Commentary: The case for a Purple Line public-private partnership

August 18, 2013

Occasionally, we publish blog posts, speech transcripts and other commentaries of interest to the Washington business community. Here’s an excerpt from a fact sheet issued by the Maryland Transit Administration outlining why Gov. Martin O’Malley is pursuing a public-private partnership, or P3, to build and run a light rail line connecting Montgomery and Prince George’s counties.

The Purple Line is a 16-mile light rail line that runs east-west inside the Capital Beltway with direct connections to Metrorail’s Orange Line, Green Line and two branches of the Red Line and to MARC’s Brunswick, Camden and Penn Lines. A total of 21 stations are planned. The total project cost is $2.2 billion.

The Purple Line is a great candidate for delivery as a P3 for several reasons:

■It is large and complex enough to have a potential for cost savings, but not too large to deter private interest.

■The Maryland Transit Administration’s other rail lines are in Baltimore, so it makes sense that the Purple Line be constructed and operated independently from these existing rail lines.

A P3 is a recognized project delivery approach in the National Capital Region.

The selection of a P3 delivery method for this project means that a single private partner will be responsible for designing, constructing, operating and maintaining the project, as well as providing some financing. This innovative project delivery method differs from a typical project in which the state separately bids for the design and construction of the transit line and then operates the system, such as Light Rail in Baltimore.

This P3 approach is known as a design-build-finance-operate-maintain and is used extensively in Canada for rail projects and also for a rail transit project in Denver.

The private partnership will manage a team of primarily local workers and contractors to ensure successful delivery of the project, bringing creativity and efficiency.

By having the contractor who builds it also responsible for long-term operations and maintenance, the contractor has greater incentive to manage risks and design a project that is well operated and maintained over the long term.

In return for operating, maintaining and financing a portion of construction, the state will pay the contractor annual payments throughout the 30- to 40-year contract period. Deductions are made from the payments if the contractor does not meet predetermined performance targets, such as on-time performance, vehicle cleanliness and customer service.

The state will still pay for part of construction, provide oversight, set fares, keep fare revenue and specify service levels. The state also can specify the general appearance of stations, vehicles and other project elements, although providing bidders with more flexibility increases the potential for cost savings. It is typical for the public agency (the state) to perform all upfront environmental documentation, acquire right of way, secure general agreements with third parties such as utilities and railroads, collect fares and provide security. The state will assess whether to keep or transfer these functions to the contractor before issuing a request for proposals.

The P3 approach can accommodate other state goals, such as workforce development, minority/disadvantaged business enterprises, and environmental enhancements such as LEED-certified facilities.

The state will use a competitive solicitation process to select a private partner. Following review of the process by the General Assembly and preliminary consent by the Board of Public Works, the request for qualifications will be issued this fall. The process and evaluation criteria will be published prior to the RFQ at www.purplelinemd.com. The final request for proposals will be released next spring with construction possible in 2015.

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