CPAQ0207 by Catharine Snell

Economizing Concrete Pavements

Second Quarter 2007, Vol. 3, No. 2

SURFACE TRANSPORTATION

The magazine of the American Concrete Pavement Association www.pavement.com

Courtesy Fluor Corp.

Public-Private Partnerships

What Are They? What Do They Mean to You?

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SURFACE TRANSPORTATION Second Quarter 2007, Vol. 3, No. 2

6 Public-Private Partnerships

14 Public Project Funding Trends

FEATURES

DEPARTMENTS

Public-Private Partnerships What Are They? What Do They Mean to You? A public-private partnership is an agreement between public and private sector parties on the provision of public infrastructure. While different models or combinations of models work for different projects, different states and different private entities, there is a real opportunity for the concrete pavement industry in PPPs.

Government Spotlight: Reports Detail Critical Highway Needs, Set Stage for Action Findings from three of six reports prepared by the American Association of State Highway and Transportation Officials (AASHTO) for National Transportation Policy and Revenue Study Commission.

Public Project Funding Trends Innovation and Change in Public Works Funding Highways, local roads and airports all face an increasing need for infrastructure to handle new capacity, but each sector faces funding challenges that create a need for innovation in construction and creative funding, according to experts interviewed by Surface Transportation.

Economizing Concrete Pavements Alternate Bids, New Designs and Willingness to Change Pay Off Saving $35 million by thinking outside the box is the result of Missouri Department of Transportation’s (DOT) use of an alternate bid process that includes designing a road project in two different ways. The Missouri/Kansas Chapter of the ACPA and the Kansas DOT are also employing innovative practices and designs to economize on concrete.

Surface Transportation is published for: American Concrete Pavement Association 5420 Old Orchard Road, Suite A100 Skokie, IL 60077 Phone: (847) 966-2272 Fax: (847) 966-9970 www.pavement.com Published by: Naylor, LLC 5950 NW 1st Place Gainesville, FL 32607 Phone: (352) 332-1252 (800) 369-6220 Fax: (352) 331-3525 www.naylor.com Publisher: Tim McNichols Editor: Thea Galenes Project Manager: Tom Schell Marketing & Research Associate: Elsbeth Russell Book Manager: Rick Sauers Account Representatives: Krys D’Antonio, Ryan Griffin, Eric Henson, Anne Marsee, Mike Scott, Paul Walley, Marcus Weston Layout & Design: Catharine Snell Advertising Art: Sharlene MacCoy ©2007 Naylor, LLC. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. Published June 2007/CPA-Q0207/5391

SURFACE TRANSPORTATION ■ SECOND QUARTER 2007 ■ 5

Public-Private

Partnerships

Courtesy Fluor Corp.

By Sheryl S. Jackson

State Highway 130 is a 49-mile, four-lane divided concrete road from Austin to San Antonio, the largest element of the Central Texas Turnpike Project. It requires 2.7 million tons of concrete. In addition, 119 bridges are included, consisting of 350,000 square feet of steel and 5 million square feet of concrete.

What Are They? What Do They Mean to You? 6 ■ SURFACE TRANSPORTATION ■ SECOND QUARTER 2007

ROBERT PRIETO BELIEVES in the value of PPPs. His company, Fluor, is a design-build firm that is actively involved in PPPs throughout the United States and other countries. Even with his belief in the beneficial option offered by PPPs, he is realistic when he says that not every highway or roadway project should be a PPP. “PPPs can create project opportunities that would not necessarily be available due to lack of funding,” says Prieto, senior vice president of the Princeton, N.J., design-build firm. “The Pocahontas Parkway in Virginia was the first project completed under that state’s PPP laws and is 15 years ahead of schedule because we did not have to wait for public funding,” he explains.

road to ensure that it receives the maximum compensation according to the contract. “In the United States, we have a third option that doesn’t exist in other countries,” points out Prieto. “Private entities can get tax-exempt financing for public works projects,” he explains. A not-for-profit entity comprised of the partners in the project can be set up to oversee the project and qualify for

tax-exempt financing. Tolls are collected by the not-for-profit entity to pay off the debt and the maintenance and operation of the road. Once the debt is retired, the road can revert back to the government’s control, or as in the case of the Pocahontas Parkway, a for-profit entity can purchase the rights to the lease, he explains. This arrangement is attractive to contractors who will make their money by designing and building the road, and it is attractive to governments that are just starting with PPPs and have concerns about private companies owning their roads, he adds.

