Special Experimental Project Number 15 ("SEP-15") advances the use of PPPs by allowing states to identify impediments to their use in the statutes, regulations, and policies that govern the Federal-aid highway program and to request exceptions to these requirements in order to test alternative project delivery methods. Experiments may be undertaken in any area of project development governed by Federal highway laws, regulations or policies including contracting, right-of-way acquisition, project finance or compliance with environmental requirements.82 The purpose of SEP-15 is to permit state and local transportation agencies and the FHWA to identify legal requirements that impede the broader utilization of PPPs and experiment with solutions that could remove, or mitigate, these impediments. The SEP-15 program is administered by the FHWA through an application process that leads to the execution of an "Early Development Agreement," which specifies the scope of any approved experimental features. Several notable PPP projects that are currently in various stages of procurement have benefited from the SEP-15 program.
For example, the SEP-15 program has allowed FHWA to experiment with certain provisions of the TIFIA statute to facilitate a more efficient PPP procurement process. The TIFIA statute requires that applications for TIFIA credit assistance include detailed information about the borrower, the plan of finance, the sources and uses of funds, and other information which is available only after the winning bidder for the project is selected. Requiring that this detailed information be included in the TIFIA application makes it more difficult to use TIFIA credit assistance for PPP projects. Because PPPs aim to achieve financial close as soon as possible after the winning bidder is selected, if the winning bidder did not apply for TIFIA credit assistance during the bidding phase, the winning bidder may choose to forego TIFIA credit assistance because the application process will delay financial close. Alternatively, multiple bidders may apply for TIFIA credit assistance for the same project before any of them are selected as the winning bidder.
To determine whether the TIFIA application process is an impediment to PPP procurement processes, under SEP-15, FHWA authorized a limited number of experiments in which TIFIA applicants may deviate from the requirement that the detailed information be submitted with the initial application. Under the experiment, the procuring agency submits an initial application during the bidding process which contains all of the information about the project that is then available. FHWA can then provide a preliminary approval of TIFIA credit assistance, which is conditioned on the winning bidder submitting the necessary information to complete the application after the selection of the winning bidder is made. Instead of multiple bidders submitting applications for the same project, the procuring agency provides the conditional approval of TIFIA credit assistance, together with a provisional TIFIA term sheet, to all of the bidders for their use in preparing bids. Once the procuring agency selects a winning bidder, that bidder can then finalize the TIFIA application process and loan documentation with FHWA in an expeditious and timely fashion without delaying financial close. FHWA has approved a conditional approval process for TIFIA credit assistance for three projects being procured by TxDOT and for the Knik Arm Crossing Project in Alaska being procured by the Knik Arm Bridge and Toll Authority.
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82 FHWA's SEP-15 authority is derived from Section 502 of Title 23 of the U.S. Code, which allows the Secretary of Transportation to test any process thereunder to identify impediments in current statutory and regulatory procedures that impede the development and implementation of innovative project delivery methods for financing, constructing, operating and maintaining Federal-aid facilities. FHWA may permit States to deviate from the legal requirements under title 23 on a case-by-case basis. FHWA may not authorize States to deviate from legal requirements under other portions of the U.S. Code (for example, a portion codifying environmental laws).