Introduction

This project is to provide research, explore and develop new sustainable business models for Public/ Private Partnerships (P3s) related to addressing the following shortages of:

  • Long-term truck parking on rural Interstate highways.
  • Short-term truck parking on metro fringe Interstate highways.
  • Rest areas for all motorists at an effective spacing interval on Interstate highways as a countermeasure to drowsy-driving.

For the purposes of this project, P3s are defined as contractual agreements between a public agency and a private sector entity that allow for private sector participation in the delivery, financing and/or maintenance and operations of transportation facilities.

The Selected Responder must develop and document at least five distinctly different P3 business models including at least one model for each of the following “contexts” as described in this exhibit:

  • Truck Haven (within Interstate right-of-way)
  • Existing Undeveloped Interchange (outside Interstate right-of-way)
  • Existing Partially or Fully Developed Interchange (outside Interstate right-of-way)

Mn/DOT intends to consider the generated business models as a means to improve highway safety for motorists, including truckers, at a lower cost to Mn/DOT than if Mn/DOT were to build, maintain and operate the facility without private sector participation. An environment of limited public sector funding and competing transportation priorities necessitates the need for Mn/DOT to investigate innovative ways to create such facilities to:

  • Enhance highway safety
  • Improve commercial freight movements

In this request, Mn/DOT describes several P3 procurement methods, contexts, constraints, opportunities, guidelines and attributes for the Responder to consider. Mn/DOT, however, desires the Selected Responder to explore other feasible and sustainable options for business models to accomplish the purpose of this project. By sustainable, Mn/DOT means a business model that generates adequate revenue to keep the venture viable for the foreseeable future and minimizes public investment in the venture over time.

Business Model Development Tasks

The Selected Responder will investigate the following for each business model developed:

  1. Value Proposition – Identify the constraints, risks and controversies associated with the potential P3, confirm the P3 can address the problem and estimate the value of a P3 from the customer's perspective.
  2. Market Segment – Identify the potential different customers the P3 will target.
  3. Value Chain Structure – Determine how the P3 will generate an adequate profit margin to sustain the P3.
  4. Revenue Generation and Margins – Investigate and document how much revenue the P3 could generate, the cost structure and target profit margins.
  5. Position in Value Network - Identify competitors, complementors and any network effects that the P3 can use to deliver more value to the customer.
  6. Competitive Strategy - Determine how the P3 will attempt to develop a sustainable competitive advantage or sustainable revenue stream.

P3 Procurement Methods

The Selected Responder must explore and consider various and diverse P3 procurement methods in developing their business models.

The following is a list of possible P3 procurement methods the Selected Responder must consider for their business models. However, the Selected Responder should consider other procurement methods where they believe other procurement methods better suit the business models they develop. The following is a partial listing of procurement methods taken from "Public-Private Partnerships: Terms Related to Building and Facility Partnerships", Government Accounting Office, April 1999. Again, the Selected Responder should propose new P3 procurement methods or variants of these as necessary.

  • Design-Build-Finance-Operate-Maintain
  • Build-Operate-Transfer
  • Lease-Develop-Operate or Build-Develop-Operate
  • Lease/Purchase

Design-Build-Finance-Operate-Maintain

With the Design-Build-Finance-Operate-Maintain (DBFOM) approach, the responsibilities for designing, building, financing, operating and maintaining are bundled together and transferred to private sector partners. There is a great deal of variety in DBFOM arrangements in the United States, and especially the degree to which financial responsibilities are actually transferred to the private sector. One commonality that cuts across all DBFOM projects is that they are either partly or wholly financed by debt leveraging revenue streams dedicated to the project. Direct user fees (tolls) are the most common revenue source. However, others range from lease payments to shadow tolls and vehicle registration fees. Future revenues are leveraged to issue bonds or other debt that provide funds for capital and project development costs. They are also often supplemented by public sector grants in the form of money or contributions in kind, such as right-of-way. In certain cases, private partners may be required to make equity investments as well. Value for money can be attained through life-cycle costing.

Build-Operate-Transfer

The private partner builds a facility to the specifications agreed to by the public agency, operates the facility for a specified time period under a contract or franchise agreement with the agency, and then transfers the facility to the agency at the end of the specified period of time. In most cases, the private partner will also provide some, or all, of the financing for the facility, so the length of the contract or franchise must be sufficient to enable the private partner to realize a reasonable return on its investment through user charges.

At the end of the franchise period, the public partner can assume operating responsibility for the facility, contract the operations to the original franchise holder, or award a new contract or franchise to a new private partner.