PPPs Offer Concrete Opportunities While different models or combinations of models work for different projects, different states and different private entities, there is a real opportunity for the concrete pavement industry in PPPs because of the different mindset required, says Prieto.

In essence, a PPP is defined as an agreement between public and private sector parties on the provision of public infrastructure; however, there is not one magic model for PPPs in the United States, explains Prieto. “The first model is the project for which the private entity assumes all risks and collects all toll fees that are set by the private entity within parameters developed by the government,” he says. “In this model the private entity owns the road and runs the road.” In the second model, the government shares risk in order to maintain control of the road, says Prieto. “This model is most often used outside the United States, but the private sector builds the road [and] then the government sets and collects the tolls,” he explains. The private entity is compensated for each mile lane of available road during the time period specified in the contract. “If a portion of the road is shut down for maintenance, the company is not compensated for that part of the road for that period of time,” he says. The private entity has the incentive to build a high-quality, low-maintenance

Courtesy Fluor Corp.

Three Models of PPPs

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The traditional method of bidding projects focused more on low costs for initial construction rather than performance costs for the life of the road, points out Prieto. When private entities are held responsible for maintenance and operations, more focus is placed on long-term outcomes and performance rather than initial costs, he adds. “When you model roads, the toughest years financially are the first five to 10 years,” says Prieto. “This is the period of time in which traffic is building and you have the lowest revenue stream and the highest costs because you are not able to pay off principle on the debt,” he continues. “If you can keep your

operating and maintenance costs low during these years, you increase the amount of revenue available to pay off debt.” The life cycle costs of concrete pavements are attractive to designbuild firms or other participants in a PPP because once the road is built, the maintenance costs are lower throughout the low revenue periods, Prieto explains.

Who Participates in PPPs? “There is a perception that PPPs limit the involvement of small- to mid-size companies,” says Gerald F. Voigt, P.E., president and chief executive officer of the American Concrete Pavement Association. “In

reality, smaller companies can get subcontracts, depending on how the PPP is set up and how the design-build firm wants to run the project.” “Most PPPs tend to be large projects that require teams of companies, not only to handle the workload, but also to reduce the risk to each individual participant,” says Rob Tucker, business development manager for Zachry Construction Corp. in Texas, the contractor that is affiliated with Zachry American Infrastructure, which is the first U.S. company formed to pursue concession agreements, including SH 130 in Central Texas. Zachry Construction is part of the design-build team for SH 130. Choosing the right

THE INDUSTRY VIEWPOINT Sorting Through Paperwork and Conserving Resources All of the paperwork is signed, but even now, Rob Tucker, business development manager for Zachry Construction in San Antonio, Texas, is surprised that the process of developing and signing the contractual documents for SH 130 took more than two years. “This was the first PPP in Texas, so the Texas Department of Transportation had no template or previous experience to guide the process,” says Tucker. Having worked through the SH 130 PPP, a preliminary template now exists for follow-on PPPs. The existence of this template, for this complicated process, could expedite implementation of future PPPs. “It’s important to recognize the maze of legal documents that must be created and understand how each one knits together with others,” recommends Tucker. “Each agreement dovetails with another, so you must be familiar with all of them to recognize the cascade effect that occurs in other documents when changes are made in one agreement.” The documents involved in the PPP process include the PPP contract, which is the comprehensive development agreement between the concessionaire and the DOT; the design-build

pre-agreement, which forms the basis for a final design-build agreement between the concessionaire and the design-build firms; and a memo of understanding between the design-build contractors, which similarly forms the basis for a final joint venture agreement. “It is critical to have a representative of the design-build firm in negotiation meetings between the concessionaire and the DOT,” says Tucker. “This presence expedites revisions in other documents caused by changes to the PPP contract and allows the design-build firm to better understand expectations by hearing and participating in the discussions,” he adds. Be sure to try to identify and address contingencies when discussing responsibilities in the contracts, Tucker continues. “For example, what happens if you find drums of hazardous material while excavating at your worksite?” he asks. “The contract needs to address who is responsible for safely removing and transporting the hazardous material,” he says, explaining that by addressing issues up-front, unnecessary delays during the project may be avoided while everyone tries to figure out who is responsible. Another issue to keep in mind is the strain on resources, says Tucker. “PPPs are typically large projects with private financing. This creates a situation in which considerable PPP resource requirements are needed at the same time

