Commonwealth Lines up Talent for Infrastructure Deals

An important story that I (and everyone else) missed… The Office of Transportation Public-Private Partnerships (OTP3) announced earlier this month the selection of its team of consultants to help in negotiations with complex P3 deals. (See the press release.)

Developing a bench of outside consultants is critical as the Commonwealth pursues partnerships to build billions of dollars worth of mega-transportation projects. Private infrastructure-investment firms hire top financial, legal and engineering talent to support their deal making, allowing them to run circles around career public-sector employees not trained in deal financing, risk management, traffic modeling and other arcane issues.

The outside expertise won’t come cheap but it should allow Virginia to cut better deals on multi-billion dollar P3 deals, potentially saving hundreds of millions of dollars over the life of the projects, often lasting 50 years or longer, and obviating hidden risks.

The outside teams include:

  • Halcrow, a cH2M Hill company (engineering)
  • Infrastructure Management Group (project finance)
  • KPMG (infrastructure finance)
  • Mercator Advisors (capital markets expertise)
  • Public Financial Management (financial advisory services)
  • Reynolds, Smith and Hill (infrastructure consulting)
  • CDM Smith (transportation consulting)


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  1. that’s the good news and I agree it is. Every since the Pocahontas Parkway fiasco, it’s been clear that VDOT lacks the in-house expertise to competently evaluate large scale bonded/pay back with tolls infrastructure projects.

    The bad part is that much of this will be submerged from public view.

    the process for deciding which projects to do and which ones to walk away from will become an internal process.

    It also means that we’re headed back to Major Investment Study type process where the project being presented to the public in theory as the preferred alternative is, in fact, the only one the state will actually support.

    so the public alternatives analysis process will be a sham and trying to actually obtain information that supports the state’s direction will become impossible as it will be labeled as “proprietary”.

    just look at the 460 project. there is ONE proposal.. with precious little real justification or alternatives process.

    1. I agree with most of what you say. Just one point of fact: There are still three proposals outstanding for the 460 project. The state has not yet selected a single candidate to negotiate with.

      The three *will* be winnowed down to one, and then serious negotiations will begin. Those negotiations will be conducted outside of the public purview, and public comment will be permitted only when a Memorandum of Understanding has been agreed to. Then, as you observe, by then any changes demanded by the public will be likely to be rejected as impractical because neither side will want to go back to the negotating table.

      It’s an inherent flaw in the process. The negotiations cannot be conducted in public. But the public should have a right to respond. I don’t know how to get around that fundamental tension.

  2. it basically eviscerates the whole concept of public input.

    it could be that for different kinds of projects, i.e. local, regional, mega-state different levels of public input are appropriate but as per VDOT’s “way”, they never really have a dialogue even about this.. they just basically decide and do it.
    VDOT has a great deal of trouble – institutionally – of truly giving the public a legitimate role in public participation. Much of it is pro-forma PR.

  3. Should there be room for government agencies to negotiate agreements outside the public view? Yes, IMO. Should the agreements then be available to the public? Yes, IMO. Should the law permit the withholding of certain information? Probably, IMO. Does the existing system make sense? No, IMO.
    The mega contract for constructing Phase I of Dulles Rail was posted to the Internet, but with significant redactions. I’ve represented local governments in Virginia to lease excess capacity in certain FCC radio licenses. The leases are available, either on-line or in hard copy. But nothing is redacted.
    Who is likely to be hurt more by the publication of pricing data — Bechtel or a small radio broadband provider? Who gets protection? Bechtel.
    More of the same.

  4. To be fair. When you involve the private sector in a large infrastructure project of which there is risk to investors – you can’t have the public “voting” on what they like best and still expect keep investor money in play.

    there may be options – but each option would have a price attached to it and perhaps that’s the way it should be done. Put a price on the options and then let the public have their say.

    In the past… if there was a project with say 5 alternatives, the public really did not care about the different costs… it was “play” money to them.

    to this day, the average person, even the one who pays attention to transportation projects – does not really appreciate the costs involved.

    and you see this over and over when people weigh in on increasing the gas tax or tolls and they believe that the existing money is being wasted and that if we spent it more wisely, we’d not need a tax increase or tolls.

    the average person cannot tell you how much they pay in gas taxes or how much it costs to build or maintain their own subdivision road or that a relatively simple traffic signal costs not a few thousand dollars but usually hundreds of thousands.

    one mile of road costs 5 million dollars. one mile of urban interstate can easily cost 100 million.

    the whole idea of the public weighing in on infrastructure projects is well intentioned but not very realistic because the public is largely ignorant on much of the key information that is presented.

  5. Darrell Avatar

    Yeah well, it’s one thing to have a RFP with a fixed price for delivery. It’s another to fix the contract by giving the contractor the keys to the vault.

    We had a big lawsuit down here not too long ago. Had to do with some bill called 3202. How in any sense of imagination is a contractor a constitutionally approved government entity for taxes?

    Another little blow up concerned the Feds concern over the LACK of public input into the state’s submissions for fed money. That was really brought up on the Norfolk Light Rail. How is a toll road like 460 one going to pass muster with the Feds?

  6. I think the Feds have totally gone over to the dark side on tolls.

    They’re basically out of money also so their main approach with what money they have left is called infrastructure banks – TIFIA …loans that have to be
    paid back, i.e. tolls.

    I LIKED the basic idea behind regional taxes as long as people agreed to them and the folks who spent the money were direct-elected as opposed to “elected officials” who are then “appointed”.

    I STILL like the idea if they can work out the governance logistics. One way would be to have each locality elected officials hold a referendum in each locality to enact the tax when then could not be spent unless each project was specifically approach by each BOS. That would add a level of transparency and accountability that was lacking in having an unelected regional authority call the shots.

    I think the State is going to walk away from local roads and concentrate on state roads and work on regional roads if the region itself can agree on what to build and providing substantial funding.

    the days when VDOT took care of everything are gone… essentially we cannot starve the gas tax and still expect funding.

  7. as I suspected: ” Virginia secretary of transportation Sean Connaughton says there will be no more major highway construction projects in the state without tolls. He was speaking in an interview with TOLLROADSnews Friday. He said the costs of major transport projects needed in the state are far beyond the capacity of the gasoline tax and federal grants to fund.”

    “The Virginia secretary called the gasoline tax “a dinosaur” as the basic funding source for roads.

    He said not only is the gas tax in decline as a revenue generator but it doesn’t have other advantages of tolls – of being able to charge those who use the facility being improved, or to manage traffic with variable rates.”

    the entire article is a pretty good read in terms of understanding Connaughton and the current thinking in the McDonnell administration on transportation.

    he called tolls the ultimate user fee.

    we’re walking away from the gas tax and embracing tolls for most all large projects.

  8. One good thing about a toll road is that it makes it more difficult for landowners to get state funding for roads that barely provide any public, versus private, benefits. A private investor is most likely to put money into something that will be used by drivers.

  9. well… toll roads might mean that you have to attract investors who will have a no-nonsense assessment of “need” – i.e. how many folks will actually PAY to use the road?

    but the state does not have to go the investor route. Both Md and Florida do their own toll roads. Md built the ICC and now have to subsidize it with tolls from their cash-cow roads.

    Va … apparently is willing to subsidize toll roads that won’t “work” as a stand-alone toll road. That’s a pretty dangerous policy.

    Imagine VDOT announcing that they are going to build the western transportation corridor as a “subsidized” toll road, for instance.

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