.
July 2014USDepartmentofTransportationapprovesPABsforPennsylvaniabridgesPPP.
October 2014 Plenary-WalshteamwinsPennsylvaniabridgesPPP.
January 2015 PlenaryreachescommercialcloseonPennsylvaniabridgesPPP.
March 2015 PlenaryandWalshreachfinancialcloseonPennsylvaniabridgesPPP.
June 2017 RBRProject’s200thbridgehasjustbeencompleted.
SHOWCASE PROJECT: Pennsylvania Rapid Bridge Replacement Project
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CONTRACTUAL STRUCTURE
Thediagrambelowillustratesthemaincontractualcomponentsoftheprojectstructure.
FINANCE BREAKDOWN
SOURCE OF FUNDS AMOUNT
Tax-exempt PABs US$793million
Equity US$58million
Milestone Payments US$224million
Availability Payments US$35million
TOTAL US$1.11 billion
Theprojectisfinancedthroughacombinationoftax-exemptPrivateActivityBonds(PABs),privateequity,milestonepayments,andavailabilitypayments.
PABsrefertotheapplicationoftaxexemptdebtinstrumentsforprivateinvestment,resultinginlowerinterestratesonthedebtandaccesstothelowercostofcapitalfromtheUStaxexemptbondmarket.
ThePABsforthePennsylvaniaRBRProjectwereallocatedbytheUSDepartmentofTransportation(USDOT),structuredandofferedbyPlenary,andreceivedaBBBinvestmentratingfromS&P.Thebondswereissuedintrancheswithmaturitiesrangingfrom4to28years,
andpricedwiththelowestyieldstomaturityofanyuninsuredBBBlevelPPPbondissuance(atthetimeofissuance),withrepaymentsourcedfrommilestoneandavailabilitypaymentsthroughoutthe25-yearoperatingtermbasedonachievementofrequiredassetperformancelevels.
Theequity providerswerePlenaryGroup(80%)andWalshGroup(20%).
Milestone PaymentswillbepaidbyPennDOTtoPWKPaccordingtoadefinedscheduleand,whilesubjecttodeductionsfornon-performance,arealsolinkedtotheachievementofprescribedlevelsofworkinplace.
TheAvailability Paymentsincludebothafixedelement(90%)andanindexedelement(10%)whichisindexedtotheConsumerPriceIndex(CPI)followingSubstantialProjectCompletion.MonthlyAvailabilityPaymentsarecalculatedbasedontheproportionalnumberofbridgestohaveachievedSubstantialCompletion,alongwithadeductionfactorduringtheconstructionphasetoincentivisefullProjectCompletion.AvailabilitypaymentsarepaidbyPennDOTtoPWKPandaresubjecttodeductionsforcertainnon-complianceasdefinedinthePublic-PrivateTransportationPartnershipAgreement(PPA)betweenPennDOTandPWKP,includinglaneclosures,lackofprescribedNBIS(NationalBridgeInspectionStandards)bridgeratings,etc.
Debt Issuer(PennsylvaniaEconomicDevelopmentAuthority)
Walsh Infrastructure Management
HDR
Walsh Construction Company & Granite Construction Company
Plenary Walsh Keystone Partners (Development Entity)
Equity Bonds
Design-BuildAgreement
DesignContract
Long-termMaintenanceAgreement
PennDotPaymentsProjectPartnership
Agreement
Private Activity Bondholders
Plenary Group & Walsh Investors
SHOWCASE PROJECT: Pennsylvania Rapid Bridge Replacement Project
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CONSTRUCTION
Morethan2,000SDbridgeswerescreenedbyPennDOTpriortoissuanceofthefinalRequestforProposals.Ahostoffactorswereconsidered,includingage,length,numberoflanes,andaveragedailytraffic,aswellasimpactonutilities,railroads,andawiderangeofpotentialenvironmentalimpacts.
WalshConstructionandGraniteConstructionJointVenture(Walsh/Granite)issubjecttospecificlanemaintenancerequirements,detourrequirementsandcalendarrestrictionspertainingtotheconstructionschedulingandlogisticsforeachreplacementbridge.Single-spanbridgeswillbeallowedtoclosefornomorethan75days,andmultiple-spanbridgesfornomorethan110days.
Thereplacementbridgeshavebeendividedintotwocategoriestofacilitatetheconstructionprocess:
•EarlyCompletionBridges(ECBs)
•RemainingEligibleBridges(REBs)
Thereare87ECBs,forwhichPennDOTprovidedTS&L(type,sizeandlocation)plans,governmentapprovals,RightofWay,andutilityclearances,tofacilitatethestartofconstructionin2015.PWKPhasfullresponsibilityforthedesign,coordinationofutilitywork,andacquiringthenecessarypermitsandgovernmentapprovalsforthe471REBs.