as the ongoing traditional state bid letting is underway. The result can be depletion of labor, materials and equipment in a particular region, which can affect availability and costs.” A significant lesson learned by Robert Prieto, senior vice president of Fluor, a Princeton, N.J. designbuild firm, is that the first step for a successful PPP is political will. “If there is no political support or weak political support for the project, you will spend a lot of time and money on proposals that will frustrate you,” he explains. Make sure that politicians understand that the benefits of a PPP include a life cycle approach to operation and maintenance as well as a performanceor outcome-based approach to design and construction, he says, adding that in the long run, taxpayers get more for their money with quality roads. “You also need to make sure that the DOT is ready for a change, not just in the way a project is funded, but also for the department staff’s role in the project,” suggests Prieto. “DOT staffs are accustomed to buying a product for which they have produced the specifications,” he explains. With PPP projects, the DOT is now in the position of buying a service for which they define expected outcomes but don’t define the actual design or construction specifications, he says. SURFACE TRANSPORTATION ■ SECOND QUARTER 2007 ■ 9

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team and selecting companies that have the same business philosophy as your company is important to the success of the project, Tucker adds. “There are two levels of involvement in a PPP,” points out Prieto. “The Special Purpose Vehicle (SPV) is the entity created to develop and own the project so it is comprised of a

company or companies that have big balance sheets,” he says. “Then the SPV contracts with a design-build firm that can stand behind the price of the project. These firms can be midsize to large companies or teams of companies, depending on the scope of the project,” he adds, explaining that his firm is a large, international firm,

but they typically use local contractors for the actual construction. “It makes sense to use local contractors, because they know how to hire local labor, find local material at the right prices, and they are familiar with local regulations,” says Prieto. “In fact, we often have local engineers come to us with ideas for PPPs in their area.”

THE PUBLIC SECTOR VIEWPOINT Transferring Risk and Increasing Funding Sources Public-private partnerships give departments of transportation (DOT) funding options that the public sector cannot tap, says Joseph A. Gustin, P.E., deputy commissioner of PPPs for Indiana Department of Transportation. “The private sector can take depreciation tax credits that might generate several hundred million dollars in savings over the life of a road that DOTs cannot take,” he explains. Tax credits, along with a mix of financing options, give the private sector more opportunities to structure debt than the DOT can because DOTs are limited to tax-exempt bonds, he adds. “By shifting long-term operating and maintenance risks to the private sector on some projects, the public sector can free funds to use for other needed roadways,” says Gustin, adding that the private sector’s flexibility in financing also better positions it to handle downturns in revenue. “For example, if a state toll road carries a debt service of $2 billion that is currently covered by revenue generated by the tolls, what happens in 10 or 15 years if gasoline prices rise to $6 per gallon and people stop driving their cars as much?” Gustin asks. A significant drop in tolls would affect a DOT’s ability to cover the debt service, and funds that were slated for new projects might have to be diverted to cover the toll road’s debt, he explains. “The private sector has the ability to seek different financing that might not carry the same level of debt service, so it could survive the downturn in revenue.” One thing that has helped the Virginia DOT develop successful PPPs is a staff that is dedicated to the program, says Deborah Brown, director of innovative financing and revenue operations. “It takes a long time to develop the internal expertise needed for PPPs, so be sure to hire external

legal, policy and financial advisers as well,” she adds. Not all projects are appropriate for PPPs, admits Gustin. The project must generate revenue so that the private entity can recoup costs and cover debt, and it must fill a need so that financial viability for the future is strong, he explains. “We see PPPs for some, not all, projects in the future. In fact, we estimate that private investment can meet only approximately 20 percent of our infrastructure needs,” says Brown. Two projects recently sent to the Indiana legislature for approval as PPP projects

were not approved, not because of the PPP concepts, but because the public opposed the road construction for a variety of reasons not related to funding, Gustin says. “These were both good opportunities for PPPs and could have generated additional revenue for the state,” he continues. “We will continue to evaluate projects for PPPs because we have a responsibility to pursue them when appropriate.”

