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Tools & Programs: SEP-15

Trans Texas Corridor 35 (TTC 35)

Work Plan For I-35 High Priority Trans Texas Corridor Procurement (Texas Department of Transportation Application for SEP-14 Approval)

  1. INTRODUCTION

    This work plan is submitted by the Texas Department of Transportation ("TxDOT") for review and approval by FHWA under Special Experimental Project No. 14 (SEP-14), with respect to development of the I-35 High Priority Trans Texas Corridor (the "Corridor") through a Comprehensive Development Agreement ("CDA"). Please refer to Exhibit A for a copy of the Minute Order and Implementation Plan for the Trans Texas Corridor adopted by the Texas Transportation Commission ("Commission") in June, 2002. Please refer to Exhibit B for relevant excerpts from the Texas Transportation Code (the "Code") and TxDOT rules (the "Rules") which forming the basis for the planned procurement approach for the Corridor (collectively, the "Enabling Legislation").

    On November 13, 2002, TxDOT received an unsolicited proposal from Fluor Enterprises Inc. offering to enter into an agreement to develop the Corridor (the "Fluor Proposal"). Following a determination that the Fluor Proposal merited further evaluation, as required by the Enabling Legislation, the Commission authorized the issuance of a request for competing proposals and qualifications ("RFPQ"). On July 25, 2003, TxDOT issued the RFPQ on July 25, 2003, with responses to the RFPQ due on September 23, 2003. TxDOT received a revised submittal from Fluor, as well as competing proposals and qualifications from two other teams. The RFPQ (including three addenda) is available for review on TxDOT's website at http://www.dot.state.tx.us/tta/profserv/rfpqlist.htm.

  2. SCOPE OF SEP-14 REQUEST

    TxDOT is requesting approval to proceed with the development of the Corridor, as described herein, as an experimental program. Specifically, TxDOT requests approval of the following experimental features deviating from requirements contained in FHWA's rules applicable to design-build projects:

    • Issuance of a request for detailed proposals ("RFDP"), execution and delivery of a CDA, and issuance of a notice to proceed with limited non-construction work under the CDA, prior to receipt of Tier I1 NEPA approval for the Corridor.
    • A modified approach with regard to project authorization, whereby such authorization would be provided on a facility-by-facility basis following issuance of the Tier II2 NEPA approval. 1
    • A right-of-way certification procedure allowing submittal of a description of the right-of-way acquisition approach planned for each facility concurrently with the request for project authorization, and provision of right-of-way certifications prior to start of construction on the parcels in question.
    • Use of the procurement process for the CDA as described herein, notwithstanding any conflict between the process described herein and the provisions of 23 CFR Part636.
    • Establishing subcontractor selection requirements that are different from Federal-aid procurement procedures applicable to State Transportation Departments.
    • Including a general warranty in individual facility agreements that exceeds the period specified in 23 CFR635.413(e)(1)(i), and requiring the developer to undertake responsibility for routine maintenance services possibly including routine maintenance in the contract.

    In addition, TxDOT requests FHWA concurrence with confirmation of the following:

    • Modification of That Form 1273, Required Contract Provisions For Construction Projects, may be modified to strike out the portion of Section VII that requires a specified percentage of work to be self-performed.
    • That FHWA has no objection to Provision of NEPA support services by the developer and/or a subconsultant on the developer's team, with the understanding that (1) all such services will be subject to control and direction by TxDOT, and that separate consultants under direct control and direction of TxDOT a consultant not affiliated with the developer will compile the NEPA documents, (2) all developer and consultant services will be subject to control and direction by TxDOT and FHWA, and (3) TxDOT and FHWA will be responsible for preparation of the EIS, and for determining the content and conclusions of the EIS.
    • That TxDOT's intended procedures for utility adjustments are covered by the existing FHWA approval of the TxDOT Alternate Procedure, and that TxDOT (a) may incorporate utility adjustment design and construction within the developer's scope of work notwithstanding the provisions of 23 CFR Section 645.115 stating that contracts for such construction must be competitively bid, (b) may provide for the developer to reimburse utility owners for costs of design and construction of utility adjustments, when such owners are entitled to such reimbursement, and (c) may allow utility owners obtaining reimbursement for adjustments to use procurement methodologies other than competitive bidding in procuring contracts for such work.

    Please refer to Sections E and F below for a discussion of issues associated with these requests.

  3. SCHEDULE

    TxDOT has established the following preliminary schedule:

    • RFPQ Issued - July 25, 2003
    • Competing Proposals and Qualifications
      Submittals Due Date - September 23, 2003
    • Shortlisting - Fall 2003
    • Start of Tier I NEPA Process - Winter 2003-2004
    • Corridor Plan - Spring 2004
    • RFDP Issued - Spring 2004
    • Detailed Proposals Due Date - Summer/Fall 2004
    • Award/Negotiation/Execution of CDA - Winter 2004-2005
    • Tier I1 NEPA Approval - Spring 2005
    • Master Development Plan approval - Spring/Summer 2005 (estimated at 6 to
      12 months after award of the CDA)
    • Implementation Plan/Plan of Finance approval - TBD
    • Award of First Facility Agreements - TBD
  4. GOALS
    TxDOT believes that use of a CDA as described herein will serve the following goals: Expedite delivery of facilities, consistent with available public and private funding and maximizing use of public-private partnerships and private equity in project delivery;

    • Attract proposals from the highest quality, most capable and innovative domestic and international multi-modal transportation and utility infrastructure entities and consortia;
    • Bring on private partners as early as possible in order to spur the identification, planning and development of the Corridor and specific Corridor facilities;
    • As specific facilities ripen for development, Achieve cost and schedule certainty early in the design phase of each facility;
    • Encourage flexibility, innovation and alternative approaches to financing, design, construction, operation and maintenance;
    • Obtain a well-designed, innovative, high quality, multimodal Corridor that is durable and backed by appropriate warranties so as to minimize maintenance expenses and life cycle costs, minimize congestion and enhance safety, while maximizing the use of Corridor right-of-way;
    • Create a process that encourages private sector competition and leveraging of public contributions with private investment;
    • Use the environmental process creatively and proactively to address issues and solve problems likely to arise over the course of development of the Corridor, resulting in a program that is responsive to the resources and community concerns while also addressing issues that may impact design, construction, operations and maintenance of the Corridor;
    • Provide environmental benefits through advance mitigation and state-of-the art design solutions that respond to environmental concerns, streamlining the environmental and permitting approval process through early assessment of opportunities and constraints, encouraging creative design solutions and integrating resource agency permitting into the NEPA process;
    • Maximize project eligibility for all available forms of financing, allowing a plan of finance to be developed involving a combination of private sector funds (including revenue-based financing), federal, state and other public funds (including both loans and grants), and leveraging scarce public funds to the maximum extent possible;
    • Enable TxDOT to share financial risk with, and assign substantial project risk to, the party best able to manage that risk early in the process;
    • Assure participation from a broad array of smaller firms, including local and WBE/MBE/DBE firms (without undertaking activities that would be inconsistent with applicable federal restrictions relating to preferences offered to local firms or local hire requirements);
    • Enable TxDOT to phase facilities meeting all environmental requirements in a manner that is logical and consistent with actual needs and available resources and funding; and
    • Ensure open, fair and wide competition for the I-35 Corridor development.
  5. DESCRIPTION OF PROPOSED PROCUREMENT APPROACH AND OTHER ISSUES

    1. Procurement Approach. The proposed procurement approach for the Corridor follows the process for unsolicited proposals under the Enabling Legislation, and is essentially the same approach as that being used by the Virginia Department of Transportation (VDOT) for its I-81 project. In developing the procurement plan for the I-35 CDA, TxDOT reviewed the guidance provided by FHWA to VDOT with regard to the I-81 project (a copy of which is attached hereto as Exhibit C posted on FHWA's website at http://www.fhwa.dot.gov/programadmin/contracts/ppta.cfm), and has taken steps to address the concepts discussed in the I-81 guidance letter.

      As noted above, TxDOT has shortlisted three proposers based on their in response to the RFPQ issued for the Corridor. These submittals essentially consist of qualifications information with development and financial plans that are highly conceptual in nature and TxDOT believes that this step of the procurement process is the equivalent of a request for qualifications under a "standard" design-build procurement as described in FHWA's design-build rule (67 Fed. Reg. 75901 et seq. (Dec. 10, 2002), as amended, adding Part 636 to Title 23 of the Code of Federal Regulations, and modifying Parts 627, 635, 637 and 71023 CFR Part 636).

    2. Remaining steps in the process include the following:

      (a) Shortlisting. TxDOT recently concluded its evaluation of the responses to the RFPQ in accordance with the evaluation criteria identified in the RFPQ and Section27.4(e) of the Rules. This process was observed by an FHWA representative. The review committee provided a recommendation to the TxDOT Executive Director regarding which firms should be asked to participate in the next stage of the procurement process. All three teams were shortlisted.

      (This step of the process conforms to the requirements of FHWA's design-build rule.)

      (b) Industry Review. An industry review process is being conducted with the shortlisted firms to obtain input into the proposed terms and conditions of the RFDP and contract documents, as well as to discuss issues associated with each team's planned approach to Corridor development. The industry review process includes scheduled workshops and one-on-one meetings and will be conducted in compliance with Section 636.115 of FHWA's design-build rule. One-on-one discussions may be conducted in person or in writing. TxDOT recognizes that this process requires a balancing of the need to maintain confidentiality with respect to approaches and concepts proposed by each team, on the one hand, and the need to prevent any situation that may be deemed to allow any team an unfair competitive advantage, on the other. Accordingly, TxDOT will keep confidential, to the full extent of the law, any information disclosed by a proposer during the discussion process that may reveal the proposer's confidential business strategies, and will require all participants representing TxDOT in the discussion process to sign confidentiality agreements. However, the concept of confidentiality will be limited to information provided by the proposers and responses by TxDOT that are intertwined with confidential concepts. Any general questions and answers, as well as any other information necessary for the development of proposals that is disclosed to one proposer, will be provided to all proposers. The TxDOT contracting officer responsible for the CDA or his/her designee will be present during any substantial discussions of potential CDA terms and will be responsible for ensuring that appropriate disclosure occurs.

      FHWA's observation of and/or participation in this process will be welcomed.

      (This step of the process conforms to the requirements of FHWA's design-build rule.)

      (c) Issuance of RFDP. Upon conclusion of the industry review process, TxDOT would submit the proposed RFDP, including draft contract terms and conditions, to FHWA for review and a determination whether the document is "satisfactory for further processing," which term shall be deemed to mean that FHWA has reviewed the document and has determined that concurrence is in acceptable form for the purpose of allowing the Corridor to remain eligible for federal funding. Following receipt of such determination of FHWA concurrence, TxDOT would issue the RFDP to the shortlisted firms. The detailed proposals would include the proposer's plans for development and financing of the Corridor, but would not include a detailed scope of work and fixed price. However, as required by the Enabling Legislation, the RFDP would require preliminary cost estimates for each proposed facility to be provided, together with a financial plan for the Corridor. The financial plan will be conceptual, describing the anticipated sources and uses of funds over the course of the development process. The proposal will also establish the price for initial work performed under the CDA. The workshops and discussions described above would continue during this phase of the procurement process, subject to the same guidelines as described above.

      (This step of the process deviates from FHWA's design-build rule in that the RFDP will be issued prior to approval of the Tier I EIS final NEPA approval. The anticipated benefit from this approach is described in Section F below. With regard to pricing, although the design-build rule generally contemplates lump sum pricing for design-build contracts, Section636.119 of the design-build rule permits agencies to enter into public-private agreements, such as CDAs, that do not include a fixed price.)

      (d) Evaluation of Detailed Proposals, Negotiations and Award. Upon receipt of the detailed proposals, TxDOT would evaluate the submissions in accordance with evaluation criteria identified in Section27.4(h) of the Rules as well as the detailed criteria contained in the RFDP. The RFDP will set forth evaluation criteria (identifying their, relative importance) and submittal requirements. TxDOT anticipates establishing DBE goals for services to be provided during the initial phase and reviewing compliance in accordance with the requirements of TxDOT's DBE program applicable to consultant contracts. TxDOT may allow oral presentations and may engage in communications to obtain clarification regarding the submissions and the oral presentations, following the procedures identified in the RFDP, factoring the presentations and clarifications into the evaluation process. TxDOT would have the right to engage in discussions with all proposers followed by a request for final detailed proposal revisions in accordance with Section 636.509 of FHWA's design-build rule, in which case the final proposal revisions would be evaluated in accordance with Section27.4(h) of the Rules and in accordance with the detailed evaluation criteria identified in the RFDP.