Lease-Develop-Operate or Build-Develop-Operate

Under these partnerships arrangements, the private party leases or buys an existing facility from a public agency; invests its own capital to renovate, modernize, and/or expand the facility; and then operates it under a contract with the public agency. A number of different types of municipal transit facilities have been leased and developed under such arrangements.

Lease/Purchase

A lease/purchase is an installment-purchase contract. Under this model, the private sector finances and builds a new facility, which it then leases to a public agency. The public agency makes scheduled lease payments to the private party. The public agency accrues equity in the facility with each payment. At the end of the lease term, the public agency owns the facility or purchases it at the cost of any remaining unpaid balance in the lease.

Under this arrangement, the facility may be operated by either the public agency or the private developer during the term of the lease. Lease/purchase arrangements have been used by the General Services Administration for building federal office buildings and by a number of states to build prisons and other correctional facilities.

P3 Contexts

The Selected Responder will develop at least one business model for each of the following three contexts.

Truck Haven

This concept assumes a facility located within the Interstate right-of-way and similar to a traditional Interstate safety rest area, however, geared more toward truckers. It may not include all amenities commonly found in a safety rest area but may include more, more extensive or modified amenities desired by truckers. Refer to market research for additional amenities desired by truckers at the following URL: .

Like a safety rest area, the facility would feature dedicated deceleration and acceleration ramps to the facility from the Interstate. The existing prohibition on commercial activities except those permitted through vending would apply.

This concept would evaluate if greatly expanded vended products and services would generate significant revenue for the State. The Selected Responder should consider the unique and extensive vended products and services found in public spaces in Asia public.

Existing Undeveloped Interchange

This concept assumes Mn/DOT and private parties share costs of developing partnership truck parking facilities at undeveloped or new interchanges where traffic volumes do not support or only marginally support viable business opportunities.

Mn/DOT could partner in various ways, perhaps participating in the cost of developing the facility and private partners could operate and maintain the facility and share in the development costs to the degree the business model could support it without jeopardizing the sustainability of the facility over time.

A lease could include terms related to profit sharing from the private partners business.

In addition, Mn/DOT could require that the facility provide additional services and amenities such that it would attract noncommercial and commercial motorists to stop at the facility, if fatigued. Mn/DOT could purchase the land on which the facility is built and enter into a long-term lease with the private partner to operate and maintain it. At the end of the lease term Mn/DOT could, after confirming the continuing need for the facility, re-advertise the lease opportunity to interested parties. Depending on the facility condition, some capital investment may be needed at the time a new lease is executed.

Existing Partially or Fully Developed Interchange

This concept assumes Mn/DOT and private parties share costs of developing partnership truck parking facilities at existing partially or fully developed interchanges where existing businesses do not or cannot provide 24-hour access to restrooms, offer products and services to the public, nor supply free parking for both cars and trucks 24-hours per day.

Unique Risks, Constraints and Opportunities

The P3 Contexts for the P3 business models present a few unique constraints and opportunities. The Selected Responder will explore and document strategies within the business models to respond to them.

Prohibition on Commercial Activities in Interstate Right-of-way

Developing a P3 business model for Truck Havens, as discussed earlier in the P3 Contexts section of this exhibit, presents a significant challenge. Federal law (23 CFR 1.23) forbids commercial activities by stating that no charge to the public for goods and services may occur at Interstate safety rest areas or privately operated information centers except for telephone and articles dispensed by vending machines. The Selected Responder will need to explore creative business models that will respond to this prohibition.

Interstate Oasis Program

One program that may be of marketing or advertising value for the business models developed for interchanges is the Interstate Oasis Program. Under the Interstate Oasis Program, Minnesota may designate businesses that meet certain criteria as “Interstate Oases”. Mn/DOT may identify the businesses with a uniform logo and signage on the Interstate system. If Mn/DOT elects to participate in the program, Mn/DOT would designate all eligible, interested businesses as Interstate Oases. The business must at a minimum provide 24-hour access to restrooms, offer products and services to the public, and supply free parking for both cars and trucks.