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Toll Roads and HOT Lanes: Successful PPPs

While opponents of the move expressed concern over the taxpayers’ loss of an asset as well as fears of outrageously high toll rates, Gustin points out that the $3.8 billion the state received for the lease will fund a 10-year transportation plan for the state. “Our need for infrastructure has outpaced funds available,” he says.

in 14 years, even though construction costs have increased steadily,” he PPPs don’t have to be utilized only adds. for new construction. In Indiana, Indiana taxpayers will benefit the state granted a 75-year lease to from the additional road capacity, and a private entity for the Indiana Toll tolls will not rise out of control, says Road that crosses the state between Gustin. “We had not raised tolls since Ohio and Illinois. The private entity 1985, but our administration increased has the authority to toll and keep them prior to signing the lease to the revenue in make the project exchange for financially and selecting companies operating and viable for the maintaining the private entity,” that have the highway as well he says. “The as expanding it contract does is important to the when needed, says allow the Joseph A. Gustin, private entity to P.E., deputy institute yearly commissioner of PPPs for Indiana “We have had no budget increase for increases, but only within parameters Department of Transportation. the purpose of roadway construction set in the contract,” he adds. What is important to remember is that there is an economic decision other than gross profit that will manage the toll rates, he adds. “The rates won’t be raised Working to bring you tomorrow’s technology above what people are willing to pay today. to use the road. If they are raised too high, traffic decreases and revenue Axim, subsidiary of the Essroc Cement Corp., is a global leader in the research, development and decreases,” he explains. Market forces, production of concrete admixtures. Progressive scientific solutions from Axim are achieving new levels of along with parameters defined in the efficiency, strength and durability critical to the success contract, will keep toll rates in check, Pervious Concrete of today’s concrete construction challenges. he says. While toll roads are a logical choice as a PPP project, high occupancy toll (HOT) lanes are also another type of project for which there is interest among private companies, says Prieto. “Not only do HOT lanes lend themselves to private development, but when done correctly, they can be used to change user Roller Compacted Concrete behavior, which can benefit everyone,” 800-899-8795 www.aximconcrete.com www.scczone.com he says. If the toll for use of the high occupancy lane is set at a higher level during certain times of rush hour, 326429_Axim.indd 1 5/1/07 1:35:33 PM some people may choose to drive to work earlier or later to avoid the higher tolls, he says. One beneficial byproduct of Miller Formless Co., Inc. PPPs will be the innovative building P.O. Box 250 techniques used to cut costs while McHenry, IL improving quality because the private 60051-0250 entity will focus upon the performance 800-435-6150 of the project over the entire life cycle, Phone: 815-385-7700 says Prieto. “As these innovations are Barrier Walls, Bridge Parapets developed, new best practices can ® ©Miller Formless Co., Inc. 2007 & 16’ Paving widths be adopted by DOTs for use in all www.millerformless.com ST projects.”

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Public Project

Funding Trends Innovation and Changes in Public Works Funding By Sheryl S. Jackson

HIGHWAYS, LOCAL ROADS and airports all face an increasing need for infrastructure to handle new capacity, but each sector faces funding challenges that create a need for innovation in construction and creative funding, according to experts interviewed by Surface Transportation. 14 ■ SURFACE TRANSPORTATION ■ SECOND QUARTER 2007

Fuel Tax Continuation Viable Option for Highway Funds Early in the 1900s, legislators recognized the importance of quality roads to the economic development of the United States. The Federal Aid Road Act of 1916 started with just $5 million available the first year to improve rural post roads, with the federal share set at not less than 30 percent the cost of the road improvement and not more than 50 percent. In 1956, the Federal-Aid Highway Act created a 41,000-mile interstate system and authorized $25 billion to be made available from 1957 to 1969 for construction of the interstate highways. The federal share of construction costs was set at 90 percent. With federal aid highway funding of over $193 billion for 2005 to 2009, the 2005 Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) not only took highway funding to new levels, but it also changed the structure and requirements of longstanding programs, introduced new initiatives, added oversight responsibilities and altered transportation policies While SAFETEA-LU expanded the highway program, it did not increase the fuel tax that comprises the major source of funding for the program, points out Leif Wathne, P.E., director of highways for the American Concrete Pavement Association (ACPA). “The federal gas tax has been 18.4 cents since the early 90s,” he explains. As construction costs continue to rise, the purchasing power of the Highway Trust Fund decreases, he says. “The