      Upon completion of the evaluation process, TxDOT would determine which proposer has offered the best value. TxDOT would then proceed with one-on-one negotiations with that proposer, for the purpose of finalizing the terms and conditions of the CDA. Negotiations would include the incorporation of unsuccessful proposers' ideas, clarifications and minor adjustments, and would address any matters that have arisen since the proposal submittal date. TxDOT would have the right to proceed with negotiations with the next highest rated proposer if negotiations with the apparent best value proposer fail.

      FHWA will have the opportunity to observe and/or participate in the evaluation, selection and negotiation processes. Prior to award, a summary will be provided to FHWA regarding the process followed, summarizing the rationale for the selection, describing substantive changes made to the CDA during the negotiations, and requesting FHWA concurrence in the award. Following such concurrence, the CDA would be awarded, executed and delivered in accordance with the RFDP, and a notice to proceed issued for the initial services thereunder.

      (This step of the process deviates from FHWA's design-build rule in that (i) ideas submitted by unsuccessful proposers would be disclosed to the successful proposer prior to award and (ii) matters arising after the proposal submittal date might require a modification in the scope of services to be provided under the CDA. Under this experimental approach, TxDOT anticipates gaining the benefit of competition in negotiating changes to the contract documents associated with incorporation of these concepts, since the successful proposer will know that TxDOT has the ability to terminate negotiations with them and proceed to the next proposer. This process is fair to all proposers because the process will be described in the RFDP, and the unsuccessful proposers will be compensated for their work product, as described in paragraph 5 below.)

    3. Payment for Work Product. As contemplated by Section 361.3022 of the Code, the RFDP will provide for a stipulated amount to be paid to each unsuccessful proposer that submits a responsive detailed proposal (subject to the proviso that the amount may not exceed the value of the proposer's work product that TxDOT determines can be used in performance of its functions). In return for such payment, TxDOT would obtain, among other things, (a) the proposer's consent to TxDOT's use of the work product in connection with the RFDP, the CDA, the project and future procurements by TxDOT, regardless of whether the proposer was selected for negotiations and/or executes a CDA; and (b) the transfer and assignment to TxDOT of all rights to the work product.

      (This step of the process conforms to the requirements of FHWA's design-build rule.)

    4. Provision of NEPA Support and Additional Services. The scope of services to be provided by the developer under the CDA would include provision of engineering studies and technical information in support of the NEPA process. These efforts will be subject to management and control by TxDOT and FHWA, which will exercise independent review and retain discretion over all of the information in the NEPA document. The developer would also undertake preliminary design efforts for Corridor facilities and due diligence activities (such as site conditions and utility investigations) in accordance with the terms and conditions of the CDA, prior to final NEPA approval.

      (This step deviates from FHWA's design-build rule in that the design-build rule does not contemplate award of a contract prior to final NEPA approval. Refer to Section F below for a discussion of the benefits associated with this experimental feature.)

    5. Planning and Preliminary Design Phase. After execution of the CDA, an initial planning and preliminary design phase will commence. During this period, the developer will work with TxDOT to complete a Master Development Plan for the Corridor. The master plan will describe facilities within the Corridor having independent utility and with logical termini and will establish a proposed program for development of the facilities. The developer will provide a project-specific finance plan for each facility included in the program, as well as an implementation plan indicating: (a) whether the facility will be delivered using design-bid-build, design-build, design-build-operate-maintain, concession or some other approach, (b) whether the developer, an affiliate and/or third parties will be responsible for design and construction of the facility, and (c) the proposed procurement approach for the contract(s) for design and construction of the facility (i.e., negotiated terms and conditions, award based on a best value selection process, competitive bidding or a different approach). The developer's services during this period will also include provision of design services in support of the NEPA process and development of preliminary design as appropriate for the proposed delivery methodology.

    6. Upon completion of the Tier II NEPA document by TxDOT and development of the preliminary design of a Corridor facility by the developer to a level allowing determination of a lump sum price, the arrangements for design and construction of the facility would be implemented. A number of different options are available, as described in Exhibit D hereto. Subsequent Agreements. If the implementation plan involves negotiated pricing of construction work, [this will be expanded to describe the process to be followed and will refer to Exhibit C.]Upon completion of the Tier II NEPA analysis by TxDOT and development of the preliminary design of a Corridor facility by the developer to a level allowing determination of a lump sum price, TxDOT and the developer would negotiate revisions to the CDA consistent with the requirements of the final NEPA approval and the plan of finance for such facility (with the price payable by TxDOT with respect to each facility to be negotiated using an "open book" approach will be used, as described in Section F below or other process, such as obtaining competitive bids,; allowing an analysis to be performed to confirm that the price is reasonable).

      If, upon completion of the Tier II NEPA document for analysis of the Corridor facility, a "no-build" project alternative is selected, or TxDOT otherwise decides not to develop the facility, the CDA will be terminated with respect to such facility. The RFDP will state TxDOT's intentions regarding compensation (if any) payable to the developer if a termination occurs, and the executed CDA will contain the final terms and conditions associated with such a termination.

      As with other federal-aid contracts, Any major revisions to the CDA will be subject to concurrence a determination that the document is satisfactory for further processing or approval (as appropriate) by FHWA.

      (This step deviates from FHWA's design-build rule in that the design-build rule does not contemplate award of a contract prior to final NEPA approval. Refer to Section F below for a discussion of the benefits associated with this experimental feature as well as other issues associated with the CDA terms and conditions.

    7. Project Authorization. In lieu of obtaining project authorization through FHWA's approval of the RFDP as contemplated by the design-build rule, TxDOT proposes that an alternative procedure for project authorization be established. This would involve FHWA review of the procurement and contract documents associated with the CDA, as well as the implementation and financing plans for the facility, and determination that such documents are satisfactory for further processing concurrence in the form of the RFDP for the purpose of allowing the Corridor to remain eligible for federal funding. Such review and determination concurrence would be considered a preliminary action by FHWA for NEPA purposes. Project authorization for each facility facilities within the Corridor would be provided following approval issuance of the Tier II final NEPA document for the approval for construction of each facility.

      (This approach deviates from FHWA's design-build rule in that the rule contemplates project authorization prior to issuance of the request for proposals. As a result of TxDOT's plan to award the CDA prior to final NEPA approval, an alternative methodology for project authorization is necessary. See additional discussion in Section F(3) below.

    8. Right-of-Way Acquisition. TxDOT anticipates that a description of the planned approach to right-of-way acquisition will be provided to FHWA as soon as it is developed. TxDOT anticipates that some early acquisitions may occur in certain areas, if appropriate, based on the results of the Tier 1 analysis. For the remainder of the Corridor, TxDOT anticipates that the description would be delivered to FHWA concurrently with the request for project authorization described in paragraph 8 above. Right-of-way certifications would be provided prior to start of construction on the parcels in question.

      (This approach deviates from FHWA's design-build rule in that the rule requires a certification to be provided earlier in the process. The approach contemplated by the design-build rule is incompatible with the CDA concept, and TxDOT has developed its suggested alternative approach with the intent of complying with the underlying philosophy of the design-build rule. See additional discussion in Section F(4) below.)

    9. 76. CDA Terms and Conditions. The terms and conditions of the CDA (a) will be subject to review and concurrence by FHWA, (b) will include a requirement to comply with Federal-aid requirements applicable to federally funded projects, including without limitation such as Davis-Bacon and Buy America, for all facilities that use Federal-aid funding, (c) will include FHWA Form 1273 modified to strike out self-performance requirements, and may place restrictions on the method of procurement used by the developer in selecting subcontractors, as deemed appropriate by TxDOT, (d) will contain terms and conditions relating to performance of work, whether self-performed by the developer or performed by subcontractors, as deemed appropriate by TxDOT, (e) will include provisions relating to utility relocations as described herein, (f) will contain provisions enabling TxDOT and FHWA to determine price reasonableness in the event that the plan of finance for a facility contemplates state or federal funding, and (g) may provide for an extended warranty and/or for the developer to perform routine maintenance work.

      (Items (c), (e) and, (f) and (g) deviate from FHWA's design-build rule in certain respects. See additional discussion in Section F below.)

  6. DISCUSSION

    1. Developer as Long-Term Partner; Financing and Pricing Issues. TxDOT anticipates that the Corridor developer will become a long-term partner with TxDOT in a joint effort to develop the Corridor and facilities on a multi-modal, multi-facility basis, building on a model that has been proven a successful means of project delivery in Europe. Following award and execution of a CDA and issuance of a notice to proceed, the parties would work together to develop the Corridor facilities in accordance with pursuant to the terms of the CDA. As specific facilities reach a level of design enabling the cost and schedule to be determined, the parties will be able to finalize the completion schedule and develop and implement a plan of finance (including determining whether public funding is required and establishing the nature and amount of such funding). Facilities will be considered ready "ripe" for development once environmental approvals have been obtained, a specific plan of finance for that facility has been developed and approved by TxDOT and the implementation plan (specific project identified, schedule, phasing, and delivery approach) has been developed and approved by TxDOT and the as-planned facility is otherwise ready for procurement and development.

      The CDA will provide several options for delivery of facilities, including the options identified in Exhibit D. (a) negotiating a supplemental agreement establishing a defined scope and price with guaranteed completion deadlines pursuant to which the developer or a developer team member would undertake the work; or (b) procuring, on either a design-bid-build or CDA basis, the design and construction of such specific facility and to manage, coordinate and guarantee the timely completion and cost of the same. Parameters for implementation of each of these options will be defined in the original CDA. The ability of the developer to self-perform work (including in the concept of "self-performance" the performance of such work by affiliated entities) is an important element in maximizing private sector interest in participating in the CDA procurement. The CDA will specifically address the requirements that must be met in order for the work to be self-performed.

      The CDA will address the manner in which the price payable by TxDOT for each facility will be determined. Certain facilities within the Corridor may be developed using a competitive procurement process, which would simplify the process of determining price reasonableness. If, however, TxDOT and the developer agree the developer will perform work with its own forces or through negotiated subcontracts, an alternative means of determining price reasonability will be necessary. TxDOT anticipates that price justification would be provided through an "open book" review of the basis for the developer's cost estimate, but will consider other alternatives proposed by the developer consistent with generally accepted accounting principles costs. or using another approach enabling a cost or price analysis to be performed, as appropriate. An "open book" review would typically entail review of all underlying assumptions and data associated with pricing, including assumptions as to schedule, composition of equipment spreads, equipment rates, productivity, estimating factors, design and productivity allowance, contingency and indirects, and other items reasonably required by TxDOT to satisfy itself as to the reasonableness of the amount. This type of review was the basis for the pricing approval for VDOT's Pocahontas Parkway design-build contract and for FTA's approval of the price for the design-build-equip contract for the Las Vegas Monorail extension.

      • TxDOT will also have several options concerning the operation and maintenance of completed Corridor facilities, including:
      • assuming operation and maintenance responsibility itself;
      • requiring or having the option to require that the developer assume operations and maintenance responsibility for a specified period;
      • requiring that the developer provide services in connection with its warranty obligations under the CDA; and/or
      • having a third party (managed by either TxDOT or the developer) assume operation and maintenance responsibility.

      TxDOT also anticipates exploring the use of (a) facility revenue sharing with the developer and/or other third parties; and (b) franchises and concessions where Corridor facilities may be leased to (and operated by) the developer or a third party on a short or long-term basis.

    2. NEPA Compliance.
      TxDOT has engaged HNTB Corp. as its Corridor Engineer. One of HNTB's primary responsibilities will be to serve as NEPA consultant for the Corridor. The RFPQ specifically states that HNTB will not be permitted to participate on a developer team. TxDOT may, however, allow certain of HNTB's subconsultants to be on developer teams, if such approval is requested. Any such decision would be made in conformance with federal requirements relating to organizational conflicts of interest (including 23 CFR Section636.116) as well as applicable state law.

