By early 2013, TxDOT took steps to launch the procurement of the SH 288 Toll Lanes in Harris County. Two important activities took place. TxDOT made certain statutorily-required determinations on delivering the project on a P3 basis and initiated the process to solicit interested private partners to participate in the project's delivery.
Since 2011, Texas transportation law has required convening a so-called SB 1420 Committee to report to TxDOT's Executive Director on proposed toll projects where the private sector has a "financial interest" (i.e. when a P3 concession is used). The committee must be convened for projects using regional funding, county or municipal rights-of-way, or local revenues. The committee must make determinations on the allocation of financial risk, method of financing, and tolling structure and methodology. Committee membership includes representatives from TxDOT, the local metropolitan planning organization, the relevant toll authority, and affected local governments.
With SH 288, the committee compared the overall costs of a design-build procurement, which does not involve private financing or long-term operations and maintenance, with a full design-build-finance-operate-maintain approach. The design-build option would require significant public investment because the constructor would have very little financial stake in the project. With the full concession, TxDOT could actually expect an upfront payment from the private partner for the right to implement the project because of potential earnings from toll proceeds over the life of the concession.
The SB 1420 Committee for SH 288 issued a report in April 2013 confirming that all project financial risk would be retained by the private developer and that the financing package for the project would rely exclusively on private funds. (The Texas Medical Center connector was added to the SH 288 project later in the year and would not be financed by the private developer.) The report also established a tolling policy prescribing minimum and maximum rates, a protocol for increasing toll rates over time, expectations for travel speeds on the tolled lanes, and other policies such as exempting public transit buses.
After the SB 1420 Committee completed its work, TxDOT issued a Request for Qualifications in early May 2013 to identify the most qualified private firms to submit detailed proposals on the design-build-finance-operate-maintain concession. Several weeks later, it held a prequalification workshop to present the project to interested bidders.
TxDOT structured the project to include at a minimum the addition of the four express toll lanes along the 10.3-mile section in Harris County, direct connectors to the Texas Medical Center pending completion of further studies later in 2013, a new interchange with Beltway 8, and operations and maintenance of the full corridor including the general-purpose lanes and frontage roads for the duration of a 52-year concession period. Optional components of the project included the addition of two general-purpose lanes between I-610 and Beltway 8 and improvements to the I-610 interchange, requiring additional right-of-way acquisition.
TxDOT estimated the design-build cost of the required components of the project within Harris County to be $567 million, with up to another $50 million for the Texas Medical Center connector. TxDOT indicated to potential bidders that it had submitted an application for a TIFIA loan from the federal government to help finance the project. The TIFIA program provides low-interest loans and credit assistance to projects of national or regional significance. TxDOT would also seek an allocation of private activity bonds (PABs) from the federal government. These bonds allow a private entity to gain access to the tax-free municipal debt market, reducing the cost of financing a P3 project. TxDOT reiterated that no public funding would be available except for the Texas Medical Center connector.
Three private consortia responded to the Request for Qualifications and all were shortlisted by TxDOT in September 2013. TxDOT issued a Request for Proposals in January 2014 and began to hold one-on-one meetings in February to discuss its requirements with the bidders. Proposals were initially due in July 2014, but the submission date was ultimately delayed until January 2015, when the bidders were required to submit separate technical and financial proposals.
TxDOT announced a conditional project award to Blueridge Transportation Group in late February 2015. The team is composed of three equity partners: ACS Infrastructure Development, an American subsidiary of a large Spanish construction firm; InfraRed Capital Partners, a British infrastructure and real estate investment firm formerly part of the banking giant HSBC; and Shikun & Binui Concessions, a division of an Israeli construction, real estate, and infrastructure firm. Blueridge Transportation Group achieved the highest combined financial and technical score, which TxDOT had weighted 80/20, offering the best value to the state. Blueridge Transportation Group's proposal included 75 percent of the ultimate configuration's I-610 interchange improvements, increasing the total cost of the project (although not TxDOT's contribution) but saving significant future capital and maintenance costs.
The formal execution of the P3 agreement between TxDOT and Blueridge Transportation Group-a process known as commercial close-occurred in March 2016. Blueridge Transportation Group then began advancing final design, utility coordination, geotechnical surveying, and securing its financing.