American Association of State Highway and Transportation Officials (AASHTO) proposes a 3 to 7 cent per gallon increase in fuel tax to restore the purchasing power of the fund.” Spending has outpaced fuel tax revenues at a rate that has depleted the Highway Trust Fund’s reserves to $16 billion in 2006, with projections that the reserves will be completely depleted by the end of 2009, according to Gregory M. Cohen, president and chief executive officer of the American Highway Users Alliance. The reserves have covered the shortfall between revenues from taxes and costs of projects, but once the reserves are depleted, there can be no more negative spending, he says. There are several proposals of different ways to fund highways, Cohen continues. “Private-public partnerships (PPPs) have been one direction for some states, but PPPs cannot resolve the entire crisis,” he says. Although politicians are reluctant to raise taxes, an increase in the fuel tax is a viable way to address the highway-funding crisis, says Cohen. “In the United States, the gas tax per gallon averages 39 cents and includes state and federal taxes. In Great Britain, the gas tax is just over $4 per gallon,” he points out. “The difference between the two countries’ gas tax programs is that in the United States, the gas tax is used mostly for highway and roadway construction,” Cohen continues. While there might be some waste or some funds diverted to other transportation issues, it is not as bad as many members of the public believe, he says. “In Great Britain, the vast majority of the gas tax collected is used for projects other than roads. Overall, our system is honest and fair.” In addition to raising the fuel tax, another way to fund the Highway Trust Fund would be to eliminate the fuel tax and set a 14.2 percent sales tax per gallon for construction of highways, says Wathne. “The current fuel tax is a set amount per gallon of gas regardless of the price of gas. A sales tax could fluctuate based on the price of gas, increasing the opportunity to collect more revenue as prices increase,” he says, adding that because road construction takes fuel, collecting more per gallon as fuel prices rise will help offset rising construction prices. According to Wathne, another way to design the fuel tax to reflect market conditions is to tie it to the Consumer Price

Index (CPI). “This would enable the fuel tax to mirror rising or falling prices in the construction industry,” he explains. Revising the way that the fuel tax is calculated, or increasing the tax in increments over the next few years, is one way to improve purchasing power of the Highway Trust Fund, but relying on taxes that are based on gallons of gasoline used may not be the best way to tax users in the future, Wathne continues. “At this point, people are still driving SUVs and vehicles that have low mileage per gallon,” he says, predicting that in the future, as more hybrids are available and acceptable to the consumer, drivers will use fewer gallons of gas to make the same drives; the same or greater number of vehicles will be on the highways, but less tax will be collected. An alternate form of user tax that has been discussed is the vehicle miles traveled (VMT) tax, says Wathne. “At an annual inspection, the mileage on your car will be recorded, and you will be assessed a tax based upon the number of miles you drove during the year,” he explains, noting that the per-mile assessment could be adjusted to reflect the use of diesel fuel or the weight of the vehicle. Another way to keep the Highway Trust Fund reserves in place is to crack down on fuel tax evasion, says Cohen. “There are some experts who say that we could recover up to $1 billion each year.”

PPPs, Privatization and Cooperation Enhance Local Roadway Funds Some federal aid is available to municipalities and local governments for local projects, but it makes up only 2 percent of the total funds used for road construction, says Scott Haislip, director of street and local roads for ACPA. Other sources of funding include income tax, state aid, property tax, sales tax and other revenue. In addition to revenue collection through taxes, municipalities often borrow in the bond market. Because municipalities can only create long-term debt through capital improvement borrowing and there are limits on borrowing, state and local transportation improvements can be hampered, says Haislip. Public-private partnerships and privatization can give local governments additional funding for needed projects, says SURFACE TRANSPORTATION ■ SECOND QUARTER 2007 ■ 15

Deborah Brown, director of innovative financing and revenue operations for the Virginia Department of Transportation (VDOT). In 1998, a not-for-profit organization was created to finance, develop, operate and maintain the Pocahontas Parkway. While the parkway was the first new project completed pursuant to Virginia’s privatization statute, through a recent refinancing transaction, it has also become the first concession project in the state’s privatization program, says Brown. “A 99year lease signed with Transurban in 2006 will ensure that the road is maintained and operated while making funds available for other roadway projects,” she explains; part of Transurban’s contract is the construction of the Richmond Airport Connector, a 1.6mile enhancement to the parkway that will improve access to the airport. New development in the area, as well as the expansion of the Richmond airport to include more carriers, made the parkway attractive to the private company, admits Brown. VDOT also utilizes prudent debt financing and a state revolving loan program, and it seeks to utilize innovative funding tools available at the federal level, including assistance from the federal credit program known as the Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA). Credit is available in the form of secured loans, loan guarantees and standby lines of credit for transportation project of a national or regional significance. To maximize opportunities available through the federal program, you must keep an open mind, says Brown. “Even if, after you’ve initially read the federal guidelines, you think you can’t do what you want to do, check further,” she says, suggesting that if features of your project don’t fit the federal regulations, apply through the Special Experimental Project. This program enables governments to “test” new approaches and innovations that may later become standard practice. While local governments don’t always work together for planning or funding purposes, the San Bernardino Associated Governments (SANBAG) is a council of local and county governments that cooperatively prioritizes and oversees the planning of all freeway construction 16 ■ SURFACE TRANSPORTATION ■ SECOND QUARTER 2007