      TxDOT anticipates that the developer will provide support to TxDOT during the NEPA process, including providing preliminary engineering, tests, studies, data, analyses and reports, supplementing the services provided by TxDOT's NEPA consultant. The ability to obtain NEPA support from the developer provides a number of advantages, including (a) a quick turnaround time in obtaining technical information, (b) enhancing the ability of TxDOT representatives to evaluate the impact of proposed alternatives on the design, construction, operations and maintenance of the Corridor, and (c) allowing TxDOT to obtain innovative ideas from the developer regarding mitigation of impacts. This would also allow TxDOT to factor the developer's plans into the environmental analysis, thus avoiding the need to undertake additional reviews during the project development phase to determine whether proposed design concepts result in additional impacts requiring mitigation. In addition, the developer's familiarity with the environmental "drivers" affecting the project and with mitigation requirements would give the developer a better understanding of the environmental solutions, and should result in greater sensitivity by the developer to the concerns of the environmental community during construction than is typically seen for construction contractors or design-builders selected after the NEPA process is completed. Safeguards will be implemented to ensure that services provided by the developer and its affiliates will not prejudice NEPA outcome.

      TxDOT has not yet determined to what extent the successful proposer will be compensated if the NEPA analysis results in a "no-build" determination or in any other decision that is incompatible with the developer's plan for the Corridor CDA concept, or other circumstances precluding the Corridor or a particular facility from going forward. TxDOT is considering various approaches, which may include a stipend or cost sharing if the Corridor or facility does not proceed and/or payment for work product produced by the developer during the environmental review phase of the Corridor or facility. The RFDP will include provisions addressing compensation payable upon such a termination. The CDA will indicate that the "no build" option may be selected, and will clearly set forth how the risks associated with the "no build" alternative (or any other alternative that is not consistent with the developer's planned approach to the Corridor or facility contemplated by the CDA) are allocated between the developer and TxDOT.

      TxDOT and FHWA will at all times direct and control the NEPA process, in accordance with applicable requirements of NEPA (including requirements relating to organizational conflicts of interest) and the guidelines set forth in FHWA's guidance letter relating to the I-81 project. , and TxDOT will take steps to ensure that the process conforms to NEPA requirements relating to organizational conflicts of interest.

    3. Project Authorization
      FHWA regulations currently provide that project authorization occurs upon FHWA approval of the request for proposals for a design-build project, based on the assumption that final NEPA approval will already have been obtained prior to issuance of the request for proposals. (See 23 CFR 635.112(i)(1) and 635.309(p).) However, that is not the case for the I-35 procurement, and it is not appropriate for FHWA to make a decision authorizing use of federal funds for the Corridor prior to issuance of the final NEPA approval. Furthermore, the Corridor, as defined by the Tier I document, will include the development of multiple specific facilities. Specific facility projects would be covered under a Tier II document, with environmental commitments incorporated in the plans for that facility project. It is not possible to ascertain the extent to which the Corridor plan of finance will require federal funding for a particular facility, and it is possible that certain facilities within the Corridor may be financeable without federal participation. On the other hand, it is likely that federal funding will be necessary for one or more facilities, and it is therefore critical that eligibility for federal funding be maintained.

      TxDOT proposes, as an alternative process, that the FHWA decision to authorize use of federal funds for a specified facility within the Corridor be made following a request by TxDOT for project authorization. Such request would be submitted only after the final NEPA decision has been issued for the facility in question. During the period prior to project authorization, FHWA would be asked to review Corridor and facility procurement and contract documents, as well as the implementation plan and plan of finance for individual facilities, and to advise TxDOT that the documents are in acceptable form for purposes of eligibility for future federal funding. Before any Federal funds could be used for development of a facility, TxDOT would provide FHWA with appropriate evidence of price reasonableness as described in Exhibit D.

    4. Right-of-Way Certification, Utilities, Warranties and Subcontracting Clause

      a) FHWA's design-build rule requires a right-of-way certification to be provided prior to project authorization, which the rule states is considered to occur upon FHWA's approval of the request for proposals. The Corridor is not currently sufficiently defined to allow the right-of-way to be identified. Furthermore, TxDOT anticipates that right-of-way acquisitions would not commence until after completion of the Tier 1 NEPA process - which will not occur until after award of the CDA. It is therefore impossible for a certification to be provided before the RFDP is issued. As stated above, TxDOT is requesting that project authorization be deferred until after issuance of the final NEPA approval allowing construction to proceed. Since the FHWA rules require right-of-way certification to be provided before project authorization can be issued, the deferral of project authorization would automatically result in a deferral of the right-of-way certification requirement. However, TxDOT believes it is likely that the right-of-way boundaries will not be determined until a point even later in time than the date of the project authorization request. Accordingly, TxDOT proposes to include a description of the planned approach to right-of-way acquisition in the request for project authorization, and to provide right-of-way certifications prior to commencement of construction on the parcels in question.

      (b) The Federal-aid rules relating to reimbursement for utility relocations do not contemplate the CDA delivery methodology and have not been updated for consistency with FHWA's design-build rule. Specifically, pursuant to 23 CFR Section 645.115, Federal-aid funds may be used for payment of utility adjustment work included in a highway construction contract that has been procured through competitive bidding. The rules do not address the use of a best value selection process such as that described herein for selection of a contractor to perform utility adjustment work, nor do they address reimbursement of utility owners as a component of a highway contractor's scope of work.

      TxDOT anticipates that compensation payable to the developer for development of a Corridor facility would include compensation for the developer's utility adjustment expenses (which would include costs of design and construction of utility adjustments incurred by the developer, as well as any developer payments to utility owners as reimbursement for their expenses incurred). Accordingly, this application requests confirmation from FHWA that these utility adjustment duties may be included within a developer's scope of work, and that a best value selection process is acceptable for highway contractors performing utility adjustment work pursuant to a CDA delivery methodology. FHWA has previously issued approvals of similar approaches for other projects, including TxDOT's SH 130 project, the T-REX project in Colorado and the ReTRAC project in Reno, Nevada.

      In addition, TxDOT currently has an Alternate Procedure in place with respect to utilities, as authorized by FHWA under 23 CFR 645.119 in 1973. FHWA previously approved use of this Alternate Procedure for TxDOT's SH 130 project. TxDOT anticipates that utility adjustments in connection with the Corridor facilities will follow generally the same approach as the SH 130 project. Accordingly, this application constitutes a request for confirmation from FHWA that, to the extent that FHWA considers the procedural requirements of 23 CFR 645A applicable to the utility adjustment work associated with the Corridor, TxDOT's intended procedures are covered by the existing FHWA approval of the TxDOT Alternate Procedure.

      (ca) FHWA's design-build rule contains a maximum two-year limit on general warranties. TxDOT believes that obtaining a general warranty is a critical part of any design-build or CDA program, since the developer will have primary responsibility for developing certain facilities and should be held liable for defects in the completed products. A requirement to identify specific warranties requires a complicated exercise with an associated possibility of errors or omissions in the list of warranty requirements. Although TxDOT believes that two years should be sufficient to uncover obvious defects for most projects, certain facilities may require a longer-term general warranty. As an example, if the developer is given responsibility for operations and maintenance of the facility, it is likely that the owner will not become aware of defects until the operations and maintenance period expires. Also, a developer might offer a longer warranty than that required by the procurement documents, in which case TxDOT would want to be able to consider that offer in making the best value determination.

      Furthermore, it is possible that a long-term warranty may involve routine maintenance work as well as preventive maintenance. It may not be practical to separate the costs of routine maintenance from the costs of preventive maintenance.

      (db) FHWA's design-build rule modified 23 C.F.R. 635.116 to provide that the self-performance requirements do not apply to design-build contracts, but did not include authorization to allow State Transportation Departments to modify Form 1273 by deleting the conflicting portions of Section VII. TxDOT requests approval to make such modification.

      In addition, Section636.119 provides for the possibility that a developer may be treated as the agent of the awarding agency under certain circumstances, subject to the requirement to follow Federal-aid procurement requirements in selection of its subcontractors. TxDOT believes that it would be appropriate for is requesting an alternative approach. First, to the extent that FHWA wishes to apply this requirement to the program, TxDOT requests that the characterization of the TxDOT/developer relationship under 23 CFR 636.119(b) to be determined on a facility-by-facility basis, after the implementation plan and plan of finance have been established for each facility. Once that occurs, the CDA will be revised, or a separate agreement signed, that will contain "price and an assignment of risk" under 23 CFR 636.119(b)(1). Second, Although TxDOT may, under certain circumstances, wish to place restrictions on the process to be followed for subcontractor selection, TxDOT would prefer to have flexibility to determine appropriate restrictions on a case-by-case basis rather than subjecting the developer to rules that may be incompatible with the implementation plan for a facility. For example, the developer may want to award subcontracts to firms that are members of its team, or the developer may have an alternative plan for source selection that is incompatible with the procurement requirements applicable to Federal-aid grantees. Exhibit D hereto describes certain of the alternative approaches to subcontracting that may be taken in the CDA and supplemental agreements for development of facilities.

      In all cases, TxDOT will include provisions in the CDA to ensure that an appropriate approach is taken to subcontracting, and will submit the planned approach to FHWA in advance of execution of the CDA for review and a determination that it is satisfactory for further processing concurrence. FHWA would therefore have substantive input into the subcontracting requirements included in the CDA.

  7. MEASURES EVALUATION

    The Corridor procurement and development process, with its innovative features, will be evaluated on a range of factors, including:

    Time Savings. TxDOT will (1) compare the actual schedule for delivery of the Corridor with the estimated schedule based on a traditional procurement process, (2) evaluate the effect of the CDA process on delivery of the facilities, and (3) attempt to quantify the value of early completion.

    Innovation in Facility Development. TxDOT will analyze the type and nature of facilities developed through CDAs and the procurement approaches described in this application and compare those facilities with TxDOT's other projects.

    Innovation in Financing. TxDOT will analyze the financing structures and methods developed in connection with the Corridor and how those structures and methods compare to TxDOT's historical project financing structures and methods. As part of this analysis and comparison, TxDOT will particularly focus upon the levels of financing and project risk shifted to the private sector and strategies employed to minimize State and TxDOT risk.

    Innovation in Design and Construction. TxDOT will analyze innovative design and construction ideas and concepts used by the developer team, which evolve as a byproduct of the CDA process.

    Connectivity Improvement. A stated goal and critical component of the Trans Texas Corridor is to enhance and improve connectivity throughout the State. TxDOT will analyze the extent to which the I-35 facilities achieve that goal.

    Quality and Warranty. A key component of the Corridor will be the ultimate quality of the work and the strength of any warranties provided for delivered facilities.

    Responsiveness to Local Concerns. Because the multimodal nature of the Corridor is unprecedented, the developer will be required to work closely with the communities through which such facilities pass. TxDOT will evaluate the success of the process in responding to concerns.

  8. REPORTING
    TxDOT anticipates filing an initial report, periodic updates, a number of interim reports, a Corridor acceptance report and post-acceptance reports as described below:

    1. Initial Report: The initial report will be filed within 120 days after the execution of the CDA and will include a preliminary analysis of the CDA procurement. This report will:

      • Describe the process used to select the developer team;

      • Identify any reaction by the industry to use of the CDA concept;

      • Document major innovations contained in the proposals received; and

      • Discuss any major problems or issues that have occurred and how they were resolved.

    2. Updates: During the period following submittal of the initial report and prior to submittal of the final report, periodic updates will be submitted as appropriate. TxDOT anticipates that updates will be provided semi-annually during the initial phases of the CDA, describing the progress of the environmental analysis as well as the developer's activities relating to the Corridor.

    3. Interim Reports: Interim reports will not be prepared on a regular schedule but will be prepared as significant developments occur, describing (a) the progress of the development of the program/project as of such date, (b) problems encountered and how they have been addressed, (c) how any changes in the project resulting from the NEPA analysis and other permitting processes have been addressed in the CDA, and (d) how the time and cost needed to complete the initial development as of the date of the report compares to past experience under design-bid-build procurement procedures. Reports will be provided upon occurrence of the following milestones, among others:

      • Issuance of the final Tier I NEPA approval and the final Tier II approvals (this will involve multiple reports since the NEPA analysis will be tiered).

      • Establishment of a defined scope and price with guaranteed completion deadlines for design and construction of Corridor facilities.

      • Completion of Corridor facilities (separate reports will be provided for separate facilities within the Corridor).

