P3 Lessons from South Mountain Freeway

How Nontraditional Procurement Shaved $122M+ and Three Years Off a Massive Highway Project

Construction begins later this summer on Arizona Department of Transportation's largest highway undertaking in history. At a cost of $1.8 billion, the 22-mile South Mountain Freeway will bypass the heart of Phoenix, offering greater bandwidth across the city's southwest quadrant while reducing congestion on its central artery. The project has turned heads around the industry because its sophisticated alternative delivery package is expected to result in cost savings between $122 and $200 million and bring motorists onto the new freeway about three years ahead of schedule.

Innovative project procurement and delivery is the shortest explanation for how and why this is possible: a public-private partnership (P3) utilising performance-based specifications. A more descriptive answer starts with a series of calculated decisions informed by economic and risk modelling and technical analyses, which led to the right P3 procurement with enough built-in flexibility to enable cost-saving innovations.

But arriving at the right P3 package did not happen overnight.

Having partnered with ADOT since 2010 as its statewide P3 program manager, HDR has worked closely with the department to structure its overall P3 program. That includes developing policies, procedures, guidelines and a transparent process for evaluating and implementing P3 projects. The program was designed to better leverage Arizona's limited financial resources while establishing viable P3 projects that will improve mobility and enhance safety.

Prior to South Mountain Freeway, with HDR's assistance, ADOT had successfully structured smaller and simpler P3 delivery packages. South Mountain Freeway was by far the largest and most complex P3, the greatest challenge yet for the department's flourishing program. In fact, in its previous design-bid-build structure, the freeway would have been delivered as nine, administratively independent projects. Completion of each project was staggered to facilitate funding. The freeway would not have opened until 2022.

A technical advisory committee facilitated by HDR evaluated six potential delivery methods, including four P3 delivery approaches, each of which shrunk nine projects into one. Among them were accelerated design-build, design-build-finance, design-build-finance-maintain and design-build-maintain. The committee recommended South Mountain Freeway's unique, design-build-maintain (DBM) model after weighing the merits identified by intensive cost-risk assessment (CRA) and value for money (VFM) analysis.

Dollar for dollar, DBM did not significantly outperform all other P3 structuring options. It did, however, offer distinct qualitative advantages given ADOT's maintenance appropriation levels and because of the DBM/P3's inherent risk transfer. Additionally, with the DBM method, completion of the new freeway accelerated so that it will now open in 2019.
Arriving at the DBM method of P3 delivery was a strong beginning but still only a start. Significant additional savings could later come from the adaptability afforded the developer. HDR helped facilitate a cultural shift within ADOT, providing white papers that addressed potential technical issues and fostering momentum away from the blanket use of prescribed provisions.

"Normally, ADOT engineers would use standard design and construction specifications but we recommended that they consider performance-based specifications," said Ken Smith, HDR principal project manager. "Using performance-based technical provisions gave the proposers more flexibility, allowing for more innovation. This intellectual engineering made it possible to incorporate alternative technical concepts and it paid off because, in the end, ADOT conservatively estimated $122 million in cost savings."

Beyond the P3

Integrated Services Laid a Foundation for Success

Before serving as statewide P3 advisor, HDR entered the South Mountain Freeway project in its infancy to assist ADOT with corridor assessment. The firm completed an environmental impact statement and location/design concept report. Both documents ultimately contributed to the project’s Federal Highway Administration approval in March 2015.

During the EIS process, HDR managed a public involvement program that kept information about this important freeway study flowing to various ADOT technical groups, consultants and partner agencies, as well as elected officials, key stakeholders and the general public. During the 90-day draft review period, a robust schedule of community meetings, a daylong public hearing and an online hearing invited public participation and feedback. More than 8,000 comments streamed in from traditional and online sources.

“We worked closely with the public for more than a decade,” said Public Involvement Project Manager Heather Honsberger. “Maintaining this conversation with the community informed our outreach program and helped identify key issues and shape messaging for education materials, stakeholder briefings and multi-media releases.”

Informational and educational materials developed in-house at ADOT’s behest, including a project video and 3D visual simulation fly through, helped foster public understanding of the project.

In August 2015, ADOT selected HDR as its general engineering consultant (GEC) for the duration of the South Mountain Freeway design and construction. HDR and its team are supporting department staff and providing oversight during all project phases in the technical areas of environmental design, right-of-way procurement, utility relocation, and construction. HDR staff will also supplement ADOT oversight of scheduling, change management, construction quality and labor compliance.

Throughout the design-build-maintain lifecycle, South Mountain Freeway is estimated to create about 30,000 jobs. Early forecasts project about $2 billion in economic development.

“The freeway will serve for years to come as more than a critical thoroughfare for Arizona’s largest metropolis,” said DJ Gribbin, HDR transportation strategic consulting director. “It is also a guide for other DOTs on how to supply needed infrastructure amid ever-increasing demand, and a shining example of what alternative delivery can make possible.”