projects, regional and local road improvements, and other transportation issues. “SANBAG is a very progressive approach to planning and funding projects in the most cost-effective way,” says Haislip. As all local governments look at construction and maintenance of roads, there is more of a proactive approach to evaluating proposals, Haislip explains. When preventative maintenance and long-term costs are considered before construction, concrete pavement becomes an attractive option, he says. This shift began in 1999 when the Government Accounting Standards Board enacted a policy, GASB 34, that requires government agencies to treat infrastructure such as pavements, bridges and airports as assets, he explains. GASB 34 promotes responsible asset management to protect the value of the projects constructed with taxpayer monies. “The result of GASB 34 is a shift from focusing on lowest initial cost for construction to long-term results that minimize capital investments in the future as well as demand maintenance,” he adds. This is a good shift for concrete pavement contractors, Haislip points out. “Concrete pavements offer lower life cycle costs, innovative techniques and extended pavement life that will help DOTs better manage their assets.”

Future of Airport Funding to be Determined in ‘07 Airport managers are approaching a “rare celestial event” with the expiration of the Airport Improvement Program (AIP) and the expiration of the rules that forced Congress to fund the AIP each year rather than hold the revenue generated by taxes and fees charged to airlines, airports and air travelers, in reserve, says Tom Zoeller, vice president of regulatory affairs for the American Association of Airport Executives. “Both expire in September 2007, so Congress will have to approve the AIP as well as funding,” he says. AIP funding in 2000 was $3.7 billion, almost double the amount of funding in previous years, Zoeller continues. “I believe that we will see it continue to increase to $3.8 billion in 2008 on up to $4.1 billion.” In addition to the taxes and fees collected for AIP, airports can also levy

a passenger facility charge (PFC) to pay for specific projects such as rebuilding a taxiway or adding gate space, says Gary Mitchell, P.E., director of airports for ACPA. “This is an important source of funding for local projects,” he says. The current PFC is capped at $4.50 per passenger, but there are recommendations to increase the cap to $7, says Zoeller. “This increase would address the need for new terminals, additional parking and other airport infrastructure,” he adds. Zoeller goes on to explpain that airports don’t have as much flexibility in funding as DOTs: “All major airport funding is rooted in federal monies, even though some of the larger airports go to the bond market for funds. They use future AIP grants or PFC collections as leverage for the bond.” Even while the airport industry watches to see at what level the AIP will be funded, there are plans for continued expansion of infrastructure, Zoeller notes. The challenge is not just finding the funds, but for many airports it’s a challenge to find the space needed. “The Federal Aviation Administration forecasts that over the next few years, the top 35 airports will handle 80 percent of all air traffic,” he says. “Some of these airports, such as La Guardia, Philadelphia, Boston and JFK, are close to, if not at, capacity. In some cases, building an extra runway might not be as good a plan as building or enhancing a nearby airport to handle some of the traffic.” In addition to finding space for improvements, it is also important to continue research for improvements in pavement for airports, says Mitchell. “Unfortunately, continued research is not included in the current legislation for airports,” he says. In prior years, a cooperative research program affiliated with the Transportation Research Board provided $2 million per year to conduct research on improvements and innovations in pavement techniques and technology. “The research board focused on practical approaches to solve existing problems and avoid them in the future,” Mitchell adds. Zoeller agrees that innovations are important. “The airport industry has always been price conscious, and we are looking for innovative ideas on new pavement construction ideas that are ST cost-effective,” he concludes.

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Economizing

Concrete Pa SAVING $35 MILLION by thinking outside the box is the result of Missouri Department of Transportation’s (DOT) use of an alternate bid process that includes designing a road project in two ways: one design is for construction using concrete and the other design is for construction using asphalt. “Not only has the use of alternate bids increased the number of companies bidding on projects by 25 percent, but the total estimated savings for the 63 projects that have been awarded under the alternate bid process is over $35 million,” says Dave Nichols, P.E., director of programs for the Missouri DOT. “Historically, we would look at a project and make an assumption that the project would most likely be bid upon by a concrete or an asphalt contractor based on the location and past experience in the area; then we would design the project for that one type of material,” he says. In 2003, the Missouri DOT staff took itself out of the decision-making process regarding concrete versus asphalt by spending some extra time and money up-front to produce two designs for the project. “We have a very competitive environment in our state, and our alternate bid process does not eliminate anyone from any project,” Nichols explains. “In fact, the increased number of bidders has reduced project costs 18 ■ SURFACE TRANSPORTATION ■ SECOND QUARTER 2007

