How the Final Highway Bill Impacts Design-Build
by Louis J. Jenny, Richard Thomas and Andrew Ausel | December 3, 2015
Congress has approved a five year transportation authorization bill, the first such authorization legislation to last longer than two years since 2005. The compromise bill was released by House and Senate negotiators December 1st, and approved December 3rd, first by a vote of 359-65 in the U.S. House of Representatives and hours later by a vote of 83-16 in the U.S. Senate.
Overall the bill would boost highway spending by 14.9 percent and transit spending by 18.1 percent. The measure is less than the six-year $400 billion plan the Obama Administration was supporting.
Provides authorization and funding for five years
- It is a five year, $305 billion authorization.
- It has $281 billion in contracting authority over five years for the Highway Trust Fund for roads, bridges, mass transit and other programs.
- $12.2 billion is tied to capital investment grants, $10.36 billion for rail-related projects, $980 million for National Highway Traffic Safety Administration vehicle safety provisions, among other provisions
- The measure is financed in part by a one-time use of Federal Reserve surplus funds and by a reduction in the dividend national banks receive from the Fed.
- There is no increase in the federal 18.4 cents per gallon tax that finances the trust fund.
Prioritizes bridges and large, nationally-important facilities
- The bill provides funding for projects to maintain and repair bridges off of the National Highway System, as these bridges often struggle to find reliable funding.
- The bill also shifts additional revenue towards the Interstate System and the National Highway System to address the significant maintenance backlog on those.
Design-Build Impact: The bill encourages states to bundle two or more bridge projects together to attract more interest from bidders and private investment. Bundling lends itself well to design-build and P3s. Historically, most bridge programs where the projects were bundled were completed using design-build.
Provides funding to focus on freight and goods movement
- The bill establishes a formula-based freight program, which will provide funds to all states to improve goods movement, reducing costs and improving performance for business.
Design-Build Impact: As part of the criteria for project evaluation and selection, priority will be put on projects in excess of $100 million that ease congestion. The large project size and location, which are more likely to be in urban areas, historically have been done using design-build.
Accelerates project delivery and increases flexibility
- Building on the reforms in MAP-21, the bill retains all design-build provisions enacted in MAP-21 and continues to accelerate the project delivery process while protecting the environment and public.
- New reforms would improve collaboration between the lead agency and the participating agencies, allow for greater reliance on documents prepared during the planning process, and reduce duplication between agencies involved in the federal environmental review and permitting
- Provides for more efficient and transparent environmental reviews and expands the use of categorical exclusions for multi-modal projects.
- Requires the DOT to annually produce a public report on the costs and benefits of deploying new technologies and innovations that provide cost and time savings.
Design-Build Impact: These provisions promote and ease the use of alternative delivery methods like design-build. The program reports should reveal the benefits of using design-build and lead to greater acceptance and utilization.
Major cuts to the Transportation Infrastructure Finance and Innovation Act (TIFIA)
- Unfortunately, while TIFIA was funded at $1 billion annually in the original MAP-21, it’s funding has been cut to just $275 million for next year, only increasing up to $300 million by 2020.
Design-Build Impact: Almost all TIFIA projects are P3s, which use design-build. The industry has been very supportive of TIFIA and won’t be happy about this. Check out this op-ed from The Hill on how successful TIFIA has been and why it should not be cut.
Creation of National Surface Transportation and Innovative Finance Bureau
- The bill creates the National Surface Transportation and Innovative Finance Bureau within the U.S. DOT to promote innovative financing best practices and reduce cost, risks and project delivery time.
- The Bureau will work with the DOT, states, public and private interests to develop and promote best practices for innovative financing, P3s, procedures, handling unsolicited bids, standard contracts, tools and techniques.
- The Bureau will share innovative financing best practices and case studies between State and local governments interested in utilizing innovative financing methods.
- Requires the Bureau within a year to submit a report that evaluates differences between design-bid-build, design-build and P3 procurements carried out under the fixed guideway program.
- The Bureau will provide technical assistance and training to field and headquarters staff of federal agencies on policy changes and innovative approaches to the delivery of projects.
- The Bureau will share best practices related to permitting and reviews for projects.
- The Bureau is required to develop benchmarks for acceptable project cost increases and delays in project delivery, to measure cost and delivery changes over the life cycle of a project. These benchmarks are to be tailored as necessary to the various types of project delivery methods.
Design-Build Impact: The bill’s focus on innovative delivery, education and training, and best practices really creates an opportunity for DBIA and design-build. The bill creates an opportunity to educate and collaborate with owners, as well as promote DBIA training, contracts and best practices.
This post was updated December 3 to account for the House and Senate votes.