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Project Profiles

New Mexico SR 44

Location

Northwest New Mexico

Project Sponsor / Borrower

New Mexico State Highway and Transportation Department

New Mexico Finance Authority

Program Areas

Project FinanceP3

Mode

Highway

Description

US 550/NM SR 44 runs from I-25 in Bernalillo north and west to the New Mexico/Colorado state line. This project involved the widening from two to four lanes of a 118-mile section running northwest from San Ysidro to just outside of Bloomfield, near the Four Corners. The project passed through three counties, four tribe and pueblo lands, and property belonging to the Bureau of Land Management, the U.S. Forest Service, and private owners.

New Mexico law did not allow for design-build procurement at the time NM 44 was widened. However, the New Mexico State Highway and Transportation Department (NMSHTD) was able to create many of the efficiencies of design-build through a professional services contract. This allowed NMSHTD to outsource services it would have traditionally self-performed - design, construction management and long-term pavement management. Procurement of construction was done separately under the traditional low-bid system.

By using a professional services contract to outsource design and construction management to the same company (the Project Development Contractor or PDC), the State was able to gain many of the efficiencies found in design-build projects - flexibility, quicker construction, cost savings, and streamlined decision-making.

NMSHTD required the road and pavement design to meet the NMSHTD and FHWA standards. However, the PDC's designer and construction manager were given the flexibility to adapt the design to address the varying conditions along the 118-mile project. This flexibility was balanced by a requirement in the professional services contract that the PDC guarantee the quality of the pavement condition over time. This guarantee took the form of a 20-year, long-term, fixed price, performance-based rehabilitation and reconstruction agreement covered by $114 million bond. During the challenging design phase and rapid construction phase of SR 44, this long-term responsibility ensured that the private sector would act like an owner and the State would receive the quality it demanded. This pavement warranty agreement provides preventive maintenance and rehabilitation to keep the road above the contractually agreed specifications. These specifications include objective measurable criteria such as IRI (international roughness index), cracking, and rutting.

The agreement also states that the warranty requirements will be waived if the level of traffic for the warranty period exceeds a cumulative 10-year design level, in this case, 4 million ESALs (Equivalent Single Axle Loads).

Cost

$314 million

Funding Sources

GARVEE bonds (sole source) - $100 million (backed by future federal highway grants)

State highway revenue bonds (tax exempt) - $214 million (backed by future State Road Fund revenues)

Project Delivery / Contract Method

Design, construction management, warrant road built with 20-year pavement performance guarantee

Private Partner

Development contractor: Mesa LLC, with CH2M Hill (design) and Flatiron (construction management)

Project Advisors / Consultants

Nossaman, Guthner, Knox & Elliott LLP

Ballard Spahr LLP

Dain Rauscher Inc.

Lenders

Bondholders

Physical Status

Completed November 30, 2001

Financial Status

Closed

Innovations

  • The innovative use of professional services contracting allowed NMSHTD to enjoy many of the benefits of a design-build project approach without requiring the State to abandon the traditional low-bid method of procurement. This innovative approach has been called Design-Bid-Construction Management-Maintain (D-B-CM-M). It is estimated that innovative financing combined with the contracting approach cut the total project time from 27 years to within 3 years. In this case, the total project time is considered the period from initial planning to completion. NMSHTD has also determined that the initial warranty cost of $62 million will save the taxpayers $89 million in maintenance costs over a 20-year period.
  • First federal highway grant anticipation notes to pledge revenues beyond the current authorization period.
  • First GARVEEs to pledge solely Federal revenue with no state back-up.
  • First long-term warranty used in the U.S.

Related Links / Articles

Coverage in Innovative Finance Quarterly

Case Study by National Council for Public-Private Partnerships

Contacts

Not available

Federal Highway Administration | 1200 New Jersey Avenue, SE | Washington, DC 20590 | 202-366-4000
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