up-front because contractors know they are competing against more contractors than before,” he says. It is important to note that Missouri does include an adjustment factor for asphalt bids to address the need for increased maintenance over the life of an asphalt road as compared to a concrete road. The only way to compare the costeffectiveness of concrete versus asphalt accurately is to incorporate the additional maintenance costs of asphalt, points out Nichols. “We were very open about how we developed the adjustment factor, and we solicited input from all contractors,” he says. By talking to all contractors, concrete and asphalt, and explaining exactly how bids are evaluated, there is a better understanding among all parties, he explains. “Contractors will tell us that they don’t like the adjustment factor, but they can live with it.”

Economizing with Design Another way that Missouri reduces costs up-front is in the design stage,

Nichols points out. “We use the American Association of State Highway and Transportation Officials’ guidelines for mechanistic pavement design to make sure that we are designing pavement that is appropriate for the specific location,” he says. This approach differs from the use of standardized pavement thickness for different categories of use and does reduce the amount of pavement material needed for the project. “We typically over-designed our roads in the past, which contributed to higher construction costs,” he adds. “Alternate bidding has forced everyone to think differently,” admits Todd LaTorella, P.E., director of engineering for the Missouri/Kansas Chapter of the American Concrete Pavement Association (ACPA). “When we design for concrete, we tend to build the Cadillac of roads so that it will last 50 years,” he says. Today, not all roads need that level of design and construction, and technology gives engineers an opportunity to be more creative in pavement design so that 20- or 30-year concrete pavements can be constructed. “We’re able to respond to customer needs without reducing the quality of the pavement,” he adds. Although the alternate bid process does present more opportunities for asphalt contractors than prior to 2003, the new techniques and flexibility in concrete pavement design has kept concrete contractors competitive, says LaTorella. A total of 35 of the 58 full-depth projects bid in Missouri since 2003, and

Alternate Bids, New Designs and Willingness to Change Pay Off

vements four of the rehab projects, have been awarded to concrete contractors, says Nichols. Some of the pavement design changes that are being used in Missouri are also helping the Kansas DOT address rising construction costs, decreasing budgets and ever-increasing traffic. “We can’t just make the pavement thinner; we have to make sure that design changes are based on sound engineering principles and that the road will be cost-effective over the life of the road, not just at initial construction,” says Andy Gisi, P.E., geotechnical engineer for the Kansas DOT. In the past, the shoulder of the road would be built at the full depth of the driving lanes at the inside edge; then the

In addition to looking at cost savings, remember that the use of variable depths for driving lanes and shoulders may affect how the contractor does business, Gisi says. “While the design change may require less material, it may take more time because the contractor has to grade the site differently,” he explains. Extra equipment and extra labor may offset some or all of the materials’ cost savings, so it is important to work together to see what will actually be saved, he suggests. “Also, remember that the longer the project takes, the more time you disrupt traffic.” According to LaTorella, costs can be reduced by eliminating tie bars in the shoulder. “We have done this in

MO/KS Chapter, ACPA

By Sheryl S. Jackson

Placement of MoDOT A2 shoulder (5-3/4" thick with no tie bars), part of I-44 in Crawford County, Mo.

Eliminating seals for joints may not look like a big cost savings, but contractors are accepting the challenge to cut unnecessary costs whenever the change doesn’t affect quality, LaTorella says. “One dollar a square yard may not look like significant savings, but when

The economic reality of roadway funding has encouraged all DOT staff members to look for new ways to approach design. shoulder slopes and becomes thinner at the outside edge. “Only 12 to 18 percent of traffic encroaches on the shoulder, and then only for brief periods of time, so there is no need for full depth pavement at any point,” Gisi explains.

Other Innovative Approaches Another change to concrete shoulders is less cement, Gisi points out. Shoulders won’t fail before the driving lanes, even with less cement, as long as engineers take the specific location into account, he says. “Urban areas do experience more traffic on shoulders, so less cement in these areas might not be cost-effective.”

