Response LettersI-64 Hampton Roads Bridge-Tunnel Expansion

SUMMARY OF RESPONSE LETTERS

I-64 HAMPTON ROADS BRIDGE-TUNNEL EXPANSION PROJECT

APRIL 2017

In the Request for Information (RFI), potential proposers were invited to provide response letters to help refine VDOT’s and HRTAC’s assumptions related to Project procurement and delivery. Twelve contractor and developer entities submitted responses, as summarized below.

Summary:

Of 12 respondents:

  • 9 could participate in DB and 7 recommended it.
  • 8 could participate in DBFOM and 5 recommended it.
  • Of the respondents recommending DBFOM, it was not clear that all had analyzed the project’s financial feasibility based on available data, or were issuing a blanket statement of preference for DBFOM based on their business model.

It did not appear that any respondents had conducted a detailed Traffic & Revenue (T&R) study. Some respondents had developed preliminary calculations based on HRTAC’s T&R study and believed the amount of financing that could be raised under a DBFOM model would not be more than 20% of project cost.

Due to low anticipated toll revenues, respondents indicated significant amount of public funds would be needed for all delivery methods including a DBFOM model.

DBFOM delivery could bring integration, life-cycle cost savings and risk-management benefits, though it is not clear whether this would be commercially feasible. The amount of financing that can be raised based on anticipated toll revenue compared to overall funding needed for the project is too low.

Multiple respondents indicated their interest in DBFOM delivery with an Availability Payment (AP) structure.

Determination of a single procurement method before RFQ was preferred.

ACS/Dragados: Could participate fully in any method. DB seems most commercially feasible due to limited toll revenue; DBOM delivery not recommended. Use of ATC process is encouraged.

Bechtel: Could participate in any method, though in varying capacities. DB model seems most pragmatically feasible: other methods would take longer and absorb more resources. Would not have equity involvement if project is revenue-risk DBFOM, but would lead an AP job.

Cintra/Ferrovial: Revenue-risk DBFOM not recommended due to low share of financing that can be raised based on anticipated toll revenue and high share of public subsidy. VDOT could split project into separate tunnel (DB) and highway (DBFOM) contracts, including O&M of new tunnels. Consider building 8 new tunnel lanes and decommissioning the existing tunnels.

Condotte: Could participate in any method, though in varying capacities. Consider splitting project into packages (tunnel, trestle, highway) for more accessible bidding. DB will bring more competition. Stipend requested, ideally covering bid design at 0.3% of project cost.

FCC: Could participate fully in any method, though would prefer DBFOM with APs. Recommendations offered for procurement process. [Response was generic and minimally tailored to HRBT; no mention of project-specific revenue concerns.]

Fluor: Could participate in DB or DBOM. DBFOM negatives (including prior concerns with toll concessions in Hampton Roads) appear to far outweigh the positives.

John Laing: Could participate in DBFOM. DB, DBF, and DBOM do not provide full integration benefits. HOT lanes will enable public-transit benefits. Consider minimum revenue guarantee. [No mention of project-specific revenue concerns.]

Lane: Could participate in DB or DBM. DB would attract most competition. DBFOM not feasible [without subsidy] due to limited toll revenue and availability of public funds with lower cost of capital. Public funding would enable lower toll rates. If DBM, should not include existing tunnels.

Macquarie: Could participate in DBFOM or DBFM. These provide better risk transfer and cost/schedule certainty, turnkey solution, lifecycle integration, and discipline of private finance. Toll revenue is insufficient to cover project costs; public subsidy will be needed.

Skanska/Kiewit/Weeks: Could participate in DB, DBF, or DBOM. DBFOM not feasible without subsidy due to limited toll revenue. Benefits of DBFOM risk transfer would be eroded by inefficient financing.

Transurban: Could likely participate in DB+OM, DBFOM, or hybrid models, but cannot opine fully based on information currently available. Concerns about history of tolling and social equity in Hampton Roads; further public surveys requested before RFQ. Additional revenue and cost projections desired. Request single procurement method be specified before RFQ.

Vinci: Could participate fully in any method, though would prefer DBFOM. [Response was generic and minimally tailored to HRBT; no mention of project-specific revenue concerns.]