AGC Addresses Contractor Risk in P3 Comments

AGC submitted comments to the Federal Highway Administration (FHWA) on a Draft Core Toll Concessions Public Private Partnership Model Contract Guide for P3 concessions using tolling as the revenue source. The Guide was prepared by FHWA in response to a requirement in MAP-21 that the agency develop model transaction documents for P3s. It is the first of several Guides that FHWA intends to produce dealing with P3 arrangements. AGC’s comments were favorable about the Guide pointing out that FHWA did a good job of balancing the desire for not mandating specific contract language with the equally strong desire to make P3s more uniform from a risk allocation point of view. AGC participated in a Listening Session that DOT held seeking suggestions on how to implement this MAP-21 directive and also previously submitted written comments and suggested at those sessions that FHWA not develop any mandatory contract language. In this set of comments, AGC suggested that the Guide go further in its recommendations for appropriate risk allocation by making suggestions about the relationship between the developer/concessionaire and the design-build firm that will perform the construction. The Guide is directed at the developer/concessionaire and addresses such construction risks as right of way acquisition, unknown underground conditions, environmental issues, permitting and others suggesting how the public owner should handle these risks as they impact the developer/concessionaire. AGC pointed out that these risks flow down from the developer/concessionaire to the design-build firm and that how these issues are resolved will impact the project’s ultimate cost. AGC also suggested that the document address the appropriate sharing of the cost of putting together a proposal, particularly in light of the political factors that can influence whether a project will ultimately move forward. AGC also suggested that once FHWA finishes all of the documents associated with this MAP-21 directive, the challenge will be to get the Guide used. Risk allocation significantly impacts the P3 market for transportation projects because unbalanced risk will discourage construction contractors from participating on these projects thereby limiting competition.