The 13-year, three-phase plan to build the Portsmouth Bypass assumed a traditional design-bid-build project delivery. This method uses separate firms to design and construct the facility. Responsibility for financing the roadway and operating and maintaining it once complete would remain with the sponsoring public agency, in this case ODOT.
As ODOT was preparing for the construction of phase 1, Ohio enacted new legislation in 2011 permitting the use of P3s in the state. Newly-elected Governor John Kasich supported greater collaboration with the private sector to capitalize on their resources and innovation in delivering new transportation infrastructure, especially in light of the constraints on the state's budgets. In 2012, a new Division of Innovative Delivery was formed within ODOT to identify, develop, and manage projects that would benefit from a P3 approach.
With the new authority to pursue P3s, ODOT reevaluated its portfolio of capital construction projects to identify those that would benefit from the P3 approach. Its goals in using a P3 were to reduce costs and achieve resource efficiencies with faster project completion timeframes when compared with traditional delivery methods. ODOT identified the Portsmouth Bypass project as a promising candidate and conducted a value for money (VfM) analysis in late 2012. This type of analysis generally compares two or more methods of project procurement to determine which one offers the best "value" to the state.
ODOT's analysis identified a number of reasons that a P3 option would present a better value to the state than the traditional approach. ODOT would have greater certainty over the project's price, schedule, and operations and maintenance standards since the risks associated with these major project components would shift to the private partner. ODOT also determined that the project could be completed eight years sooner than a state-led effort, and in a single phase. The P3 approach would also engender competition and a favorable bidding environment. This was advantageous when undertaking a project in a part of the state with historically limited competition among construction firms, especially for paving contractors. Contractually, fewer "interfaces" between project participants would also reduce the possibility for disputes.
In addition, the P3 option would require less initial funding from ODOT because of the private partner's upfront financing, freeing up budget capacity for other projects in ODOT's work program. A private partner's financing package likely would capitalize on a federal loan program called TIFIA, which provides credit assistance to projects of regional or national significance. TIFIA could lend the project money at a low interest rate not otherwise available from other debt financing options. The loan program requires a dedicated revenue source for repayment, which in this case would be availability payments from ODOT. Availability payments are annual payments made to a private developer for the satisfactory management and upkeep of the facility and can be adjusted downward if certain performance targets are not met. Overall, ODOT's analysis estimated that the P3 option would require 50 percent less public funding during the originally estimated 13-year construction period.
Overall, ODOT concluded that there were a number of compelling reasons to advance the Portsmouth Bypass as an opportunity to gain experience with P3s, and by early 2013, decided to pursue the design-build-finance-operate-maintain approach to deliver the project.