    4. Corridor Acceptance Report: A Corridor acceptance report will be submitted within 180 days following TxDOT's determination that the development work under the CDA is complete. This report will:

      • Provide an overall evaluation of the CDA procurement and process for the development of the major facilities;
      • Provide an overall evaluation of the NEPA process for Corridor and individual facilities;
      • Evaluate the measures identified in Section G above;
      • Describe lessons learned, pitfalls to avoid and suggestions for improvements on future innovative procurements and approaches to NEPA reviews;
      • Document contract complications encountered and claims made during construction of the subject facility;
      • Indicate and evaluate innovations in design or construction.
    5. Post-Acceptance Reports: A post-acceptance report will be submitted at the end of the first two years of any long-term O&M or concession term, and at appropriate intervals thereafter. This report will:

      • Evaluate the overall quality and performance of the facility; Identify and evaluate warranties and document complications encountered during the period; Identify any cost- or time-intensive maintenance items and evaluate the manner and effectiveness of their resolution; Evaluate the overall safety and operation of the facility;
      • Evaluate design requirements in the completed facility and document any design adjustments that could improve quality; and
      • Evaluate the private sector's responsiveness as operator, maintenance provider and/or concessionaire, as applicable

CONCLUSION
TxDOT believes the procedures described herein will result in the successful development of the Corridor. We look forward to working with FHWA as the development progresses, and to providing you and others with the benefits of our experience.

EXHIBIT A

Minute Order and Trans Texas Corridor Plan
(attached)

EXHIBIT B

Relevant Provisions of H.B. No. 3588

CHAPTER 227. TRANS-TEXAS CORRIDOR

Sec. 227.001. DEFINITIONS. In this chapter:

(1) "Bond" has the meaning assigned by Title 9, Government Code.

(2) "Construction" includes extension, expansion, and improvement.

(3) "Credit agreement" has the meaning assigned by Title 9, Government Code.

(4) "Facility" means:

(A) a state highway;

(B) a turnpike;

(C) a freight or passenger railroad, including a commuter railroad, intercity railroad, and high-speed railroad;

(D) a public utility facility; or

(E) any structure that is reasonably necessary for the effective operation of a method of transportation, including an intermodal transfer or staging area, weigh station, inspection station, rest area, service station, restaurant, train or bus station, warehouse, freight interchange, switching yard, maintenance yard, and pipeline pumping station.

(4-a) "Facility" does not include a border inspection facility that serves a bridge that had more than 900,000 commercial border crossings during the fiscal year ending August 31, 2002.

(5) "Fee" includes any charge, toll, rent, lease payment, user fee, franchise fee, percentage fee, license fee, fare, tariff, or other consideration received in return for the use of:

(A) property that is part of the Trans-Texas Corridor;

(B) a facility on the Trans-Texas Corridor; or

(C) a service that is offered in connection with the Trans-Texas Corridor.

(6) "Operation" includes maintenance and repair.

(7) "Public utility facility" means:

(A) a water, wastewater, natural gas, or petroleum pipeline or associated equipment;

(B) an electric transmission or distribution line or associated equipment; or

(C) telecommunications, information services, or cable television infrastructure or associated equipment, including fiber optic cable, conduit, and wireless communications equipment.

(8) "Trans-Texas Corridor" means the statewide system of facilities designated by the commission under this chapter.

(9) "Turnpike" has the meaning assigned to turnpike project under Section 361.001.

Sec. 227.023. PARTICIPATION BY PRIVATE ENTITIES.

(a) To the maximum extent practical and economical, the department shall encourage the participation of private entities in the planning, design, construction, and operation of facilities.

(b) The department shall contract with a private entity to operate a railroad using rail facilities owned by the department and may not use department employees to operate a railroad. The department may maintain a rail facility directly or through a private entity.

(c) To the extent and in the manner that the department may enter into comprehensive development agreements under Chapter 361 with regard to turnpikes, the department may enter into comprehensive development agreements under this chapter with regard to facilities on the Trans-Texas Corridor. All provisions of Chapter 361 relating to comprehensive development agreements for turnpikes apply to comprehensive development agreements for facilities under this chapter, including provisions relating to the confidentiality of information. Claims arising under a comprehensive development agreement are subject to Section 201.112.

CHAPTER 361. STATE HIGHWAY TURNPIKE PROJECTS

SUBCHAPTER I. PARTICIPATION IN TURNPIKE PROJECTS

Sec. 361.301. AGREEMENTS WITH PUBLIC OR PRIVATE ENTITIES TO CONSTRUCT, MAINTAIN, REPAIR, AND OPERATE TURNPIKE PROJECTS.

(a) Notwithstanding Section 361.231 and Subchapter A, Chapter 2254, Government Code, the department may enter into an agreement with a public or private entity, including a toll road corporation, to permit the entity, independently or jointly with the department, to construct, maintain, repair, and operate turnpike projects.

(b) The department may authorize the investment of public and private money, including debt and equity participation, to finance a function described by this section.

Sec. 361.302. COMPREHENSIVE DEVELOPMENT AGREEMENTS.

(a) Subject to Section 361.3021, the department may enter into a comprehensive development agreement with a private entity to construct, maintain, repair, operate, extend, or expand a turnpike project.

(b) In this subchapter, "comprehensive development agreement" means an agreement with a private entity that, at a minimum, provides for the design and construction of a turnpike project and may also provide for the financing, acquisition, maintenance, or operation of a turnpike project.

(c) The department may negotiate provisions relating to professional and consulting services provided in connection with a comprehensive development agreement.

(d) Money disbursed by the department under a comprehensive development agreement is not included in the amount:

(1) required to be spent in a biennium for engineering and design contracts under Section 223.041; or

(2) appropriated in Strategy A.1.1. Plan/Design/Manage of the General Appropriations Act for that biennium for the purpose of making the computation under Section 223.041.

(e) The authority to enter into comprehensive development agreements provided by this section expires on August 31, 2011.

Sec. 361.3021. LIMITATION ON DEPARTMENT FINANCIAL PARTICIPATION. The amount of money disbursed by the department from the state highway fund and the Texas mobility fund during a federal fiscal year to pay the costs under comprehensive development agreements may not exceed 40 percent of the obligation authority under the federal-aid highway program that is distributed to this state for the fiscal year.

Sec. 361.3022. PROCESS FOR ENTERING INTO COMPREHENSIVE DEVELOPMENT AGREEMENTS.

(a) If the department enters into a comprehensive development agreement, the department shall use a competitive procurement process that provides the best value for the department. The department may accept unsolicited proposals for a proposed project or solicit proposals in accordance with this section.

(b) The department shall establish rules and procedures for accepting unsolicited proposals that require the private entity to include in the proposal:

(1) information regarding the proposed project location, scope, and limits;

(2) information regarding the private entity's qualifications, experience, technical competence, and capability to develop the project; and

(3) a proposed financial plan for the proposed project that includes, at a minimum:

(A) projected project costs; and

(B) proposed sources of funds.

(c) The department shall publish a request for competing proposals and qualifications in the Texas Register that includes the criteria used to evaluate the proposals, the relative weight given to the criteria, and a deadline by which proposals must be received if:

(1) the department decides to issue a request for qualifications for a proposed project; or

(2) the department authorizes the further evaluation of an unsolicited proposal.

(d) A proposal submitted in response to a request published under Subsection (c) must contain, at a minimum, the information required by Subsections (b)(2) and (3).

(e) The department may interview a private entity submitting an unsolicited proposal or responding to a request under Subsection (c). The department shall evaluate each proposal based on the criteria described in the notice. The department must qualify at least two private entities to submit detailed proposals for a project under Subsection (f) unless the department does not receive more than one proposal or one response to a request under Subsection (c).

(f) The department shall issue a request for detailed proposals from all private entities qualified under Subsection (e) if the department proceeds with the further evaluation of a proposed project. A request under this subsection may require additional information relating to:

(1) the private entity's qualifications and demonstrated technical competence;

(2) the feasibility of developing the project as proposed;

(3) detailed engineering or architectural designs;

(4) the private entity's ability to meet schedules;

(5) costing methodology; or

(6) any other information the department considers relevant or necessary.

(g) In issuing a request for proposals under Subsection (f), the department may solicit input from entities qualified under Subsection (e) or any other person. The department may also solicit input regarding alternative technical concepts after issuing a request under Subsection (f).

(h) The department shall rank each proposal based on the criteria described in the request for proposals and select the private entity whose proposal offers the apparent best value to the department.

(i) The department may enter into discussions with the private entity whose proposal offers the apparent best value. The discussions shall be limited to:

(1) incorporation of aspects of other proposals for the purpose of achieving the overall best value for the department;

(2) clarifications and minor adjustments in scheduling, cash flow, and similar items; and

(3) matters that have arisen since the submission of the proposal.

(j) If at any point in discussions under Subsection (i), it appears to the department that the highest ranking proposal will not provide the department with the overall best value, the department may enter into discussions with the private entity submitting the next-highest ranking proposal.

(k) The department may withdraw a request for competing proposals and qualifications or a request for detailed proposals at any time. The department may then publish a new request for competing proposals and qualifications.

(l) The department may require that an unsolicited proposal be accompanied by a nonrefundable fee sufficient to cover all or part of its cost to review the proposal.

(m) The department shall pay an unsuccessful private entity that submits a response to a request for detailed proposals under Subsection (f) a stipulated amount of the final contract price for any costs incurred in preparing that proposal. The stipulated amount must be stated in the request for proposals and may not exceed the value of any work product contained in the proposal that can, as determined by the department, be used by the department in the performance of its functions. The use by the department of any design element contained in an unsuccessful proposal is at the sole risk and discretion of the department and does not confer liability on the recipient of the stipulated amount under this section. After payment of the stipulated amount:

(1) the department owns with the unsuccessful proposer jointly the rights to, and may make use of any work product contained in, the proposal, including the technologies, techniques, methods, processes, and information contained in the project design; and

(2) the use by the unsuccessful proposer of any portion of the work product contained in the proposal is at the sole risk of the unsuccessful proposer and does not confer liability on the department.

(n) The department may prescribe the general form of a comprehensive development agreement and may include any matter the department considers advantageous to the department. The department and the private entity shall finalize the specific terms of a comprehensive development agreement.

(o) Subchapter A, Chapter 223, and Chapter 2254, Government Code, do not apply to a comprehensive development agreement entered into under Section 361.302.

Sec. 361.3023. CONFIDENTIALITY OF INFORMATION RELATING TO COMPREHENSIVE DEVELOPMENT AGREEMENTS.

(a) To encourage private entities to submit proposals under Section 361.3022, the following information is confidential, is not subject to disclosure, inspection, or copying under Chapter 552, Government Code, and is not subject to disclosure, discovery, subpoena, or other means of legal compulsion for its release until a final contract for a proposed project is entered into:

(1) all or part of a proposal that is submitted by a private entity for a comprehensive development agreement, except information provided under Section 361.3022(b)(1) and (2);

(2) supplemental information or material submitted by a private entity in connection with a proposal for a comprehensive development agreement; and

(3) information created or collected by the department or its agent during consideration of a proposal for a comprehensive development agreement.

(b) After the department completes its final ranking of proposals under Section 361.3022(h), the final rankings of each proposal under each of the published criteria are not confidential.

Sec. 361.3024. PERFORMANCE AND PAYMENT SECURITY.

(a) Notwithstanding Section 223.006 and the requirements of Subchapter B, Chapter 2253, Government Code, the department shall require a private entity entering into a comprehensive development agreement under Section 361.302 to provide a performance and payment bond or an alternative form of security in an amount sufficient to:

(1) ensure the proper performance of the agreement; and

(2) protect:

(A) the department; and

(B) payment bond beneficiaries who have a direct contractual relationship with the private entity or a subcontractor of the private entity to supply labor or material.

(b) A performance and payment bond or alternative form of security shall be in an amount equal to the cost of constructing or maintaining the project.

(c) If the department determines that it is impracticable for a private entity to provide security in the amount described by Subsection (b), the department shall set the amount of the bonds or the alternative forms of security.

(d) A payment or performance bond or alternative form of security is not required for the portion of an agreement that includes only design or planning services, the performance of preliminary studies, or the acquisition of real property.

(e) The amount of the payment security must not be less than the amount of the performance security.

(f) In addition to performance and payment bonds, the department may require the following alternate forms of security:

(1) a cashier's check drawn on a financial entity specified by the department;

(2) a United States bond or note;

(3) an irrevocable bank letter of credit; or

(4) any other form of security determined suitable by the department.

