Nice and Simple

Phillip A Washington, CEO, LA Metro

Los Angeles County is well positioned for transportation transformation. California Governor Jerry Brown recently signed legislation allowing LA Metro to put a transportation tax measure on a future ballot.

Though the LA Metro board of directors has not officially decided or approved putting a measure on the ballot in 2016, Metro staff have been directed to initiate a “bottom-up” process to determine Council of Government (COG) project priorities and input.

Indeed, it’s unclear what the ballot measure will look like, but the discussion is focused around extending the current Measure R tax and augmenting it with a new half-cent sales tax that would raise approximately $12bn. 

In my role as chief executive officer, I have stressed the need to have every tool in the transportation infrastructure project delivery toolbox to build “as much as we can, as fast as we can, until it’s all done”. With that in mind, it is imperative for Metro to consider all project delivery methods, ie, design-build; design-bid-build; construction management general contractor (CMGC); and P3s.

That said, let me focus on the P3 delivery method and Metro’s P3 plans going forward.

The P3 project delivery method is not a panacea and will not cure all transportation infrastructure project ills, and surely private sector money is not free. However, the identification of appropriate P3 opportunities, the structuring of the delivery method, and the potential to accelerate and transfer project risks are all important benefits to P3 implementation. Successful P3s have several key things in common: 


•  Allows the public sector entity to retain ownership of the transportation asset at all times, sets fares/tolls and fare/toll policy, and keeps all project revenues – and in turn makes payments, most often availability payments, to the concessionaire based on established performance metrics

•  Encourages collaboration between the public entity and its private sector partner on risk allocation – who takes on what risks and whether there should be risk transfer

•  Allows private sector creativity by implementing Alternative Technical Concepts (ATCs) rather than a Value Engineering approach to enable proposers to effectively manage their project costs

•  Develops performance specifications rather than detailed level specs that have been the norm for traditional capital projects

•  Maximizes proposer flexibility through the use of performance level specifications

•  Establishes, and rigorously adheres to, a request for proposal (RFP) schedule

•  Provides for a stipend to the proposers to defray some of the costs of proposal preparation and at the same time ensure the public agency owns the approach and ATCs created by both the winning and unsuccessful proposers

• Addresses the concerns of organized labor

•  Develops and insists upon decisive leadership at all levels. Decentralizing decision making and empowering your leaders

•  Fosters an in-depth understanding, by the public entity, of lifecycle costs

With the possibility of a successful November 2016 sales tax ballot initiative, LA Metro has the potential to become the transportation infrastructure capital of the world.

Extraordinary job creation, small and minority business renaissance, an economic development revival in the form of vibrant transit oriented communities that includes mixed income and affordable housing around our transportation investments, and above all a bevy of mobility options that allow people to traverse the entire county with ease. 

With these benefits possible, we need every single project delivery method at our disposal to complete and even accelerate capital investments. P3s must be in that toolbox. 

People often ask which LA Metro projects are good candidates for a P3. My response: the private sector will decide. This is why we have created, what I call, a private sector friendly “Unsolicited Proposal Policy”. 

Implementation of this policy will allow the private sector to not always be reactive in their approach to responding/interacting with the public entity, ie simply responding to an RFP. We want the private sector to be proactive and submit their unsolicited ideas to us for consideration. 

After submittal, if we think the idea or unsolicited proposal has either financial or technical merit, we will pursue it if the conditions are right. Our goal is to not simply default to the oftentimes government answer – “No”, but to try and get to “Yes”. 

So, the infrastructure vision at LA Metro is rather simple. Use every project delivery tool in the proverbial toolbox to “build as much as we can, as fast as we can, until it’s all done”. Failure is simply not an option.