Corps Picks Four Projects to Evaluate for P3s
The U.S. Army Corps of Engineers has selected four major civil-works projects as candidates for a new public-private partnership (P3) pilot program, which aims to speed up project construction and reduce costs.
The program is part of a broader Revolutionizing USACE Civil Works effort to accelerate project starts and completions. One goal is to cut the Corps' huge backlog—approaching $100 billion—of congressionally authorized but unfunded projects.
Decisions on whether the four projects will advance as P3s will not come quickly, however. The Corps says it will be at least six months and as many as 24 months before it determines whether a P3 approach will work for the projects.
The selected projects, which the Corps announced on June 21, include two in Texas—levee raising and other storm protection work from Sabine Pass to Galveston Bay and deepening the Port of Brownsville ship channel.
Also on the list are an environmental restoration project for the Los Angeles River and a new second lock at Sault Ste. Marie in Michigan.
The Corps says the four projects were chosen from among eight submissions and “will be further developed and validated” to see if they should move forward as P3’s. Lauren Leuck, strategic communication lead for Revolutionize USACE Civil Works, says,"We're in the very early stages" of these projects' development.
The largest of the four projects is the $3.9-billion Sabine Pass-Galveston Bay flood protection plan. It will draw on “private entities” for the nonfederal share, the Corps says. Nonfederal sponsors include the Texas General Land Office, the Special Purpose Vehicle and Trust: two local drainage districts, and Orange County, Texas.
The Brownsville ship channel project would involve dredging the waterway to 52 ft from 42 ft and carries an estimated cost of $288 million. The Brownsville Navigation District is the nonfederal sponsor. Nonfederal revenue would come from private sources, according to the Corps
The L.A. River ecosystem improvement plan is pegged at $1.4 billion. Besides federal funds, it will involve grants from state and local government and private foundations, along with ‘”usage revenue, tax assessments and “general funds,” according to the Corps.
The new second Soo Lock in Michigan is estimated to cost $922 million. The Michigan Dept. of Transportation is the nonfederal sponsor and state appropriations and user fees are listed as the nonfederal revenue sources.
A fifth project, highway bridges over Massachusetts' Cape Cod Canal, also was apparently going to be selected, but “has been put on hold,” Leuck says. She says that the Corps and the Federal Highway Administration “are exploring a variety of options to fund that project.”
Although decisions on the four projects will not come for a while, the Corps is committed enough to the P3 idea that it plans to make a request for P3 proposals an annual occurrence.
It has high-level support within the civil works program. Last September, R.D. James, assistant secretary of the Army for civil works, sent a memorandum to the Chief of Engineers, Lt. Gen. Todd Semonite, outlining policies for the P3 program.
For example, to be eligible, a project's construction cost must be over $50 million, must use some combination of design, build, finance, operation and maintenance and be able to produce revenue or use nonfederal funding.
Industry observers react
Many questions remain to be answered about the potential P3 projects. John Doyle, special counsel with law and lobbying firm Jones Walker LLP, says, "Conceptually, if this can be made to work over the long haul it could have a very substantial positive effect on at least parts of the civil works program."
But Doyle, a former senior Army civil works official, adds, "That’s a long-term outcome that depends on being able to demonstrate in the near term that it is in fact workable in the water resources world."
Jim Walker, American Association of Port Authorities director of navigation policy and legislation, noted in emailed comments that in general, "The federal government as a whole has had difficulty developing and executing P3s."
The big exception is the Dept. of Transportation, which has provided funds for many P3 highway and bridge projects. In most cases, it is the states, not U.S. DOT, that administers construction contracts, including those for P3s, Walker points out.
He contends that the views of the Office of Management and Budget have "stymied' federal P3 efforts, making such projects "unattractive to federal agencies and the private sector." One issue has been how OMB "scores" multi-year P3 projects to determine their initial-year cost.
Walker adds that congressional appropriators also have hampered use of P3s, being concerned about such projects that would need appropriations for multiple years, thus "tying appropriators' hands."
Walker, also a former senior Corps official, observes that House appropriators rejected a Trump administration request for $150 million in the fiscal year 2020 budget for an "Innovative Funding Partnerships" program.
Gary Loew, a senior adviser with water-resources consulting firm Dawson & Associates, says of the pilot program, "I think it's a great start." Loew, who had a nearly 40-year career as a Corps official, says that in 10 to 20 years, "I can see [the Corps] slowly accumulating new [legal] authorities to have an effective P3 program that could be as much as 20% to 25% of the Corps funding sources in any given years." He adds, "But I don't think that's going to happen quickly."
The Corps does have one P3 project underway: elements of a $2.8-billion flood control improvement plan in the Fargo, N.D.-Moorhead, Minn., area.
It has had a long, bumpy path. It was authorized in 2014 but had a permit denied by the state of Minnesota and had construction suspended by a court injunction. But the two states developed a Plan B and the Corps and the nonfederal sponsors each were to build a portion of the project.
Things seemed on track but on June 24, The Forum, a Fargo newspaper, reported that the Buffalo-Red River Watershed District voted against a permit for the project, an action that the paper described as "a major setback" for the plan.