PUBLIC-PRIVATE PARTNERSHIPS: THE HOT LANES PROJECT by J. R. Steele On September 10, 2007, the Virginia Department are shared in order to deliver a service or facility for the of Transportation (VDOT) announced an “in-principal” general public’s use. With this sharing of resources also Public-Private Partnership with the joint-venture Fluor comes the sharing of the inherent risks and rewards in Corporation and (“Flour-Transurban”) to the delivery of the service or facility. construct the Commonwealth’s and 395 The use of a PPP is thought to promote timely, ef- High Occupancy Toll Lanes project fi cient, and less costly construction for both the public (“HOT Lanes”). Under the Public-Private Partnership, and private partners. PPPs allow projects to move VDOT will own and oversee the lanes, but Fluor- more quickly because the project can avoid some of Transurban will construct and, upon completion, be the governmental funding issues that can slow down a responsible for maintaining and operating the HOT traditionally government funded construction project. Lanes. This Public-Private Partnership is set to be fi nal- In addition, a PPP encourages the participating private ized upon completion of environmental approvals and entity to invest in the state where the project is located. fi nancial feasibility studies. This article is intended to Another important advantage of using a PPP is that acquaint Commonwealth businesses with Public-Private the public benefi ts from the use of new, cutting-edge Partnerships and specifi cally highlight the Virginia HOT technology that normally a governmental entity would Lanes Public-Private Partnership. deem too risky for public procurement. PPPs have been successful on a multitude of projects throughout the What is a Public-Private Partnership? United States, including transportation, water/wastewa- The development of the Public-Private Partnership, or ter management, urban development, school/university, PPP, evolved from the fact that the United States is faced and utility projects. with an aging infrastructure, coupled with the reduction In Virginia, the Public-Private Transportation Act of of local, state, and federal government budgets for repair 1995 (“VA PPTA”), as amended by the 2005 General and improvements to older infrastructure. The PPP was Assembly (VA. CODE ANN. § 56-556, et seq.), is the developed in order to address this problem and to bring legislative framework enabling the Commonwealth of private capital and knowhow to public projects. Virginia to enter into agreements with private entities to construct, improve, maintain and operate transporta- tion facilities. The Commonwealth has utilized PPPs PPP & HOT Lanes Websites: on several transportation infrastructure projects. For • The National Council for Public- example, Route 895 Pocahontas Parkway—a 8.8-mile Private Partnerships: long freeway that crosses the —was funded www.ncppp.org • Public-Private Transportation 90% through private funds. In addition, in Powhatan and Act (PPTA): www.virginiadot.org Goochland Counties, Western Route 288’s largest section /business/ppta-default.asp was awarded under a PPTA and the Dulles Greenway, a • HOT Lanes: 14-mile freeway, was built 100% by private funding. www.virginiahotlanes.com The VA PPTA allows both solicited and unsolic- • Federal Highway Administration ited project proposals. The major steps undertaken to – Public-Private Partnerships evaluate, select, and implement projects are similar for www.fhwa.dot.gov/PPP both solicited and unsolicited proposals. The process, however, is not subject to the Virginia Public Procure- ment Act (“VPPA”) (VA. CODE ANN. § 11-35, et seq.). In general, a PPP is a contractual agreement between Under the VA PPTA, the private and public entity are a public agency (federal, state, or local) and a private provided great fl exibility in developing fi nancing meth- sector entity. Through the PPP agreement, the assets, ods, including user fees, service payments, issuance of skills, and resources of both the public and private entity debt, equity or other securities or obligations. Sale and