(g) The department by rule shall prescribe requirements for alternate forms of security provided under this section.

Sec. 361.303. OWNERSHIP OF TURNPIKE PROJECT.

(a) A turnpike project that is the subject of a comprehensive development agreement with a private entity, including the facilities acquired or constructed on the project, is public property and belongs to the department.

(b) Notwithstanding Subsection (a), the department may enter into an agreement that provides for the lease of rights-of-way, the granting of easements, the issuance of franchises, licenses, or permits, or any lawful uses to enable a private entity to construct, operate, and maintain a turnpike project, including supplemental facilities. At the termination of the agreement, the turnpike project, including the facilities, is to be in a state of proper maintenance as determined by the department and shall be returned to the department in satisfactory condition at no further cost.

Sec. 361.304. LIABILITY FOR PRIVATE OBLIGATIONS. The department may not incur a financial obligation for a private entity that constructs, maintains, or operates a turnpike project. The state or a political subdivision of the state is not liable for any financial or other obligations of a turnpike project solely because a private entity constructs, finances, or operates any part of the project.

Sec. 361.305. TERMS OF PRIVATE PARTICIPATION.

(a) The department shall negotiate the terms of private participation in a turnpike project, including:

(1) methods to determine the applicable cost, profit, and project distribution between the private equity investors and the department;

(2) reasonable methods to determine and classify toll rates;

(3) acceptable safety and policing standards; and

(4) other applicable professional, consulting, construction, operation, and maintenance standards, expenses, and costs.

(b) A comprehensive development agreement entered into under Section 361.302 must include a provision authorizing the department to purchase, under terms and conditions agreed to by the parties, the interest of a private equity investor in a turnpike agreement.

(c) The department may only enter into a comprehensive development agreement under Section 361.302 with a private equity investor if the project is identified in the department's unified transportation program or is located on a transportation corridor identified in the statewide transportation plan.

Sec. 361.306. RULES, PROCEDURES, AND GUIDELINES GOVERNING SELECTION AND NEGOTIATING PROCESS.

(a) The commission shall adopt rules, procedures, and guidelines governing selection and negotiations to promote fairness, obtain private participants in turnpike projects, and promote confidence among those participants. The rules must contain criteria relating to the qualifications of the participants and the award of the contracts.

(b) The department shall have up-to-date procedures for participation in negotiations on turnpike projects.

(c) The department has exclusive judgment to determine the terms of an agreement.

(d) The department shall include the attorney general or the attorney general's designated representative in a negotiation with a private participant.

Sec. 361.307. AGREEMENTS WITH PRIVATE ENTITIES AND OTHER GOVERNMENTAL AGENCIES.

(a) The department and a private entity jointly may enter into an agreement with another governmental agency or entity, including a federal agency, an agency of this or another state, including the United Mexican States or a state of the United Mexican States, or a political subdivision, to independently or jointly provide services, to study the feasibility of a turnpike project, or to finance, construct, operate, and maintain a turnpike project.

(b) The department may not enter into an agreement with the United Mexican States or a state of the United Mexican States without the approval of the governor.

Relevant Provisions of TxDOT Rules

CHAPTER 24. TRANS-TEXAS CORRIDOR

SUBCHAPTER B. DEVELOPMENT OF FACILITIES

Sec. 24.11. Comprehensive Development Agreements.

(a) To the extent and in the manner that the department may enter into comprehensive development agreements with respect to turnpike projects under §§27.1-27.5 of this title (relating to Policy, Rules, and Procedures for Private Involvement in Department Turnpike Projects), the department may enter into comprehensive development agreements for the financing, design, construction, maintenance, or operation of a facility on the Trans-Texas Corridor.

(b) The department shall utilize the processes and procedures provided in §§27.1-27.5 of this title when considering the use of a comprehensive development agreement, including when:

(1) requesting qualifications and proposals or accepting unsolicited proposals for the financing, design, construction, maintenance, or operation of a facility;

(2) evaluating and ranking submissions and proposals; and

(3) selecting the proposal that provides the best value to the department.

(c) The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Facility--Has the meaning assigned by Transportation Code, §227.001(4).

(2) Trans-Texas Corridor--The system of multimodal facilities designated under Transportation Code, §227.011.

CHAPTER 27. TOLL PROJECTS

SUBCHAPTER A. POLICY, RULES, AND PROCEDURES FOR PRIVATE INVOLVEMENT IN DEPARTMENT TURNPIKE PROJECTS

Sec. 27.1. Statement of Policy.

(a) It is the policy of the department to consider the feasibility of private involvement in every turnpike project it undertakes. The objectives of this policy are to:

(1) expand the scope of turnpike projects studied;

(2) accelerate the construction and completion of turnpike projects;

(3) reduce the overall costs of a turnpike project; and

(4) maximize the benefits of turnpike project facilities.

(b) To encourage private participation, the department may issue requests for proposals from private entities to acquire, design, finance, construct, maintain, or operate turnpike projects under a comprehensive development agreement. The department will also accept unsolicited proposals from private entities to acquire, design, finance, construct, maintain, or operate turnpike projects under a comprehensive development agreement, and will evaluate those proposals in accordance with these rules and the Turnpike Act. The department will consider the extent to which private involvement in existing and future turnpike projects of the department is practicable and beneficial, and will analyze whether department participation is practicable and beneficial with respect to projects proposed by responsible private parties. The department may formulate selection criteria for its use in considering the private entities with which the department may contract to undertake responsibilities for its projects, as well as for evaluation of projects suggested to the department as suitable for private participation.

(c) These rules apply to private involvement in the acquisition, design, financing, construction, maintenance, or operation of all or substantially all of a turnpike project or of multiple turnpike projects. These rules are not intended to limit or otherwise apply to the department's procurement of goods and services in the ordinary course of its operations, for which the department may seek private participation in accordance with the Turnpike Act and other applicable laws, rules, and policies.

Sec. 27.2. Definitions.

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Commission--The Texas Transportation Commission.

(2) Comprehensive development agreement--An agreement with a private entity that, at a minimum, provides for the design and construction of a turnpike project and may also provide for the financing, acquisition, maintenance, or operation of a turnpike project.

(3) Department--The Texas Department of Transportation.

(4) Design--Includes planning services, technical assistance, and technical studies provided in support of the environmental review process undertaken with respect to a turnpike project, as well as surveys, investigations, the development of reports, studies, plans and specifications, and other professional services provided for a project.

(5) Proposal review fee--A fee prescribed by these rules that must be tendered with any unsolicited proposal or with any proposal submitted under §27.5(d) of this subchapter.

(6) Request for proposals --A request for submittal of a detailed proposal from private entities to acquire, design, finance, construct, maintain, or operate turnpike projects pursuant to the Turnpike Act.

(7) Request for qualifications--A request for submission by a private entity of a description of that entity's experience, technical competence, and capability to complete a proposed project, and a proposed financial plan for the proposed project.

(8) Turnpike Act--Transportation Code, Chapter 361.

(9) Turnpike project--A toll highway constructed, maintained or operated under Transportation Code, Chapter 361 as part of the state highway system and any improvement, extension or expansion to the highway, including:

(A) a facility to relieve traffic congestion and promote safety;

(B) a bridge, tunnel, overpass, underpass, interchange, entrance plaza, approach, toll house, service road, ramp, or service station;

(C) an administration, storage, or other building the department considers necessary to operate the project;

(D) property rights, easements and interests the department acquires to construct or operate the project;

(E) a parking area or structure, rest stop, park, and any other improvement or amenity the department considers necessary, useful, or beneficial for the operation of a turnpike project; and

(F) a toll-free facility that is appurtenant to and necessary for the efficient operation of a turnpike project, including a service road, access road, ramp, interchange, bridge, or tunnel.

Sec. 27.3. General Rules for Private Involvement.

(a) The rules in this subchapter address the manner by which the department intends to evaluate submissions received from private entities in response to requests for qualifications and proposals issued by the department, as well as unsolicited proposals received by the department. The department reserves all rights available to it by law in administering these rules, including without limitation the right in its sole discretion to:

(1) withdraw a request for qualifications or a request for proposals at any time, and issue a new request;

(2) reject any and all proposals, whether solicited or unsolicited, at any time;

(3) terminate evaluation of any and all proposals, whether solicited or unsolicited, at any time;

(4) issue a request for qualifications relating to a project described in an unsolicited proposal after the rejection or termination of the evaluation of the proposal and any competing proposals;

(5) suspend, discontinue, or terminate comprehensive development agreement negotiations with any proposer at any time prior to the actual authorized execution of such agreement by all parties;

(6) negotiate with a proposer without being bound by any provision in its proposal, whether solicited or unsolicited;

(7) request or obtain additional information about any proposal, whether solicited or unsolicited;

(8) modify, issue addenda to, or cancel any request for qualifications or request for proposals;

(9) revise, supplement, or make substitutions for all or any part of these rules; or

(10) retain or return all or any portion of the fees required to be paid by proposers under this subchapter.

(b) Except as provided in §27.4(n) of this subchapter, under no circumstances will the state, the department, or any of their agents, representatives, consultants, directors, officers or employees be liable for, or otherwise obligated to reimburse, the costs incurred by proposers, whether or not selected for negotiations, in developing solicited or unsolicited proposals or in negotiating agreements. Any and all information the department makes available to proposers shall be as a convenience to the proposer and without representation or warranty of any kind except as may be specified in the request for qualifications or request for proposals. Proposers may not rely upon any oral responses to inquiries. If a proposer has a question regarding these rules or any request for qualifications or request for proposals issued by the department, the proposer must submit the question in writing to the person responsible for receiving all submissions and the department will provide the answers in writing. In submitting any proposal, whether solicited or unsolicited, the proposer shall be deemed to have unconditionally and irrevocably consented and agreed to the foregoing provisions and all other provisions of these rules.

(c) All proposals, whether solicited or unsolicited, submitted to the department become the property of the department and may be, except as provided by Transportation Code, §361.3023, subject to the Public Information Act, Government Code, Chapter 552. Proposers should familiarize themselves with the provisions of Transportation Code, §361.3023 and the Public Information Act. In no event shall the state, the department, or any of their agents, representatives, consultants, directors, officers, or employees be liable to a proposer for the disclosure of all or a portion of a proposal submitted under this subchapter. If the department receives a request for public disclosure of all or any portion of a proposal, the department will notify the applicable proposer of the request and inform such proposer that it has an opportunity to assert, in writing, a claimed exception under the Public Information Act or other applicable law within the time period specified in the department's notice and allowed under the Public Information Act. If a proposer has special concerns about information it desires to make available to the department, but which it believes constitutes a trade secret, proprietary information or other information excepted from disclosure, the proposer should specifically and conspicuously designate that information as such in its proposal.

(d) A nonrefundable and nonnegotiable proposal review fee may be required for any unsolicited proposal submitted under this subchapter or for any proposal submitted under §27.5(d) of this subchapter. The proposal review fee shall be applied by the department to offset the cost of processing and reviewing the applicable proposals. Any unsolicited proposal must be accompanied by a proposal review fee of $20,000. The proposal review fee for any proposal submitted during the period described in §27.5(d) of this subchapter shall be $20,000, unless otherwise expressly provided in the department's notice described in that section. Failure to submit the required proposal review fee, if any, shall bar the department's consideration of the applicable proposal. All fees shall be submitted in the form of a cashier's check made payable to the department.

(e) All proposals, whether solicited or unsolicited, should be as thorough and detailed as possible so that the department may properly evaluate the potential feasibility of the proposed project as well as the capabilities of the proposer and its team members to provide the proposed services and complete the proposed project.

(f) Studies that the department deems necessary as to route designation, civil engineering, traffic and revenue, environmental compliance, and any other matters will be assigned, conducted, and paid for as negotiated between the department and the successful proposer and set forth in the comprehensive development agreement or in any separate contract for consultant services. Unless otherwise provided in the request for proposals issued with respect to a solicited proposal, the department will favor proposals, whether solicited or unsolicited, in which the costs for studies will be advanced by the private developer. The department reserves the right to discharge, in whole or in part, the costs for such studies in its sole discretion and pursuant to the Turnpike Act. The department may require that the financial plan for each proposal, whether solicited or unsolicited, provide for reimbursement of all related expenses incurred by the department, as well as any department study funds utilized, in connection with the project.

