Design-Build
Georgia DOT Drops Big P3 Procurement After Price Comes In Unexpectedly High
State officials pledge to continue $1.8-billion project despite setback
Rendering of a section of the additional lanes planned in the SR 400 project. Image: Georgia DOT
State transportation officials in Georgia dropped a public-private partnership plan for the estimated $1.8-billion lane additions to State Route 400 in Forsythe and Fulton Counties after the price from the selected P3 team came in unexpectedly high.
Both the Georgia Transportation Board and the proposing team, led by contractor The Walsh Group and its subsidiary Archer-Western, expressed their regrets about the project delay and work gone to waste.
The long-planned finance-design-build-operate contract was supposed to create new tolled express lanes on a 16-mile stretch of one of the state's busiest highways. Georgia will continue the project without employing a P3, said Meg Pirkle, Georgia Dept. of Transportation chief engineer. The submitted price, which she said "far exceeds" the state funding available, was not disclosed.
The change of plans comes at a time when the risks of infrastructure design-build P3s are being more widely discussed.
The change of plans comes at a time when the risks of infrastructure design-build P3s are being more widely discussed. Numerous prior design-build P3 team members have posted losses on their bottom lines, according to recent studies.
The proposing team, led by developer Meridiam and Walsh Investors, included Archer-Western Construction and C.W. Matthews Contracting Co. in a joint venture. Arcadis was the lead engineer and Meridiam and Walsh Investors were to be lead maintenance firms. Two competitors eliminated earlier in the selection process included one team partly comprised of ACS, Dragados, Halmar and Parsons, and the second that included John Laing, Acciona and Wood Environment.
A spokesman for Chicago-based The Walsh Group said, “Our team invested a significant amount of time and money into this procurement, and we’re extremely disappointed in the outcome."
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Members of the Georgia Transportation Board, which oversees the DOT, also expressed deep disappointment. At a meeting Aug. 19 in Atlanta at which the board formally rejected the P3 price proposal and called off the procurement, somber tones were used to describe the let-down.
'Upsetting Point in the Cycle'
Kevin Abel, a board vice chairman, said that he had observed "a tremendous amount of blood, sweat and tears put into this project's planning, design and procurement."
"This is obviously a very upsetting point in the cycle ….," he said, adding that the project remained alive and important to Georgia.
Pirkle cited recent material-price inflation that has sent lumber and steel prices sky-rocketing during the pandemic. "The proposal was received in May during the height of this unusual COVID economy," she said.
But even with the price volatility and supply chain disruptions, "the price received was substantially higher than anticipated in our project budget."
There was one telling moment during the board P3 committee meeting on Aug. 19. One member asked if the state cost estimates were made very many months before the P3 price proposal was submitted.
The state's estimate was made "some months before and we consider that our estimate was a little low," said Pirkle.
TThe board member then asked, "Do we allow cost or pricing flexibility during the ongoing life of this project to account for events like we just experienced and are still in the midst of?"
Pirkle replied, "Not typically."
