Back in the noughties, the Texas Department of Transportation (TxDOT) kicked off procurement on a plan to develop a new type of highway project: managed lanes. A consortium headed by Cintra & Meridiam won the contract - and with that the opportunity to provide not one innovation, but two.
The project would see 13 miles of the I820 & SH121 redeveloped through a hard-bid P3, reconstructing and upgrading existing lanes with new tolled extra-capacity lanes added to help alleviate congestion between Fort Worth and Dallas airport. Alongside the Transurban project in Virginia, this new model of project was being tried for the first time.
Many readers will be thinking, ‘I’ve traveled on that road to P3C for the last near decade’. So, why are we talking about it today?
By virtue of an extremely innovative procurement, the project has only truly just come to completion - opening section 3C, the last of a long-line of project extensions, born out of a pioneering relationship between the public and private sectors.
It’s a simple idea: TxDOT bid two contracts at the start of the first project, one a hard-bid for NTE1&2, the other, a predevelopment agreement (PDA). Out of these two contracts, a co-operative, adaptable relationship formed, allowing new projects and also projects changes to come forward and be delivered.
The PDA would allow the private sector to analyze and develop new ideas for projects around the original project, proposing extension and alterations that would be beneficial to the population.
Nicolas Rubio, partner and CEO Americas for Meridiam, says that this extra PDA contract “started running very fast”, and in the “first year we analyzed other highways in the corridor and identified projects that would make sense, putting forward proposals and negotiation with the authority to develop them”.
This approach enabled the project not only to bring new projects into analysis, but also - because of the tie between the two parties - it made more projects actually feasible, with Rubio saying that some elements of the project would not have been discovered or submitted otherwise.
“There is an interesting element that under a PDA there can be an industry review process between the two sides that allows you to bring to the table ideas and solutions that are very hard to bring to the table in a hard bid,” says Rubio.
He points to a section of the south tip of 3A&B entering Fort Worth, which saw the plans drastically change to enter the city in a different point that saw the stretch cross over a new highway.
“In a standard hard bid, that change cannot be done. It’s such a big variation,” says Rubio, pointing to the fact that considerations such as the risks involved in re-opening the environmental assessment would have made it unfinanceable.
This flexibility works for both sides. The concessionaire came up with a way to attract more traffic and revenue, and the authority benefits from its partner’s innovations and expertise to seek and find solutions. And they both get the freedom to deliver.
Many in the industry are talking about progressive P3s versus hard bids - but this project is showing that perhaps it's a false dichotomy, and actually conjoining the two is a sweet spot.
“There is a balance between keeping competitive tension, which is achieved through the hard bid, and also taking full advantage of the innovation capacity and the economies of scale that the private sector can bring in PDA,” says Rubio.
The contractor is already there, knows the environment, supply chains set-up, innovation is brought in house, relationships are built: it’s a true partnership.
In terms of breaking ground, the managed lanes concept has been proven by the project. The benefits for the surrounding society of a new highway, extra capacity, and the choice to pay for a quicker ride if they want it, have been a resounding success. And all while not stretching public finances, and guaranteeing private sector operation and maintenance.
The latest local satisfaction rating among customers, as run by the firm every year, came in at 74% support.
“The public perception is that it’s a win-win,” Rubio says. For future projects, authorities can look to this as a viable, uncontroversial way of ticking the boxes on many highway needs. “It’s an easy sell," says Rubio.
This is not just blowing their own horn either: the North Central Texas Council of Governments, the entity in charge of planning decisions, recently delivered a very positive presentation on the project, giving full throated support.
Part of the strong social support also came from having the Dallas Police and Fire Retirement System as an early investor – one of the first US pension funds to directly invest in this kind of project. This also helped bring some vital, local voices to the project that helped carry it through difficult scenarios.
“Having them on board was very important. It was a project being done at a difficult time, the model was untested. Having the local voice involved was extremely important, creating a reputation,” says Rubio.
The praise does belong on both sides of the concession, but particularly Rubio is keen to stress the importance of TxDOT and its approach.
“It was very smart and bold,” he says. “It’s not easy for a public authority to get into something new but you look back and it has been very successful.
“Especially when other officials come to Dallas, the guys they talk to are the local people, and they are very satisfied.”
In that sense, Rubio says the project has become a case study: “It’s being analyzed in every single new procurement.”
With large-scale highway developments coming forward in Georgia, Tennessee, Illinois, Maryland and more, it’s important to celebrate the seeds of these opportunities - and direct them towards a potential successful direction of travel.
 NTE 1&2 (the hard bid P3 portion) was awarded and reached commercial close in 2010 and opened to traffic in 2014. NTE 3a&3b reached commercial close in 2013 and opened to traffic in 2018. Discussions on NTE 3c (the segment that is now opening) kicked-off in 2016 and reached commercial close in 2019. Because by 2016 the PDA contract was not anymore valid, this last segment was arranged as a change order to the NTE 3a&3b concession contract.