Public-Private Partnership Proposal Submitted for South Mountain Freeway

PHOENIX — A group of private companies has suggested a public-private partnership to construct the proposed South Mountain Freeway, perhaps paving the way to a faster and less-expensive model for construction. The highway, if built under this proposal, would not be a toll road.

This is the first unsolicited proposal for a highway public-private partnership submitted to the Arizona Department of Transportation. Under state law, ADOT is required to conduct an initial review of the proposal – which the private companies pay for – before deciding if the concept merits an open solicitation for other companies to submit competitive proposals.

The South Mountain Freeway remains a corridor under study, and this public-private partnership proposal has no impact on the ongoing environmental impact statement that is scheduled to be finalized in 2014. The environmental impact statement must be completed and acceptable to the Federal Highway Administration regardless of how the proposed project is funded or constructed.

“Any public-private partnership proposal has to be aligned with the goals and interests of taxpayers. We look for concepts that can be done better, faster and less expensively, providing real value for the traveling public,” said ADOT Director John Halikowski. “As the first unsolicited proposal for a highway project, this concept shows the role ADOT is playing in seeking innovative solutions to address the state’s transportation challenges.”

Following the initial review of the concept, ADOT will complete a more detailed analysis of the partnership proposal. If the proposal passes this second phase, and there is a determination of merit, ADOT may use any part or the entire unsolicited proposal as the basis for a request for proposals seeking other firms to submit competitive proposals.

The private companies – led by Kiewit Development Co., Kiewit Infrastructure West Co., Sundt Construction, Inc. and Parsons Corporation – are working under the name South Mountain Development Group. The group has outlined several potential benefits of the public-private partnership:

• Examine constructing the entire corridor at a lower cost and ahead of the current planned schedule
• Explore private sector investment and financial solutions that may maximize the use and allocation of limited public funds with no tolling or user fees
• Offer flexibility to adapt to changes in project concept, with no involvement in the environmental process or selection of the project alignment
• Provide significant subcontracting and job opportunities for local contractors to ensure the greatest benefit to the local economy and taxpayers

According to an executive summary of the proposal submitted by South Mountain Development Group, “The primary goal of the proposal is to provide value to ADOT and the people of Arizona by exploring concept definition, scope and financial solutions to advance the project’s development. The South Mountain Freeway is a critical project to the region and its economic recovery. It has been on the books for 30 years and has been part of a regional freeway plan approved on two separate ballot measures, first in 1985 and again in 2004. Early delivery of this project will reduce congestion, create an economic boost by generating much needed construction jobs and provide a long awaited route to bypass downtown Phoenix.”

Public-private partnerships allow a private sector entity to participate in the delivery of a transportation project. ADOT has authority to partner with the private sector to build or improve Arizona transportation facilities.

A public-private partnership, often simply called a P3, refers to the contractual agreement between a public agency and a private sector entity that allows the private sector entity to have greater participation in the delivery of a transportation project. Using traditional project delivery methods, ADOT bears all of the risks and responsibilities for a project. Under a public-private partnership, the private partner takes on some or all of the project's risks and responsibilities.