(g) The department, in its sole discretion, may authorize the successful proposer to seek licensing, permitting, approvals, and participation required from other governmental entities and private parties, subject to such oversight and review by the department as specified in the comprehensive development agreement or in any separate contract for consultant services.

(h) The department may solicit proposals or accept unsolicited proposals in which the proposer is responsible for providing assistance in the environmental review and clearance of the proposed project, including the preparation of environmental impact assessments and analyses and the provision of technical assistance and technical studies to the department or its environmental consultant relating to the environmental review and clearance of the proposed project. The environmental review and the documentation of that review shall at all times be conducted as directed by the department and subject to the oversight of the department, and shall comply with all requirements of state and federal law, applicable federal regulations, and the National Environmental Policy Act (42 U.S.C. §4321 et seq.), if applicable, including but not limited to the study of alternatives to the proposed project and any proposed alignments, procedural requirements, and the completion of any and all environmental documents required to be completed by the department and any federal agency acting as a lead agency. The department:

(1) shall determine the scope of work to be performed by the private developer or its consultant or subcontractor;

(2) shall specify the level of design, alternatives to be reviewed, impacts to consider, and other information to be provided by the private developer or its consultant or subcontractor; and

(3) shall independently review any studies and conclusions reached by the private developer or its consultant or subcontractor before their inclusion in an environmental document.

(i) Completion of the environmental review is required before the private developer may be authorized to conduct and complete the final design and start construction of a project. Additionally, all applicable state and federal environmental permits and approvals must be obtained before the private developer may start construction of a project. Unless and until that occurs, the department is not bound to any further development of the project. The department and any federal agency acting as a lead agency may select an alternative other than the one in the proposed project, including but not limited to the "no-build" alternative. A comprehensive development agreement shall provide that the agreement will be modified as necessary to address requirements in the final environmental documents, and shall provide that the agreement may be terminated if the "no-build" alternative is selected or if another alternative is selected that is incompatible with the requirements of the agreement.

(j) All public meetings or hearings required to be held pursuant to applicable law or regulation will be directed and overseen by the department, with participation by such other parties as it deems appropriate.

(k) Any matter not specifically addressed in this subchapter which pertains to the acquisition, design, financing, construction, maintenance, or operation of a turnpike project pursuant to this subchapter shall be deemed to be within the primary purview of the commission, and all decisions pertaining thereto, whether or not addressed in this subchapter, shall be as determined by the commission, subject to the provisions of the Turnpike Act and other applicable law.

Sec. 27.4. Solicited Proposals.

(a) If the department develops a concept for private participation in a turnpike project, it will solicit participation in accordance with the requirements of this section.

(b) The department will set forth the basic criteria for professional expertise, financial capability, and end-product expectations in a request for qualifications and will publish it at a minimum in the Texas Register and in one or more newspapers of general circulation in this state. The department may also elect to furnish the request for qualifications to businesses in the private sector that the department otherwise believes might be interested and qualified to participate in the turnpike project which is the subject of the request for qualifications.

(c) At its sole option, the department may elect to furnish conceptual designs, fundamental details, or detailed plans of the proposed project in the request for qualifications.

(d) The request for qualifications may request one or more conceptual approaches to bring the turnpike project to fruition. The request for qualifications shall request a proposed financial plan for the project that includes projected project costs and proposed sources of funds.

(e) The department, after evaluating the submissions received in response to a request for qualifications, will identify those entities that will be considered qualified to submit detailed proposals for a proposed project. In evaluating the submissions, the department will consider each entity's financial condition, management stability, technological capability, experience, staffing, organizational structure, project commitment, and such other qualities that the department considers relevant to the successful completion of the project. The request for qualifications will include the criteria used to evaluate the submissions and the relative weight given to the criteria. The department shall advise each entity providing a submission whether it is on the "short-list" of qualified entities.

(f) The department will issue a request for proposals from all private entities qualified for the short-list, consisting of the submission of detailed documentation regarding the turnpike project. The request for proposals may require the submission of additional information relating to:

(1) the proposer's qualifications and demonstrated technical competence;

(2) the feasibility of developing the project as proposed;

(3) detailed engineering or architectural designs;

(4) the proposer's ability to meet schedules;

(5) a detailed financial plan, including costing methodology; or

(6) any other information the department considers relevant or necessary.

(g) If the department solicits proposals in which an entity affiliated with the private developer will act as the department's environmental consultant for the proposed project, the request for proposals may require the submission of a consolidated joint proposal from the private developer and the environmental consultant or subcontractor that results in a comprehensive development agreement and separate contract for environmental services.

(h) The proposals will be evaluated by the department as to their feasibility (including the reasonableness of the financial plan), realistic time frame, assumptions (including those related to ownership, legal liability, law enforcement and operation of the project), forecasts, financial exposure and benefit to the department, compatibility with other planned or existing transportation facilities, likelihood of obtaining necessary approvals and other support, cost and pricing, toll rates and projected usage, scheduling, environmental impact, manpower availability, use of technology, governmental liaison, and project coordination, with attention to efficiency, quality of finished product and such other criteria, including conformity with department policies, guidelines and standards, as may be deemed appropriate by the department to maximize the overall performance of the project and the resulting benefits to the state. Specific evaluation criteria and requests for pertinent information will be set forth in the request for proposals.

(i) Based on the evaluation and the evaluation criteria described under subsection (h) of this section, the department will rank all proposals that are complete, responsive to the request for proposals, and in conformance with the requirements of this subchapter, and may select the private entity whose proposal offers the apparent best value to the department. If the request for proposals provides for a consolidated joint proposal to be submitted for a separate environmental consultant contract as well as the comprehensive development agreement, the request for proposals shall specify how the two parts of the proposal will be evaluated in making the overall best value determination. The proposers will be notified in writing of the department's rankings. The department shall also make the rankings available to the public.

(j) Final selection of any proposal will be dependent, in part, on the adequacy of the financial plan presented in that proposal. The department will review the adequacy of the financial plan presented in the proposal and determine if it is based on reasonable financial assumptions.

(k) Only if a proposal is determined to be financially feasible and to provide a reasonable basis for further development of the proposal will the department then attempt to negotiate a comprehensive development agreement with that party to construct, maintain, repair, or operate the turnpike project and (if included in the request for proposals) an environmental consultant contract. The Attorney General or the Attorney General's designated representative will be included in the negotiations with the proposer. If a comprehensive development agreement satisfactory to the department cannot be negotiated with that proposer, the department will formally end negotiations with that proposer and, in its sole discretion, either:

(1) reject all proposals;

(2) terminate or suspend the evaluation of all proposals;

(3) cancel the request for proposals;

(4) modify the request for proposals and begin again the submission of proposals; or

(5) proceed to the next most highly ranked proposal and attempt to negotiate a comprehensive development agreement with that party in accordance with this paragraph.

(l) If an environmental consultant contract satisfactory to the department cannot be negotiated with the selected consultant, the department may elect to terminate negotiations and proceed with the negotiation of the comprehensive development agreement only.

(m) If during the course of negotiations with the highest ranking proposer it appears that the proposal will not provide the department with the overall best value, the department may enter into negotiations with the proposer submitting the next highest ranking proposal.

(n) The request for proposals shall, as authorized under Transportation Code, §361.3022(m) and other applicable law, stipulate the amount of money the department will pay to an unsuccessful proposer that submits a detailed proposal that is responsive to the requirements of the request for proposals.

Sec. 27.5. Unsolicited Proposals.

(a) Private entities may submit unsolicited proposals to the department requesting participation in a turnpike project to be constructed pursuant to the Turnpike Act. Unsolicited proposals that comply with the requirements of this section shall be processed in accordance with the requirements of this section.

(b) A proposal requesting department participation in a proposed turnpike project shall be filed with the department and must include the following information:

(1) the limits, scope, and location of the proposed project, including all proposed interconnections with other transportation facilities;

(2) the results expected from project implementation and the critical factors for the project's success;

(3) all studies previously completed concerning the project;

(4) complete information concerning the experience, expertise, technical competence, and qualifications of the proposer and of each member of the proposer's management team and of other key employees or consultants, including the name, address, and professional designation of each member of the proposer's management team and of other key employees or consultants, the capability of the proposer to develop the proposed project, and information responsive to the evaluation criteria listed in §27.4(e) of this subchapter;

(5) a proposed financial plan for the proposed project that includes, at a minimum, projected project costs and proposed sources of funds;

(6) a specific description of the level and nature of participation sought from the department;

(7) information necessary for the department to carry out its environmental review responsibilities under §27.3(h) and (i) of this subchapter;

(8) a listing of anticipated opponents and a description of potential social, economic, and environmental impacts, and potentially competing facilities and proposers;

(9) other information of probable interest to the department; and

(10) the proposal review fee of $20,000 in the form prescribed by §27.3(d) of this subchapter.

(c) Any proposal properly filed with the department in accordance with subsection (b) of this section and accompanied by the proper proposal review fee will be reviewed by the department. The department may meet with the proposer as necessary to clarify the proposal, or may issue requests for clarification. Based on that review and any clarification, an initial recommendation will be made to the commission as to whether the department should further evaluate its requested participation in the applicable turnpike project. That recommendation shall be based on whether the proposed project:

(1) is compatible with existing and planned transportation facilities; and

(2) furthers state, regional, and local transportation plans, programs, policies, and goals, as well as the proposal's responsiveness to such other evaluation criteria as the department deems relevant.

(d) If the initial recommendation is that the department further evaluates its requested participation in the applicable turnpike project and the commission approves that recommendation, the department will publish notice of that decision and provide an opportunity for the submission of competing proposals and qualifications as provided in this section. The department will publish a notice in the Texas Register and in one or more newspapers of general circulation in this state. The notice will state that the department has received an unsolicited proposal under these rules and the Turnpike Act, that it intends to evaluate the proposal, that it may negotiate a comprehensive development agreement with the proposer based on the proposal, and that it will accept for simultaneous consideration any competing proposals and qualifications that the department receives in accordance with these rules within 45 days of the initial publication of the notice in the Texas Register, or such additional time as authorized by commission order. In determining whether to authorize additional time for submission of competing proposals and qualifications, the commission will consider the complexity of the proposed project. The notice will summarize the proposed turnpike project, identify its proposed location and interconnections with other transportation facilities, and provide a conceptual design. The department also may provide traffic counts, forecasts, and other available data either in the notice or upon request of any party responding to the notice. The notice will also specify the criteria that will be used to evaluate the unsolicited proposal and any competing proposals, and the relative weight given to the criteria. A proposal submitted in response to a notice must contain the information required by subsection (b) of this section.

(e) Failure by a prospective proposer to submit a competing proposal, together with the proper proposal review fee in the form prescribed by §27.3(d) of this subchapter, within the 45-day period or such additional time as authorized by the commission, shall preclude the proposal from consideration by the department unless and until the department terminates consideration of, or negotiations on, the original unsolicited proposal and any and all competing proposals received within that time period. The department will not grant requests to extend the time period to submit competing proposals; and the receipt of one or more competing proposals during that period will not trigger the posting or publication of a new notice or the commencement of any new time period.

(f) The department recognizes that it may receive proposals that have certain characteristics in common with the original unsolicited proposal, yet differ in other material respects. In those cases, the department reserves the right, in its sole discretion, to treat such a proposal as either a competing proposal or a noncompeting proposal. Because of the consequences to a proposer of failing to submit a proposal that the department could later deem a competing proposal within the 45-day period, or such additional time as authorized by the commission, prospective proposers are strongly urged to monitor the department's notices of unsolicited proposals received, and be prepared to submit within that time period if they perceive that a proposal they are considering or are preparing bears certain similarities to, or has characteristics in common with, an unsolicited proposal which is the subject of a notice.

(g) Upon the expiration of the 45-day period, or such additional time as authorized by the commission, the department will subject the original unsolicited proposal, together with any and all properly submitted competing proposals, to the following evaluation process. If one or more properly submitted competing proposals are received, the department shall review the proposals, together with the original unsolicited proposal, utilizing the evaluation criteria set forth in §27.4(e) of this subchapter and the request for competing proposals and qualifications, and the information specified in subsection (b) of this section. The department will identify those proposers that will be considered qualified to submit detailed proposals for the proposed project, and the process will proceed in the manner described in §27.4(e)-(n) of this subchapter.

(h) If no properly submitted competing proposal is received, the department will request a detailed proposal containing the information described in §27.4(f) of this subchapter from the proposer submitting the original unsolicited proposal, and will proceed, to the extent applicable, in the manner described in §27.4(g)-(n) of this subchapter.

