Honolulu withdraws from $9B rail P3 procurement

Dive Quick:

• Honolulu Mayor Kirk Caldwell has withdrawn the city from participation in a public-non-public partnership (P3) for the past four-mile leg of the $9 billion Honolulu Rail task, Honolulu Civil Beat described. As component of his announcement, Caldwell also said that he has notified the Federal Transit Administration (FTA), which is giving $one.5 billion for the task, of his final decision. 
• Caldwell did not condition just what was driving his final decision, but the city had budgeted $one.four billion, and a person bidder, Tutor Perini, reported in the course of a current earnings call that its proposal for finishing the task was extra than $2 billion and that there were only two bidders. The Honolulu Authority for Fast Transportation (HART), which is major the procurement, has not produced any information and facts on the bidders or their proposal quantities.
• The city was a joint partner in the procurement with HART, and it is even now up to the company to terminate the P3 procurement. HART will discuss the city’s final decision, as effectively as how the task will shift ahead, at a special board assembly on Oct. 8. 

Dive Insight:

The price tag of the twenty-mile commuter gentle rail task has improved by $four billion considering that 2012 and is about 7 several years driving timetable. A condition auditor’s report slammed HART for its mismanagement of the task. In addition, the FTA said it will not release $744 million of remaining grant dollars right up until HART contracts out and proves it can finance the past leg.

So, concerns about mismanagement and funding apart, how difficult is it for companies like HART to change from a P3 to a different product at this phase of procurement? It would not essentially spell disaster for the task, said attorney Mitchell Bierman, partner at Weiss Serota Helfman Cole & Bierman P.L. in Florida. 

“It may not be these a massive problem,” he said. 

On the federal government side of a P3 procurement, Bierman said, there has to be a great offer of specificity in conditions of what will be predicted from vendors so that it will be capable to thoroughly gauge effectiveness. If the technical specs were offered to vendors in suitable element, it could be just a subject of pulling out the undesirable elements these as design and style, operations or routine maintenance. 

“As long as the technical specs were effectively composed to start off with, it may not be that difficult to pivot to a standard owner-contractor product,” he said. “At this stage, their activity may effectively be a person of subtraction mostly.”

It would be extra difficult to exit a P3 if the task was underway, Bierman said, since the vendors usually make a massive upfront funds investment decision and have the possibility to amortize that investment decision in excess of a long time period of time. 

Last 12 months when Denver Worldwide Airport (DEN) officers fired Great Hall Partners (GHP), which had a $one.8 billion P3 agreement to comprehensive the Great Hall task and then run and sustain it, the airport selected to ditch the P3 product and retain the services of a construction manager as a substitute. As component of the offer, DEN had to protect GHP’s financial institution funding, termination service fees and superb invoices.