LOS ANGELES — Voters' approval of the Los Angeles Metropolitan Transportation Authority's latest sales tax measure has spurred interest from private industry in partnering with the transit authority.
"We have received 50 unsolicited proposals and they are all private companies," said Joshua Schank, head of Metro's Office of Extraordinary Innovation. "Of the 50, nine are on major Metro projects that could develop into P3s."
Voters on Nov. 8 approved Measure M, which adds a permanent half-cent sales tax and continues in perpetuity an earlier half-cent tax approved by voters in 2008 through Measure R. The Measure R tax had been slated to end in 2039.
Metro has received three different proposals just to develop a Sepulveda Pass transit project connecting the largely residential San Fernando Valley with the employment centers on the city's Westside. The proposals came from a team led by Cintra Global Holdings Ltd.; a seven-member consortium that includes HDR and Plenary Group; and Parsons.
Proposals to accelerate a variety of other projects that include private financing have come from Parker Infrastructure Partners, Skanska, ACS, Kiewit-AECOM and Goldman Sachs.
"We hoped that our call for innovation would pique the interest of the private sector, and we're happy to say that the private sector has responded in a big way so far," Schank said.
The transit authority launched its efforts in earnest to go after public-private partnerships through an unsolicited proposal process at its inaugural "Transformation Through Transportation" conference held in February.
Metro wants proposals for projects that are delivered faster, better or cheaper, Schank said.
Metro chief executive officer Phillip Washington created the concept of asking for unsolicited proposals when he headed the Denver area's Regional Transit District, Schank said. Washington was named head of Los Angeles' transportation authority in March 2015.
Washington wooed Schank, well-known in transportation circles, away from a position as president and CEO of the Eno Center for Transportation in Washington, D.C., a nonpartisan transportation policy think tank.
He charged Schank with helping pilot new ideas within Metro and to be a liaison with private industry and academia on new concepts coming from outside the authority.
In addition to working on P3s, Schank is also working on a partnership with Uber and Lyft on discounts if their passengers use the new Metro stations. He is also looking at using new technology to change how riders pay transit fares.
The unsolicited proposal process enables private companies to submit concepts outside of the usual request for proposal process.
When Metro receives an unsolicited proposal it goes through a 60-day phase one review process to determine if it has technical and financial merit.
If it passes this initial evaluation, it moves to phase two, where Metro asks for a more detailed proposal.
If the proposal makes it through the second phase of evaluation, Metro will either develop a request for proposal and follow the agency's competitive process, or in rare instances proceed with a sole source contract if the proposal provides a unique service that can't be performed by other contractors.
Once Metro receives an unsolicited proposal, the information is confidential until an RFP is issued. As a result, no details have been revealed about what exactly the proposals are from the companies that have submitted thus far.
Schank said he can't comment on the specifics of the nine proposals other than to say they all have a financial component and claim to accelerate project delivery.
The advantage for companies of submitting unsolicited proposals is that when an RFP is developed for the project based on the idea, the company that crafted the idea makes the short-list of companies that get to deliver it, Schank said.
The companies that provide the proposals would have the advantage of knowing what is coming, but it is still a competitive process, he said.
"There is no guarantee that P3s will result in better proposals," Schank said. "The key is in not trying to do P3s for the purpose of doing them, but only if it is a significantly cheaper way of doing it and they can promise better outcomes."
In addition to the passage of Measure M, Schank also cited Metro's CEO as an attraction to private companies who want to partner with Metro, because Washington spearheaded Denver's Eagle P3 project.
That $2.2 billion project that involved $1.03 billion in federal funding and $450 million in private financing resulted in the construction of three rail lines, the purchase of 54 cars and the construction of a commuter rail maintenance facility.
Denver's transit district entered into a 34-year agreement with Denver Transit Partners to operate and maintain the lines. DTP repays its private financing from the amount it receives from the transit district.
"Metro made previous attempts at getting a P3 together, but it did not have the CEO who put together the only transit P3 in the country – and they did not have the expertise in developing P3s that we do now," Schank said.
The appeal of Measure M for private partners is that it fully funds the construction, operation and maintenance of major transportation projects that could benefit from innovative private sector approaches to project delivery and life-cycle costs, said David Yale, a Metro managing executive officer.
In addition to generating an expected $120 billion over four decades, another plus from LA Metro's standpoint is that Measure M does not sunset, providing funding for longer-term P3 arrangements, such as 50-year lifecycle cost arrangements, that would otherwise not be possible, Yale said.
Metro is supported with three separate sales tax measures, approved by voters in 1980, 1998, and 2008.
The Measure M projects that Metro considers ripe for public-private partnerships are the West Santa Ana Branch light rail project, the high desert multi-purpose corridor, the Crenshaw Northern light rail extension, the 710 South Corridor, the Sepulveda Pass transit corridor and the Interstate-5 widening project.
