Honolulu withdraws from $9B rail P3 procurement | Dump Trucks Charlotte NC
- As part of his announcement, Caldwell also said that he has notified the Federal Transit Administration (FTA), which is providing $1.5 billion for the project, of his decision.
- Caldwell did not state exactly what was behind his decision, but the city had budgeted $1.4 billion, and one bidder, Tutor Perini, reported during a recent earnings call that its proposal for completing the project was more than $2 billion and that there were only two bidders. The Honolulu Authority for Rapid Transportation (HART), which is leading the procurement, has not released any information on the bidders or their proposal amounts.
- The city was a joint partner in the procurement with HART, and it is still up to the agency to cancel the P3 procurement. HART will discuss the city's decision, as well as how the project will move forward, at a special board meeting on Oct. 8.
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The price of the 20-mile commuter light rail project has increased by $4 billion since 2012 and is about seven years behind schedule. A state auditor’s report slammed HART for its mismanagement of the project. In addition, the FTA said it will not release $744 million of remaining grant money until HART contracts out and proves it can finance the last leg.
So, concerns about mismanagement and funding aside, how difficult is it for agencies like HART to switch from a P3 to a different model at this stage of procurement? It wouldn't necessarily spell disaster for the project, said attorney Mitchell Bierman, partner at Weiss Serota Helfman Cole & Bierman P.L. in Florida.
"It may not be such a big hassle," he said.
On the government side of a P3 procurement, Bierman said, there has to be a great deal of specificity in terms of what will be expected from vendors so that it will be able to properly gauge performance. If the specifications were presented to vendors in adequate detail, it could be just a matter of pulling out the unwanted elements such as design, operations or maintenance.
"As long as the specifications were well written to begin with, it may not be that difficult to pivot to a traditional owner-contractor model," he said. "At this point, their task may well be one of subtraction primarily."
It would be more difficult to exit a P3 if the project was underway, Bierman said, because the vendors typically make a big upfront capital investment and have the opportunity to amortize that investment over a long period of time.
Last year when Denver International Airport (DEN) officials fired Great Hall Partners (GHP), which had a $1.8 billion P3 contract to complete the Great Hall project and then operate and maintain it, the airport chose to ditch the P3 model and hire a construction manager instead. As part of the deal, DEN had to cover GHP's lender financing, termination fees and outstanding invoices.