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Public-Private Purple Line Partnership Will Be Rare Use Of The Strategy

by Aaron Kraut — August 8, 2013 at 1:10 pm 180 0

Rendering via Maryland Transit Administration

The announcement Monday that Maryland is looking for a private partner to build and operate the Purple Line makes the transit project a rare one in the U.S. to use the P3 (public-private partnership) strategy.

In a fact sheet about the P3 process from the Maryland Transit Administration, the state agency references three rail projects in Denver using a private partner to help plug funding gaps.

Gov. Martin O’Malley and Lt. Gov. Anthony Brown came to Bethesda on Monday to announce the state, which will contribute $400 million toward construction, will need to use a similar approach with the 16-mile Purple Line light rail. The state is hoping for about $900 million from the federal government to help construct the project.

According to a required presolicitation report, the Maryland Department of Transportation estimates it will need $400 million to $900 million in construction funding from a private source to complete the estimated $2.2 billion project.

Maryland would pay whatever contractor is chosen annual payments throughout the 30- to 40-year contract period and deduct payments if the contractor doesn’t meet performance targets such as on-time performance, vehicle cleanliness and customer service.

The MTA would also set the fares for the system, but it’s still deciding whether to keep or transfer responsibility for security, fare collection and other duties.

This fall, the state’s Department of Transportation will put out a request for qualifications using a Design-Build-Finance-Operate-Maintain (DBFOM) delivery model, different from the typical model in which the state separately bids for the design and construction of the transit line and then operates the system.

The MTA hopes this means a better-built project. From the fact sheet:

By having the contractor who builds it also responsible for long-term operations and maintenance, the contractor has greater incentive to manage risks and design a project that is well operated and maintained over the long term.

The MTA also argues that having a private operator of the Purple Line makes sense because most of its offices and employees are based out of Baltimore. The idea is the MTA would more easily be able to oversee work and operation of the planned Red Line light rail system in Baltimore.

Matt Johnson, a planner with the M-NCPPC and contributor to Greater Greater Washington, today wrote that in P3 projects, having a single private entity in charge is where savings come from:

In P3s, the cost savings come primarily from two factors: private firms may be more efficient, and risk may be more properly assigned and managed.

One way projects end up wasting money is through “interface problems.” For example, a crew comes out to string catenary wire, but they discover that the catenary supports haven’t been installed yet. That risk is still there with a P3, but since the contractor has assumed the risk, it’s their problem, not the public’s.

Meanwhile, the contractor, which is likely to be a major firm, may be able to leverage their other investments to get a good deal on steel. Or they might have a subcontractor who builds railcars, which saves them from having to do a separate procurement.

At least one transportation expert said finding Purple Line savings similar to the $300 million shaved off of one of the Denver projects will be more difficult, according to this report from WAMU transportation reporter Martin Di Caro:

“The Purple Line has suffered through a lot of political challenges, and trying to change the alignment or come up with innovations on this project is going to be a lot harder than in Denver because of those political constraints,” [Joshua ] Schank said.

The final request for proposals will be released next spring. The MTA is hoping construction on the Purple Line starts in 2015 and lasts five years, so it is ready to open in 2020.

The Bethesda Purple Line station, which MTA projects would be one of the system’s busiest with 15,000 daily riders, will include access to the Bethesda Metro platform at Elm Street and Wisconsin Avenue.

County planners and state transportation officials are making last-minute efforts to improve the design of the station, so that it would include a Capital Crescent Trail crossing under Wisconsin Avenue and avoid having a 92-foot high fan tower outside near Bethesda Row.

The MTA has given the county an end-of-year deadline to get the owners of the Apex Building, which sits on top of the area of the planned station, to agree to raze their property.

Rendering via Maryland Transit Administration

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