TheabovearrangementwaspossiblethankstoanEarlyDevelopmentAgreementbetweentheUSFederalHighwayAdministration(FHWA)andPennDOT,wherebytheFHWAgrantedapprovalunderSEP-151toPennDOTtoallowPWKPtoobtainthenecessarypermitsandapprovalsforeachREBintheproject.Ordinarily,itwouldbeprohibitedfortheconcessionaire,inthiscasePWKP,toberesponsibleforpermittingandapprovalsunderFHWA’sDesign-BuildContractingregulations.
Theconstructionplan,usingalocalapproach,envisionsthatthemajorityofbridgeconstructionworkwillbeperformedprimarilybyPennsylvania-basedsubcontractors.ThelargequantityofconstructionmaterialsrequiredfortheprojectwillalsobeprimarilysourcedfromsuppliersandfabricatorslocatedinandnearPennsylvania,providingalargeandsteadyvolumeofordersoverthethreeyearconstructionperiod.
Bridgedesignsandcomponentswillbestandardisedasmuchaspossibletofacilitateefficientdesignapprovals,permitting,materialsprocurement,andconstruction.
1 The US Federal Highway Administration (FHWA), a division of the US Department of Transportation, established the SEP-15 program to encourage tests and experimentation in procurements of federal aid transportation projects. Among the specific objectives of SEP-15 is the promotion of project management flexibility, innovation, improved efficiency, and timely project implementation. SEP-15 addresses, but is not limited to, four major components of project delivery: contracting; compliance with environmental requirements; right-of-way acquisition and project finance.
PennDOT •Snowandiceremovalandcontrol;
•Emergencyandincidentfirstresponse;
•Pavementstriping,reflectors,etc.;
•Asphaltmaintenance(afterfirst5years);
•Vegetationcontrolinrightofway(off-structure).
PWKP •MaintainallbridgesataconditionratingofNBIS7orgreater;
•Performbi-annualNBISinspectionsandpreventativemaintenance;
•Trafficmanagementduringmaintenanceactivities;
•Identifyandcorrectalldamagestotheprojectfromemergenciesorincidents;
•Controlanyvegetationgrowthonthebridgestructures;
•Maintainanystreamchannelswithin50feetofeachbridge;
•Maintainasphaltpavementconstructedaspartoftheworkfor5yearsfromSubstantialProjectCompletion;
•Provideacontacttoreceivepublicfeedbackonthebridges.
OPERATIONS AND MAINTENANCE
Themainongoingoperationalresponsibilitiesareasfollows:
SHOWCASE PROJECT: Pennsylvania Rapid Bridge Replacement Project
APPENDIX
Details of the Project
TheRBRProjectisexpectedtocreateefficienciesthrougheconomiesofscale,innovationandoptimalriskallocationthatwillallowPennDOTtodelivermorebridgesfasterandatalowerwhole-lifecostthanispossiblewhenusingatraditional“design,bid,build”procurement.TheRBRProjectwillimprovetheconnectivityofPennsylvania’stransportationnetwork,whileminimisingtheimpactsonthetravellingpublic.Theimprovedconnectivity,includingtheremovalormodificationofcertainweightrestrictionsonsomereplacementbridges,willincreasetheefficiencyoffreightandcommercialmovements,whichwillbenefitthestate’seconomy.
Images courtesy of BATIC Institute
Map of ECBs to be replaced in Pennsylvania.
Map of REBs to be replaced in Pennsylvania.
The staff of the Global Infrastructure Hub (GI Hub) have prepared this summary of the Pennsylvania Rapid Bridge Replacement Project, and any opinions, findings and recommendations contained herein are not necessarily the views of the GI Hub Board of Directors, or the G20 member countries, or of other countries which are donors of the GI Hub. In this document, the GI Hub is not seeking to provide professional advice and, to the extent permitted by law, the GI Hub disclaims liability to any person or organisation in respect of anything done, or omitted to be done, in reliance upon information contained in this document.
Additional details on the Pennsylvania RBR Project can be found at:
http://www.penndot.gov/ProjectAndPrograms/p3forpa/Pages/Rapid-Bridge-Replacement-Project.aspx
http://parapidbridges.com
https://plenarygroup.com/projects/north-america/pennsylvania-rapid-bridge-replacement
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