U.S. Department of Transportation
Federal Highway Administration

Virginia Division Office
(804)775-3320

400 N. 8th Street Rm. 750
P.O. Box 1024
Richmond, Virginia 23240

May 6, 2003

Malcolm T. Kerley, P.E.
Chief Engineer for Program Development
Virginia Department of Transportation
1401 East Broad St.
Richmond, VA 23219

Subject: I-81 Public Private Transportation Act (PPTA) Proposals

Dear Mr. Kerley:

We have reviewed the series of questions regarding the I-81 PPTA proposals that were submitted with your March 7 letter. One additional question was added (as #G13) as a result of discussions at the March 19, 2003 Commonwealth Transportation Board workshop.

We have coordinated the enclosed responses with our Headquarters office, which included a review by our Office of the Chief Counsel. If any other questions arise, please feel free to contact me.

Sincerely yours,

/s/ Roberto Fonseca-Martinez

Roberto Fonseca-Martinez
Division Administrator

EXHIBIT A

VDOT Questions Regarding I-81 PPTA Proposals

General

G1. Is there a national precedent in which a construction contractor completed a NEPA document, which was then passed through the SHA to FHWA for approval? What methods were employed by the SHA to ensure objectivity?

FHWA Response: At the outset, FHWA wants to emphasize that completing a NEPA document is not simply an analytical exercise. Intertwined in the process of preparing a NEPA document are key public sector decision points and interactions with Federal and state agencies. For example, early in the NEPA process, it is essential to involve other Federal and state agencies in scoping, to identify the full range of potential environmental impacts for analysis and establish the purpose and need for the project, the range of alternatives to be analyzed, and analytical methodologies to be used (e.g., the extent of analysis for secondary and cumulative impacts). For a major highway project, these are not simply analytical exercises that a private entity can undertake on its own.

For this reason, the SHA must provide direction and oversight over any actual NEPA document. As a general rule, construction contractors are free to provide information and analyses which the SHA can consider using in the NEPA document. FHWA is aware of several cases where a highway construction contractor has submitted extensive environmental analysis to a SHA that, in turn, was used by the SHA in finalizing its independent NEPA document. The SHA can ensure objectivity by carefully documenting that the SHA's in-house experts, or consultant advisers retained by or on behalf of the State, have directed and maintained oversight over the preparation of the actual NEPA document. The work of such consultant advisors must be controlled by the State rather than the entity seeking to construct the project, and otherwise be in accord with 40 C.F.R. §1506.5(c), as modified by 23 U.S.C. §112(g).

G2. Will FHWA allow a contractor to complete both NEPA and the design for a project?

FHWA Response: No and yes. As noted above, a private sector entity cannot simply complete the NEPA document on its own. However, a consultant may work on the NEPA documentation and also do follow-up design work. This can be done under separate contracts for NEPA and design work (the State and FHWA Division Office may agree that this is the preferred approach) or under a single contract. Section 112(g), 23 U.S.C., allows a State to procure, under a single contract, the services of a consultant to prepare environmental documents for a project as well as subsequent engineering and design work on the project. The State must, however, comply with the standards of participation and review detailed above in G1 prior to submission to FHWA for approval.

What conditions will FHWA place on this approach?

FHWA Response: To comply with §112(g), the State must conduct a review assessing the objectivity of the environmental documentation prior to submission for approval.

G3. Will FHWA allow a contractor to complete NEPA and construct a project? What conditions will FHWA place on this approach?

FHWA Response: A contractor may provide substantial environmental input to a State for a NEPA document, but a contractor (with or without a construction interest) may not "complete NEPA." The State must manage and be accountable for the environmental document.

With regard to a contractor providing substantial environmental input as well as having a design or construction interest, 40 C.F.R. §1506.5(c) states, "Contractors shall execute a disclosure statement prepared by the lead agency, or where appropriate the cooperating agency, specifying that they have no financial or other interest in the outcome of the project." Prior court cases placed this issue in context and held that a contractor may have an interest in the project, but such an interest must be fully disclosed and the responsible agency must take an independent, "hard look" at the environmental consequences to ensure that the "integrity and objectivity" of the process is protected. While enacting §112(g), the Congress has determined that a financial interest in future design work is not sufficient to disqualify a consultant from doing NEPA work; a financial interest in future construction work by a potential construction contractor was not specifically addressed in the statute. The State DOT's contract with the environmental consultant must be separate from the contract for the PPTA proposer team. This will ensure State control as specified in the response to G1.

G4. FHWA is required to perform an independent review of NEPA documents prepared by SHAs prior to approving them. Please describe exactly what the VA Division does in this review. Could VDOT apply the same standards of review to contractor-prepared documents to ensure objectivity?

FHWA Response: NEPA indicates that a state agency or official with statewide jurisdiction may prepare an environmental impact statement for a federal agency provided that, among other things, the responsible federal official independently evaluates the environmental impact statement prior to its approval and adoption. The FHWA Virginia Division takes an unbiased, objective, hard look at all facets of VDOT's environmental impact statement preparation, including purpose and need, alternatives including the no-action alternative, impacts, and mitigation. FHWA does not have a preconceived notion regarding the best solution to the identified problems and independently considers the proposal with regard to reasonable alternatives, impact reduction, costs, level of service provided, and meeting the intended purpose and need for the proposal. VDOT should indeed independently review any studies and conclusions reached by consultants before their inclusion into a NEPA document.

G5. Will the FHWA Virginia Division work directly with a consultant hired by the Department to prepare NEPA documents?

FHWA Response: Not without appropriate VDOT involvement. VDOT is responsible for the preparation of the NEPA document that is submitted to the FHWA Virginia Division according to established procedures. VDOT may hire a consultant to conduct environmental studies, analysis, or documentation. This consultant may provide substantial input, but VDOT retains responsibility for the content and accuracy of all studies and analyses and for the submission of the document with the appropriate recommendation to FHWA Virginia Division. FHWA will work with VDOT to assist in the preparation of the document, and VDOT will be FHWA's primary point of contact for this effort. FHWA would not be willing to work directly with the contractor without the presence of VDOT. That being said, consultants retained by a State routinely participate in meetings between the State and FHWA regarding the form and content of an EIS.

G6. Will the FHWA Virginia Division work directly with a consultant hired by the PPTA contractor to prepare NEPA documents?

FHWA Response: See G5. VDOT will be FHWA's primary point of contact for this effort. FHWA would not be willing to work directly with the consultant without the presence of VDOT. However, the consultant can and should be available to participate in working meetings between VDOT and FHWA as the NEPA document is being developed.

G7. Will the FHWA Virginia Division work directly with a consultant hired by the PPTA contractor to complete NEPA if the draft and final documents are reviewed by and passed through VDOT?

FHWA Response: See G5 and G6.

G8. How will the FHWA Virginia Division ensure that their NEPA approval (ROD, FONSI, or CE) remains valid throughout the life of the project?

FHWA Response: Although lacking in specific details, both proposers include positive commitments to ensure compliance with environmental requirements and describe organizational structures and include team members with expertise in the environmental area. FHWA would expect any contracts that VDOT would enter with the successful proposer to include specific references to the approved environmental documents. As with any project, proposed changes subsequent to the NEPA approval would need to be considered and environmental reevaluations completed by VDOT as necessary to keep the NEPA documentation valid. The Virginia Division, as a partner in this effort will provide necessary staff to provide advice in the development of any needed reevaluations and take appropriate approval actions.

G9. What methods will the FHWA Virginia Division employ to ensure compliance with commitments contained in their NEPA approval (ROD, FONSI, or CE)?

FHWA Response: In addition to our response to G8, the contracts VDOT enters to implement the project should make specific references to any environmental commitments made in the NEPA and subsequent permitting process. FHWA's environmental regulations at 23 C.F.R. §771.109 indicate that "It shall be the responsibility of the applicant, in cooperation with the Administration, to implement those mitigation measures stated as commitments in the environmental documents prepared pursuant to this regulation. The FHWA will assure that this is accomplished as a part of its program management responsibilities..." and that "it shall be the responsibility of the State highway agency to ensure that the project is constructed in accordance with and incorporates all committed environmental impact mitigation measures listed in approved environmental documents..." The Division would have involvement in the oversight of the project and would assist VDOT in various elements of project implementation, including ensuring timely implementation of environmental commitments. The Division will take necessary actions to ensure commitments are being implemented as appropriate. The Division will consult with VDOT prior to commencement of construction regarding our degree of oversight.

G10. Can a solicited proposal received prior to issuance of FHWA's final rule on design build be "grand fathered" to avoid the requirements of the design build regulations?

FHWA Response: VDOT anticipates executing a master agreement that provides for preliminary engineering, construction, operation, and maintenance services on I-81. This type of contract is included in the definition of a "design-build contract" in 23 C.F.R. §636.103. While the FHWA considers this agreement to be included in the definition of a design-build contract, VDOT's PPTA procurement process is considered to be a hybrid process and therefore, portions of the design-build rule are not directly applicable to the Virginia PPTA process. It is our understanding that VDOT issued a request for conceptual proposals in September of 2002 and the Commonwealth Transportation Board voted to advance both conceptual proposals to the next stage of review on March 20, 2003. On face value, this does not comply with the provisions of 23 C.F.R. §636.109. The FHWA supports the VDOT's PPTA program as an experimental contracting program under SEP-14. We fully support Virginia's continued use of the PPTA as long as it is evaluated under SEP-14. However, SEP-14 is not a process for waiving NEPA requirements. NEPA requirements must still be met. The inherent principle that the NEPA process be objective and unbiased is applicable outside of the design-build rule. The FHWA is willing to work with VDOT to coordinate the NEPA evaluation and procurement process to ensure NEPA compliance and eligibility of future Federal-aid participation.

G11. Does tolling affect the determination that an action has logical termini and independent utility?

FHWA Response: FHWA's environmental regulations [23 C.F.R. §771.111(f)] and the Council on Environmental Quality's regulations [40 C.F.R. §1508.25] for implementing NEPA address logical termini and independent utility. Each outlines specific rules for a project to be able to "stand alone" in an individual NEPA document.

VDOT would have to demonstrate that any proposed action meets the above requirements. We believe that tolling does affect the determination that an action has logical termini and independent utility. To propose an action that would be tolled on I-81 that is less than the entire corridor, VDOT would have to demonstrate, among other things, that the action can and would proceed regardless of the outcome of other proposed actions. As the means to fund the action, tolling plays a role. Final approval to toll any portion of I-81 cannot be given until that particular portion has satisfied the requirements of the NEPA process.

G12. If it were determined that an action that is less than the entire length of the project has logical termini and independent utility, would FHWA approve tolling on that section alone if the NEPA work on the other sections were not completed or delayed?

FHWA Response: A State may have multiple independent projects within an approved facility if adequate justification for the independent utility and logical termini is provided. FHWA's approval as a toll pilot project is governed by §1216(b) of TEA-21. This legislation allows up to three facilities, each in a different State, to be permitted. FHWA's guidance allows for a phased approach where we would give a Phase I approval for "provisional" acceptance to the entire length of I-81 as a toll facility prior to the completion of NEPA. The guidance further indicates that in Phase 2, a candidate project will be required to satisfy compliance with the NEPA process prior to obtaining final acceptance as one of the three toll facilities in the §1216(b) pilot program. Although no specific time limits are established for this phase, it is expected the States will accomplish this task in a timely manner. If this does not occur, a candidate's "provisional" acceptance may be withdrawn and offered to another candidate submitted during Phase 1. If any segment of the entire facility proposed to be tolled satisfies the Phase 1 and Phase 2 requirements and has independent utility and logical termini for use as a toll facility, then the FHWA would approve tolling for the facility segment prior to the completion of any other necessary requirements on other sections of the entire proposed toll facility.

G13. Under VA's PPTA, can a comprehensive agreement be entered into prior to the Record of Decision being issued?

FHWA Response: Yes, as long as the agreement documents the risks that are being assumed and does not influence the alternatives analysis required by NEPA. Of course, no construction may occur prior to the ROD [or other final NEPA approval] being issued and FHWA will not provide any final design, right-of-way or construction approvals prior to the ROD's completion. The SHA and/or the PPTA project proposer will need to clearly document in the agreement how the parties will allocate the risks inherent in the outcome of the alternatives analysis (i.e. the risk that the "no build" or another alternative that is not consistent with the terms and conditions of the comprehensive agreement is selected.)


