TTC 35 SEP-14 Approval Memo

Subject: Action: Procurement Approach for the I-35 Corridor
Approval under Special Experimental Project No. 14
Innovative Contracting Practices (SEP-14)

Date: February 27, 2004

From: Dwight A. Home
Director, Office of Program Administration

Reply to Attn. of: HIPA-30

To: Mr. C.D. Reagan
Division Administrator
Austin, Texas

This is in response to your December 19, 2003, memo and the Texas Department of Transportation's (TXDOT) December 5, 2003, letter that submitted an SEP-14 work plan for the procurement of the High Priority Trans-Texas Corridor through a public private partnership. We appreciate the opportunity to review and provide comments at an early point in the project development process. Thank you for incorporating the suggestions, comments and clarifications requested by Gerald Yakowenko of my staff in a November 21, 2003, telephone conference.

Regarding TXDOT's specific request to proceed with certain features of the contracting process under SEP-14, we concur with the use of all the proposed concepts for evaluation under SEP-14:

• Issuance of a request for detailed proposals, execution of a comprehensive development agreement (CDA) and issuance of a notice-to-protect with limited non-construction work under the CDA, prior to the receipt of Tier I NEPA approval for the corridor. This approval is given with the understanding that your office will be involved in all phases of the NEAP review and approval process and will consult the Office of Project Development and Environmental Review as appropriate.
• 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 II NEPA approval.
• Establishing subcontractor selection requirements that are different from Federal-aid procurement procedures applicable to State Departments of Transportation. Title 23 CFR 635.116(d) eliminates the traditional prime contractor self-performance requirement for design-build contracts. At some future date, the FHWA intends to issue a revision to the Required Contract Provisions Federal-aid Construction Contracts, Form FHWA-1273. In the interim, TXDOT may modify the form FHWA-1273 requirements by adding a supplemental special provision for this purpose.
• Including a general warranty in individual facility agreements that exceed the period specified in 23 CFR 635/413(e)(1)(i), and requiring the developer to undertake the responsibility for routine maintenance services. We agree that this provision is appropriate for this long-term contract in order to incorporate quality and life-cycle concepts in the design and construction process.
• Provisions for NEPA support services by the developer and/or sub-consultant on the developer's team with the conditions noted in the work plan.
• Provisions for the use of unsuccessful proposer's ideas in final negotiations with the conditions noted in the work plan concerning an adequate description in the RFDP and the use of stipends.

In addition, we agree that it is acceptable to proceed with the proposed procurement process under SEP-14. While we are concerned with the concept of using an "open book review" process or an independent engineer's estimate to verify price reasonableness, we agree that such a process should provide some assurance of reasonable prices, if properly implemented.

As a condition of this SEP-14 approval, we request that your office and TXDOT develop a formal procedure (prior to the execution of the development agreement) for verifying price reasonableness and developing an independent estimate. This procedure should describe the criteria and considerations that will be used in developing independent cost estimates and the criteria that will be used in determining whether the developer's prices are reasonable.

We congratulate TXDOT for attempting such an ambitious project and look forward to TXDOT's evaluation of the innovative features of this project. Should you have any questions, please contact Gerald Yakowenko at (202) 366-1562.