P3 Requirements, Attributes & Guidelines

The Selected Responder must develop business models that each include, at a minimum, the following:

  1. Restrooms accessible 24 hours per day year around
  2. Products and services desired by the public, especially those desired by truckers
  3. Significant supply of free parking for both cars and trucks accessible 24 hours per day year around

The Selected Responder must also consider the following attributes and guidelines in developing the business models:

  1. Cost effectively providing parking and amenities desired by:
  2. Commercial truck operators for long-term periods to meet hours of service regulations and for short-term periods at metro fringe locations.
  3. All motorists for short-term periods to address driver fatigue.
  4. Protect public investment in the P3s both short-term and long-term.
  5. Minimize significant direct competition with existing businesses and instead propose models that provide complementary services to existing businesses, where possible.
  6. Minimize costs to Mn/DOT associated with providing such services in the short-term and long-term.
  7. Provide business models that provide fair and equal opportunities for interested parties to partner with Mn/DOT.
  8. Promote economic development and improve commercial freight movements and processes.

Desired Responders

Mn/DOT will accept proposals from one prime firm from the Pre-Qualification List for Transportation Planning, (7.1 Planning Class I and Class III). The prime firm may offer to provide all necessary expertise for this project or may subcontract with and manage other firms with the necessary expertise. The fees for each subconsultant firm, however, must not exceed the fee of the prime.

Mn/DOT seeks a multidiscipline consultant team consisting of a:

  • Financial & investment planner
  • Real estate developer
  • Commercial development specialist
  • Researcher
  • Construction estimator (only for potential future phases)

Mn/DOT also seeks the consultant team with the following experience:

  • Planning and/or development of commercial truck stops
  • Planning and/or development of commercial facilities serving toll roads
  • Development of commercial business models and plans
  • Commercial property management and leasing
  • Public / Private Partnership experience in transportation and other arenas

Phased Contract Term

Mn/DOT intends to enter into a contract with the Selected Responder for a term of three years; however, Mn/DOT has only secured funding for the first phase as described in this exhibit. Dependent upon the business models developed in this initial phase, Mn/DOT may secure funds for future phases which may include funding for the following:

  • Business Plan Development
  • Partner Identification
  • Partnership Development
  • Partnership Implementation (Pilot Project)

Important Note: Mn/DOT encourages responders to include in their proposal any portion of the above future phases that they could complete within this initial phase.

Phase 1

Schedule

Mn/DOT expects the Selected Responder to begin work of this first Phase on April 11, 2011 and to complete the work by June 30, 2011. This allows the Selected Responder 80 calendar days to complete the work as described herein. Mn/DOT has only secured funding for this project in State Fiscal Year 2011 which ends at midnight June 30, 2011.

Budget

Mn/DOT has secured $200,000 for the Selected Responder to complete the work as described in this exhibit.

Work Plan & Approach

Responders must include in their proposal:

  • A description of how they will Approach this project
  • Work Plan describing how they will complete the work of this project within the established fee amount and within the time constraints as defined in this exhibit.

The Selected Responder will use and follow the Work Plan and the Approach to complete the work of this project as described in their response to this proposal. However, the Selected Responder may request an adjustment to the Work Plan and Approach from Mn/DOT. Mn/DOT may accept or reject such requests.

Deliverables

The Selected Responder must prepare and submit a final document entitled, “Truck Haven and Truck Parking Public/Private Partnerships - Business Models for Minnesota Interstates”. Mn/DOT requires a document of sufficient quality and detail such that it will serve as the basis for the development of specific business plans, identification of potential and likely partners and as tool to inform Mn/DOT of the P3 opportunities. Mn/DOT requires a document suitable to present to prospective partners and Mn/DOT staff as a marketing tool.

In addition, the document must include the following:

  1. Description of at least five distinctly different P3 business models. These include the models required in Item 2 below.
  2. Description of at least one business model applicable to each of the three “P3 Contexts” as described in this exhibit.
  3. For each business model:
  4. Document the findings of each of the “Business Model Development Tasks” as described in this exhibit.
  5. Document and describe a preferred “P3 Procurement Method” as described in this exhibit. The Selected Responder may propose alternate “P3 Procurement Methods” where the Selected deems more than one procurement method may suit the developed business model.
  6. Document the extent to which the model complies with “P3 Requirements, Attributes and Guidelines” as described in this exhibit and include possible mitigation in situations of non-compliance.
  7. Document the key conditions likely to influence the success or failure of the business model.
  8. Additional documents as proposed in the Selected Responders proposal.

Working with Mn/DOT

Mn/DOT will assign a Project Manager to serve as a liaison between Mn/DOT and the Selected Responder. Mn/DOT’s Project Manager will serve on and take direction from a Mn/DOT established steering committee. Mn/DOT may seek internal technical and expert office advice during the project and may assign additional staff to assist with this project, as the Mn/DOT Project Manager deems necessary.