Star

S1. Do the requirements of the new design build regulations apply to the Star proposal?

FHWA Response: See G10 above.

S2. If the DB regulations apply to the Star proposal, can the Department simply readvertise for RFPs after completing NEPA on that proposal?

FHWA Response: See G10 above.

S3. Is there an alternate FHWA process or alternate FHWA funding that would obviate the need to comply with the design build requirements?

FHWA Response: Yes, SEP-14 is still a valid approach. Noting that the inherent principle that the NEPA process be objective and unbiased is applicable outside of the design-build rule.

S4. What specific federal actions does FHWA anticipate for the Star proposal as currently presented?

FHWA Response: There are four actions that FHWA would have to take on the Star proposal in order for it to be constructed: 1) approval of funding the proposal; 2) approval of a toll pilot project for I-81 in Virginia; 3) approval of I-81 interchange modifications; and 4) approval of design exceptions on I-81. These approvals would require NEPA compliance; in addition, it is our expectation that all applicable federal regulations, including design standards, will be met.

S5. Is there an opportunity to split the Star proposal into separate projects with independent utility and logical termini to satisfy NEPA?

FHWA Response: While the opportunity exists to develop separate projects within the overall corridor upgrade plan for NEPA review purposes, no justification for individual projects sections with independent utility and logical termini has been presented to date. Therefore, at this time we cannot agree with the proposer's assumptions as specified in the conceptual proposal regarding the independent utility or the schedule of 4 (or more) sections with independent utility.

S6. What level of environmental document do you anticipate for the Star proposal?

FHWA Response: Based on our understanding of the project, which is to reconstruct 325 miles of Interstate highway and conversion to a toll facility, an Environmental Impact Statement (EIS) appears to be the appropriate document to demonstrate compliance with NEPA. [A proposed approach to NEPA compliance has not been provided. Such an approach could provide reasoning and justification of logical termini and independent utility of distinct sections and the development of more than one NEPA document within the 325-mile corridor. The rationale for determining the appropriate level of environmental document necessary for the independent sections must be provided and reviewed by FHWA before proceeding with this approach. FHWA would consider such proposed strategies if provided.]

S7. Can the Star proposers hire a contractor to complete NEPA then turn the document over to VDOT for adoption? If so, what specifically would VDOT have to do with the document before providing it to FHWA?

FHWA Response: No. As noted in G1 and G5, completing NEPA is not simply an analytical exercise in preparing a document. VDOT will have to participate in key decision points in the NEPA process and VDOT will be required to take a hard look at the environmental consequences of the project, demonstrate that it has independently and extensively reviewed the consultant's analysis, and be able to show that it directed and oversaw the technical services provided by the consultant. VDOT will be held responsible for protecting the integrity and objectivity of the process and for demonstrating how they protected the integrity and objectivity of the process. This standard of review will not be met if a consultant, without significant guidance from VDOT, performs research and analysis and then just turns over the document to VDOT at the end of process.

S8. Can the Star proposers fund a NEPA study to be independently managed and submitted by the Department?

FHWA Response: Yes - See answers to questions G3, G5, and G6.

S9. Based on the details contained in the Star proposal, what approach to NEPA does FHWA recommend?

FHWA Response: For any proposal on this project, we believe that it would be in VDOT's interest to have the proposers prepare an approach outlining NEPA compliance. The NEPA phase of the project will have a substantial influence on the overall project schedule. VDOT's and FHWA's management of this phase will likely be highly scrutinized by those interested in the project. Any approach to NEPA should include the reasoning and justification related to any determinations of logical termini and independent utility of the proposed sections that are less than the entire corridor length, including recommendations and reasoning regarding the level of documentation considered appropriate for these sections. The proposer should also indicate whether or not a tiered EIS would be considered for determining the logical and independent sections and level of documentation for subsequent tier 2 studies. An extremely important aspect of any NEPA proposal must include a schedule with realistic time frames. We would also recommend that this NEPA approach be accepted by VDOT and FHWA prior to the development of any detailed proposals.

S10. What normal delegation of authority procedures for decision making apply to this proposal?

FHWA Response: Normal delegation of authority procedures would apply to this proposal. The FHWA Virginia Division would be the primary decision-maker for the project. Decisions to be made by FHWA Headquarters would be the potential approval of I-81 as a toll pilot and the use of SEP-14. The FHWA Virginia Division may request prior concurrence from FHWA Headquarters on some aspects of the NEPA prior to taking a final action. Under Mega project procedures (for projects costing more than $1 billion), the Division would consult with Headquarters prior to our formal acceptance of the finance plan for the project.


Fluor

F1. Do the requirements of the new design build regulations apply to the Fluor proposal?

FHWA Response: See G10.

F2. What specific federal actions does FHWA anticipate for the Fluor proposal?

FHWA Response: There are two actions that FHWA would have to take on the Fluor proposal as presented in order for it to be constructed: 1) approval of a toll pilot project for I-81 in Virginia; and 2) approval of design exceptions on I-81. These approvals would require NEPA compliance; in addition, it is our expectation that all applicable federal regulations, including design standards, will be met. [The Fluor proposal indicates that neither federal funding nor I-81 interchange modifications would be necessary.]

F3. Is there an opportunity to split the Fluor proposal into separate projects with independent utility and logical termini to satisfy NEPA?

FHWA Response: Yes - See S5.

F4. What level of document do you anticipate for the Fluor proposal?

FHWA Response: Without any justification otherwise, an EIS - See S6.

F5. What specifically would a document for FHWA's approval to toll the interstate include?

FHWA Response: FHWA's published guidance on the toll pilot program (64 FR 6735-6736) addresses NEPA responsibilities as part of FHWA's interstate toll approval. It states, "A pilot project, regardless of whether Federal-aid funds are to be used in subsequent reconstruction or rehabilitation activities, must satisfy the requirements of the NEPA process before final approval is given to the project. The analysis of the project must take into account not only the impacts of the proposed reconstruction or rehabilitation activities but also consider impacts associated with converting the free facility to a toll facility." Later, it states, "It is recognized that the NEPA impacts of a proposed pilot project under this program, not only involve those associated with the proposed reconstruction/rehabilitation activities themselves but also those associated with converting a free interstate facility to a toll facility, such as potential changes in travel patterns, construction of toll collection facilities, and economic equity impacts." The final document signifying FHWA's final approval to toll the Interstate is a formal toll agreement between the State and FHWA providing for audits and toll revenue use limitations as specified in §1216(b)(5) of TEA-21.

F5a. What would be the need for the action?

FHWA Response: Since VDOT has not approached FHWA with a specific proposal, a formal purpose and need statement has not been developed. It would be VDOT's responsibility to prepare the purpose and need statement for solving identified problems in the I-81 corridor for NEPA purposes. The purpose and need would be related to correcting current and future transportation problems on I-81 and not simply related to the need to implement tolls, which is merely the means to fund the needed improvements.

F5b. What should be considered as a range of alternatives?

FHWA Response: The study must include all reasonable alternatives, which are based on meeting the identified purpose and need for the proposal, including the no-build.

F6. What level of environmental document would be required to support FHWA's interstate access approval?

FHWA Response: Fluor's proposal indicates that Interstate access approval will not be necessary, however, see the response to F4. Should any access approvals or interchange modifications become necessary they should be considered in the project's overall NEPA document and not separately.

F7. Can the Fluor proposers hire a contractor to complete NEPA then turn the document over to VDOT for adoption? If so, what specifically would VDOT have to do with the document before providing it to FHWA?

FHWA Response: No - See answer to question G1, G5, and S7.

F8. Can the Fluor proposers fund a NEPA study to be independently managed and submitted by the Department?

FHWA Response: Yes - See answers to questions G3, G5, and G6.

F9. If another federal agency serves as the lead agency for NEPA, will FHWA's design build regulations apply?

FHWA Response: See G10.

F10. If another federal agency serves as the lead agency for NEPA and allows the contractor to prepare the NEPA document on their behalf will FHWA be able to adopt the document?

FHWA Response: While we wouldn't expect another federal agency to take the lead role on an Interstate upgrade project, the CEQ regulations do provide for adoption of NEPA documents by an agency when that document has been prepared by another agency. FHWA would review the document and determine its appropriateness in meeting FHWA environmental requirements.

Will conflict of interest statements be required?

FHWA Response: We are not aware of any Federal agencies that have an exception to CEQ's requirements under 40 C.F.R. §1506.5(c) that indicates, "Contractors shall execute a disclosure statement..." In addition, if the VDOT anticipates using Federal-aid funding in this contract, the organizational conflict of interest provisions of 23 C.F.R. §636.116 apply.

F11. Based on the details contained in the Fluor proposal, what approach to NEPA does FHWA recommend?

FHWA Response: Although few details are provided other than Flour expects VDOT to perform the NEPA studies, see full response to Star question S9.

F12. Will the action's physical construction impacts (wetlands, noise, etc.) have to be evaluated in the environmental document?

FHWA Response: Yes. See F5.

F13. What normal delegation of authority procedures for decision making apply to this proposal?

FHWA Response: Normal delegation of authority will apply - See S10.

EXHIBIT D
ALTERNATIVE DEVELOPMENT APPROACHES

In order to allow maximum flexibility during the planning phase of the program, TxDOT expects that the CDA will leave the door open to various different development approaches, with the decision regarding the approach for a particular facility to be made on a facility-by-facility basis during the process of developing the implementation plan and plan of finance. Options include:

  1. Facility agreement between TxDOT as Owner and Developer or Developer affiliate as contractor - Similar to the approach taken for the Pocahontas Parkway project, TxDOT and the developer (or an affiliate of the developer) may negotiate the terms and conditions of a supplemental agreement for design and construction of the facility (the "Facility Agreement"), with the developer/affiliate as the prime contractor. The fact that the Facility Agreement is a follow-on contract to the CDA would be deemed to satisfy the competition requirements of 23 CFR 636.119(a), even though the agreement may be a separate contract from the original CDA. As was the case for the Pocahontas Parkway project, TxDOT would independently estimate the cost of performance of the work and would carefully review the developer's books to ascertain the basis for pricing and to determine whether the price is fair and reasonable, before entering into the Facility Agreement. TxDOT would provide an opinion of its independent consulting engineer to FHWA for review and concurrence, as evidence of price fairness and reasonableness. TxDOT anticipates that the agreement could implement the innovative approaches described in this SEP 14 application for such contracts, as well as any additional innovations approved by FHWA.
  2. Facility agreement between Developer as franchise holder and separate entity as contractor - Similar to the approach undertaken for the Las Vegas Monorail extension, the CDA might allow the developer to enter into a negotiated Facility Agreement with a separate entity which may or may not be affiliated with the developer. If public funding will be used to pay for costs of the Franchise Agreement, TxDOT would perform a price reasonableness analysis as described above, with an independent estimate provided by TxDOT and an "open book" review of the developer affiliate's pricing data. As with alternative 1, TxDOT would provide an opinion of its independent consulting engineer to FHWA for review and concurrence, as evidence of price fairness and reasonableness. It is also possible that the CDA would contemplate a competitive procurement by the developer. In such case the CDA requirements regarding the procurement process would be subject to FHWA review and concurrence.
  3. Competitive procurement of separate facility agreements by TxDOT - TxDOT might enter into contract(s) for development of the facility with entity(ies) not affiliated with the Developer. The developer would provide assistance to TxDOT in connection with such contracts as TxDOT deemed appropriate. The developer and developer affiliates would be allowed to participate in the competition only if TxDOT determines that the developer's prior involvement in the program would not give it an unfair competitive advantage. TxDOT would follow federal-aid procurement requirements for all federally funded contracts, with the understanding that it would have the continuing ability to implement the innovative approaches described in this SEP-14 application for such contracts, as well as any additional innovations approved by FHWA.

1. The term "facility" is broadly defined by the Enabling Legislation, and includes "(A) a state highway; (B) a turnpike; (C) a freight or passenger railroad, including a commuter railroad, intercity railroad, and high-speed railroad; (D) a public utility facility; or (E) any structure that is reasonably necessary for the effective operation of a method of transportation, including an intermodal transfer or staging area, weigh station, inspection station, rest area, service station, restaurant, train or bus station, warehouse, freight interchange, switching yard, maintenance yard, and pipeline pumping station.

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