Honolulu withdraws from $9B rail P3 procurement

Kennith Bogan

Table of Contents

Dive Short:

  • Honolulu Mayor Kirk Caldwell has withdrawn the metropolis from participation in a general public-private partnership (P3) for the final four-mile leg of the $nine billion Honolulu Rail task, Honolulu Civil Defeat claimed. As part of his announcement, Caldwell also explained that he has notified the Federal Transit Administration (FTA), which is offering $1.five billion for the task, of his decision. 
  • Caldwell did not state specifically what was behind his decision, but the metropolis had budgeted $1.four billion, and 1 bidder, Tutor Perini, reported throughout a recent earnings call that its proposal for completing the task was far more than $2 billion and that there were being only two bidders. The Honolulu Authority for Speedy Transportation (HART), which is top the procurement, has not unveiled any data on the bidders or their proposal quantities.
  • The metropolis was a joint associate in the procurement with HART, and it is however up to the agency to cancel the P3 procurement. HART will explore the city’s decision, as nicely as how the task will shift forward, at a particular board assembly on Oct. 8. 

Dive Insight:

The price of the twenty-mile commuter light rail task has enhanced by $four billion considering that 2012 and is about seven many years behind schedule. A state auditor’s report slammed HART for its mismanagement of the task. In addition, the FTA explained it will not release $744 million of remaining grant income until HART contracts out and proves it can finance the final leg.

So, concerns about mismanagement and funding aside, how challenging is it for companies like HART to switch from a P3 to a different product at this stage of procurement? It wouldn’t necessarily spell disaster for the task, explained lawyer Mitchell Bierman, associate at Weiss Serota Helfman Cole & Bierman P.L. in Florida. 

“It may possibly not be this sort of a major hassle,” he explained. 

On the federal government aspect of a P3 procurement, Bierman explained, there has to be a fantastic offer of specificity in phrases of what will be expected from suppliers so that it will be ready to effectively gauge performance. If the technical specs were being introduced to suppliers in enough detail, it could be just a subject of pulling out the unwanted factors this sort of as style, functions or servicing. 

“As extended as the technical specs were being nicely created to start off with, it may possibly not be that challenging to pivot to a regular proprietor-contractor product,” he explained. “At this point, their process may possibly nicely be 1 of subtraction principally.”

It would be far more challenging to exit a P3 if the task was underway, Bierman explained, because the suppliers typically make a major upfront cash investment and have the prospect to amortize that investment in excess of a extended period of time of time. 

Previous 12 months when Denver Global Airport (DEN) officials fired Wonderful Corridor Associates (GHP), which had a $1.8 billion P3 agreement to total the Wonderful Corridor task and then run and sustain it, the airport chose to ditch the P3 product and hire a building manager in its place. As part of the offer, DEN had to deal with GHP’s lender financing, termination fees and remarkable invoices. 

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