Honolulu withdraws from $9B rail P3 procurement

Dive Brief:

  • Honolulu Mayor Kirk Caldwell has withdrawn the metropolis from participation in a general public-private partnership (P3) for the last four-mile leg of the $nine billion Honolulu Rail task, Honolulu Civil Beat noted. As element of his announcement, Caldwell also claimed that he has notified the Federal Transit Administration (FTA), which is furnishing $1.5 billion for the task, of his determination. 
  • Caldwell did not condition specifically what was driving his determination, but the metropolis experienced budgeted $1.four billion, and one particular bidder, Tutor Perini, reported through a recent earnings call that its proposal for finishing the task was more than $two billion and that there ended up only two bidders. The Honolulu Authority for Rapid Transportation (HART), which is leading the procurement, has not released any information and facts on the bidders or their proposal quantities.
  • The metropolis was a joint lover in the procurement with HART, and it is nevertheless up to the agency to cancel the P3 procurement. HART will go over the city’s determination, as very well as how the task will move forward, at a special board conference on Oct. 8. 

Dive Insight:

The price of the twenty-mile commuter gentle rail task has improved by $four billion because 2012 and is about seven a long time driving timetable. A condition auditor’s report slammed HART for its mismanagement of the task. In addition, the FTA claimed it will not release $744 million of remaining grant cash till HART contracts out and proves it can finance the last leg.

So, concerns about mismanagement and funding aside, how tricky is it for companies like HART to swap from a P3 to a different product at this stage of procurement? It wouldn’t necessarily spell catastrophe for the task, claimed attorney Mitchell Bierman, lover at Weiss Serota Helfman Cole & Bierman P.L. in Florida. 

“It may not be this sort of a huge stress,” he claimed. 

On the govt facet of a P3 procurement, Bierman claimed, there has to be a great deal of specificity in conditions of what will be expected from distributors so that it will be equipped to thoroughly gauge overall performance. If the requirements ended up presented to distributors in suitable depth, it could be just a make a difference of pulling out the undesired elements this sort of as design and style, functions or upkeep. 

“As extensive as the requirements ended up very well published to begin with, it may not be that tricky to pivot to a standard owner-contractor product,” he claimed. “At this issue, their process may very well be one particular of subtraction principally.”

It would be more tricky to exit a P3 if the task was underway, Bierman claimed, for the reason that the distributors typically make a huge upfront money expenditure and have the option to amortize that expenditure more than a extensive period of time. 

Previous yr when Denver Global Airport (DEN) officers fired Excellent Hall Associates (GHP), which experienced a $1.8 billion P3 deal to total the Excellent Hall task and then function and sustain it, the airport selected to ditch the P3 product and employ a development manager rather. As element of the deal, DEN experienced to protect GHP’s loan company financing, termination costs and excellent invoices.