Virginia officials signed a contract with a private firm yesterday that sets it on course to engineer, design and build the extension of Metro to Tysons Corner and the Dulles corridor, marking the first time that a Metro extension would be built by a private company instead of the transit agency.
The unusual arrangement between the state and Dulles Transit Partners LLC follows more than a year of confidential negotiations. It is the first application of Virginia's 1995 public-private partnership laws to a transit proposal. In all other instances, the state has used the law for road projects.
There are few similar arrangements nationwide, which has drawn the notice of federal officials as well as the transit industry.
The stakes are high. The $4 billion Dulles project is the third most expensive rail proposal in the country, surpassed only by two projects in Manhattan -- a $17 billion plan to build a subway along Second Avenue and a $5.2 billion plan to extend the Long Island Rail Road from the East River to Grand Central station.
Dulles Transit Partners is composed of two engineering giants, Bechtel Corp. and Washington International Group. A third company, West Group, dropped out of the partnership this year amid concerns by federal officials about a possible conflict of interest. West Group is the largest landowner in Tysons Corner and would have been helping to build a rail line that would increase its property value. It also owns land along the right of way that will likely be purchased by the state.
In the contract signed yesterday, state officials agreed to pay Dulles Transit Partners $45.5 million for preliminary engineering for the 23-mile rail extension from West Falls Church to Route 772 in Loudoun County. The work is expected to take about 15 months and result in a more detailed plan that will include stronger estimates for construction costs. The state and the firm would then have to negotiate a separate agreement for final design and construction.
Yesterday's action came a day after the Federal Transit Administration approved Virginia's request to begin engineering, but only for the first phase of the project -- an 11-mile stretch from West Falls Church to Tysons Corner and Wiehle Avenue in Reston. The federal government is expected to pay some of the engineering costs for the first phase but has made no commitments beyond that.
Karen J. Rae, director of the Virginia Department of Rail and Public Transportation, said that the deal with the private firm gives the state greater control and that the project will be completed faster and at a lower cost than if Virginia had allowed Metro to do the work.
The $45.5 million price charged by Dulles Transit Partners for preliminary engineering is 8 percent less than estimates for the work given by an independent engineering firm, Rae said. In addition, the private firm has agreed to forgo $15 million of that payment if the state decides after the preliminary engineering that it doesn't want Dulles Transit Partners to perform the final design and construction, Rae said. In addition, the private firm has pledged to invest $25 million in the project. Virginia will reimburse the firm only if the state selects it to perform final design and construction.
Still, the figure is more than the $42 million that Metro estimated it would cost the transit agency to perform preliminary engineering.
Rae said that Metro's estimate was too speculative to be measured against the price charged by Dulles Transit Partners and that it is only one factor among several in the state's decision.
"This is about a package," Rae said. "Dulles Transit Partners have made a huge, upfront investment that's at risk; they negotiated a price that's 8 percent below the number given us by independent engineering consultants. It's a whole package. And I don't think the traditional [Metro] approach would have gotten us this far. . . . There are very few companies out there willing to invest major dollars upfront to get a project like Dulles up and moving."
Spokesmen for Dulles Transit Partners did not return telephone calls for comment yesterday.
Under the deal, Metro will get paid $12.5 million to oversee the preliminary engineering work by Dulles Transit Partners. The Federal Transit Administration required Virginia to use Metro's expertise because the state Department of Rail and Public Transportation has not managed construction of a major rail project.
The state's Public-Private Transportation Act was enacted to get transportation projects built more quickly and efficiently and to encourage private investment.
Typically, a company pays for a road or other improvement and, in exchange, gets the right to collect toll revenue to pay back its costs and make a profit.
The Dulles rail line differs because it is a transit project, and a private contractor would not be able to recoup costs and make a profit by collecting fares. In this case, the partnership agrees to build the project at a fixed price with built-in profit margin. If costs increase during construction, as they tend to do on mega-projects, the state and the private firm share the financial risk, Rae said.
Meanwhile, a Fairfax County Circuit Court judge dismissed a lawsuit yesterday filed by landowners from the western part of the county who argued that Virginia officials violated state law when they selected rail to serve the Dulles corridor. They are considering an appeal, their attorney said.