Virginia’s Engineering Address - www.vaeng.com June 2008 The Virginia Engineer Page 21 leaseback transactions are also choices that are available ing the current Metrorail extension to the Washington if the parties desire. Dulles International Airport in Northern Virginia—where Both solicited and unsolicited project proposals are the terms of the construction contract (including docu- evaluated under a competitive process. After evaluating ments dealing with cost estimates, scheduling, overruns, any competing proposal, the Commonwealth can choose markups, overhead and profi t) will be “sealed jointly” by to enter negotiations with selected private entities. Nego- the partnership and kept from the public until the end of tiations may result in a private entity partner being chosen the extension project. Supporters of this arrangement are for the project. Final authorization to develop the project, quick to point-out that the VA PPTA was developed by however, is contingent upon successful negotiation and the legislature of the Commonwealth to address private execution of a comprehensive agreement between the entities’ concerns that companies participating in a PPP public and the chosen private entity. At a minimum, the may be required to disclose proprietary information, comprehensive agreement will outline the parties’ rights such as fee structures and business strategies, thereby and obligations, set maximum return rates to the private disclosing such information to their competitors. It is not entity, allocate risk and liabilities and—in accordance clear whether this debate will be taken up by the Com- with VA.CODE ANN. §56-566—establish a timeline for monwealth’s legislature, but these concerns are certain to termination of the private entity’s authority and turn-over infl uence the way public and private entities craft future of the project to the Commonwealth. PPP agreements in the Commonwealth. One of the recent criticisms of the VA PPTA is its perceived lack of transparency. The hallmark of public What is a HOT Lane? contracting is transparency at all levels of the contract As background, VDOT maintains the third largest process. The VA PPTA has been criticized by some highway system in the United States, encompassing a because the negotiation process between the Common- total of 57,100 miles of roads with 1,120 miles of those wealth and contractors on PPP projects is not fully trans- being classifi ed as interstate roads. Of the 1,120 miles parent. This criticism is largely based on issues surround- of interstate roads, there is a growing concern from the government and the state’s citizens that the amount of traffi c volume is overwhelming the interstate system causing widespread delays. After years of debate and study, the Com- monwealth has chosen High Occu- pancy Toll Lanes, or “HOT Lanes”, as one of the weapons to decrease the number of vehicles found on Vir- ginia’s most congested interstates. More specifi cally, HOT Lanes are to be constructed adjacent to ex- isting or “regular” interstate 95 and 395 Capital Beltway traffi c lanes. Similar to High Occupancy Vehicle BUILDING YOUR BRIDGE TO SUCCESS (HOV) Lanes, HOT Lanes are ex- THE VIRGINIA ENGINEER is designed to reach Virginia’s clusively reserved for motorcycles, engineers — engineers employed in industry; by town, city, carpooling, vanpooling, buses, and emergency vehicles. However, un- county, state, and federal government agencies; consulting like HOV Lanes, those motorists who engineers, and engineers employed by major contracting are not carpooling or riding a bus will fi rms. If your fi rm offers commercial/industrial products and/or be required to pay a toll when using services to the engineering community in Virginia, our design the lanes. The HOT Lanes Project specs will interest you. Simply contact Richard Carden at will: 1-877-779-3527; or fax us a note at 804-779-3032; or send • Add four new HOT Lanes on us an e-mail to [email protected]. the Capital Beltway from the Spring-

Page 22 The Virginia Engineer June 2008 Virginia’s Engineering Address - www.vaeng.com monwealth. The project will also support regional transportation goals by dovetailing with Metrorail’s plans to extend Metro services to Wash- ington Dulles International Airport. Construction on the HOT Lanes project is expected to begin some time in the fi rst half of 2008 with the lanes slated to be opened some time Graphic #1. Graphic courtesy of www.virginiahotlanes.com in 2013. The estimated cost of the entire project is in the neighborhood fi eld Interchange to just north of the toll amount will also increase—thus of one billion dollars. Dulles , and regulating the number of cars using • Convert the existing, reversible the lanes. Therefore, the toll amount Conclusion: High Occupancy Vehicle (“HOV”) will change throughout the day ac- Virginia is embracing the use lanes on I-95/395 into HOT Lanes, cording to real-time traffi c conditions of PPPs to address the growing expand it from two lanes to three in order to manage the number of transportation infrastructure and lanes, and extend two of the lanes cars in the HOT lanes and keep them state budgetary problems the Com- 28 miles south into Spotsylvania congestion free—even during rush monwealth is facing. The success of County. hour. The HOT Lanes will utilize the HOT Lanes project, and other As depicted in Graphic #1, once electronic toll collection technology. Commonwealth PPPs, will largely the HOT Lanes project is completed, The project will be built in such a determine whether or not the use of there will be a total of twelve lanes manner that further expansion of the PPPs in Virginia becomes the public total on portions of the Capital Belt- system will be possible. infrastructure and facility delivery method of choice. It is clear, at least for the foreseeable future, that Vir- ginia businesses are likely to see in- creased use of these partnerships not only on transportation projects, but on various other public projects. ##

About The Author J. R. Steele is an associate with the national law fi rm of Akerman Graphic #2. Graphic courtesy of www.virginiahotlanes.com Senterfi tt in its Tysons Corner, Virginia, offi ce (www.akerman. way, with 4 general purpose lanes One of the major goals of the com). J. R.’s practice is devoted and 2 Hot Lanes north- and south- HOT Lanes is to reduce the overall to construction and government bound. number of vehicles on the road by contracts law. For questions or In addition, as depicted in Graph- encouraging people to utilize public additional information, please ic #2, portions of I-95/395 north- and transportation or carpooling options. contact him at (703) 790-8750 or south-bound will have 9 total lanes The Capital Beltway portion of the by email at jr.steele@akerman. with 6 general purpose lanes and 3 project will bring HOV service to com. reversible HOT Lanes. the beltway in Virginia for the fi rst The toll amount for motorists uti- time. The hope is that HOV traffi c, Article originally published in the lizing these HOT Lanes will fl uctuate. especially carpools and buses, will June 2008 issue of The Virginia Engi- When the traffi c is light in the HOT now be able to move freely in and neer and is available online at www. Lanes, toll prices will be low. When out of Tysons Corner, one of the vaeng.com. Send questions or com- congestion increases, however, the most congested areas in the Com- ments to [email protected].

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