Missouri, and it represented a significant cost savings,” he says. LaTorella admits that eliminating tie bars is “pushing the envelope” in creative thinking, but the economic reality of roadway funding has encouraged all DOT staff members to look for new ways to approach design. Not sealing joints is another way that several states (including Missouri) are reducing costs by changing a traditional approach. “The philosophy is that the road will last longer if you keep water out of the joints,” says LaTorella. “The reality is that [studies show] there is little difference in [performance of] roads that have sealed joints and those that don’t.”

you look at the savings over the total project, it might represent $200,000,” he explains. Another significant change in the Missouri and Kansas DOTs’ approaches to road construction is the willingness to move forward without building test sections, says LaTorella. “Engineers use the best data and technology to design the pavement correctly for the specific site, [and] then the road is built.” This differs from the traditional approach of “testing” a new technique for as long as 10 years before implementation. LaTorella concludes, “When people want to save money, they are much more ST willing to change.” SURFACE TRANSPORTATION ■ SECOND QUARTER 2007 ■ 19

Government Spotlight

Reports Detail Critical Highway Needs, Set Stage for Action (Editor’s note: This story details findings from three of six reports prepared by the American Association of State Highway and Transportation Officials (AASHTO) for National Transportation Policy and Revenue Study Commission.)

U.S. freight traffic will experience “staggering increases” during the next three decades, according to John Horsley, executive director of AASHTO, who cited four trends that are leading up to what he characterized as an impending “tsunami of freight.” They are: • traffic volumes and freight movement rising with economic growth; • U.S. manufacturing output continuing to grow; • just-in-time strategies spurring shipping; and • growing international trade stimulating a rising tide of imports and exports. Horsley warned that transportation’s economic edge is trailing and said the situation will not improve without intervention. Truck traffic on the Interstate Highway System is expected to double to 22,700 trucks per mile in 2035. Three other reports also provided insights into the conditions and needs of the nation’s highway systems. Here are some of the key findings, indexed to each of the reports:

Report #1: An Overview • The United States also should increase funding by nearly double, from $43 billion in fiscal year 2009 to $73 billion by the year 2015. • An increase of 3 cents or its equivalent will be needed in 2009 to sustain the highway program at the levels guaranteed in the current highway bill, SAFETEALU. This effectively would restore the spending power to 1998 levels. Spending would have to be increased by another 7 cents or equivalent levels between 2010 and 2015. (The “equivalent levels” language is a term of art in the legislative wording; it’s there to reduce resistance to spending increases.) Incidentally, the current funding level of 18.3 cents, the Federal excise tax, has been in place since 1996. • The cost to improve U.S. highways and bridges to the levels needed this year is $155.5 billion.

The report also underscores the demand on highways, both domestically and worldwide, notably: • The 47,000+-mile Interstate Highway System represents about 1 percent of total U.S. highway miles but carries 24 percent of all traffic and 41 percent of large truck traffic. • In 1955, U.S. highways carried 65 million vehicles. Today, essentially the same roadways carry 246 million vehicles; the figure is expected to reach almost 400 million by 2055. • U.S. population, which grew by 130 million to 295 million between 1955 and 2005, is expected to increase to 435 million within the next 50 years. • China is building a 53,000-mile national expressway system, which, when finished in 2020, will rival the U.S. Interstate System in size. Elsewhere in the world, India is building a 10,000-mile system, and Europe (with a population of 450 million) is spending billions of Euros on a network of highways, bridges, tunnels, ports and rail lines.

Report #2: Policy Recommendations The second report also states, contrary to popular belief, “Highway Trust Fund revenues are not declining,” according to AASHTO. Fuel tax revenues are still viable, says AASHTO’s Horsley. The bad news is purchasing power is eroding and highway spending has exceeded income, which explains why agencies and contractors are perennially behind in the proverbial game of catch-up. Also in the second report, which focuses mostly on policy recommendations, AASHTO reports the following: • supplement state and local revenues through alternative financing; • reduce annual highway fatalities by 10,000 each decade; • reduce congestion and energy consumption to improve air quality; • double transit ridership over 20 years; and • establish a National Rail Transportation Policy for passenger and freight needs.

To achieve goals within the highway arena, AASHTO makes the following highway recommendations: • increase national highway system core program funding; • base project selection on strategic future planning instead of earmarking; • accelerate project delivery; and • investigate adjustments to truck size and weight on a regional basis.

Report #3: Increasing Trust Fund Revenues The third in the series of six reports includes a number of short-term options to increase Highway Trust Fund revenues, notably: • a 10-cent fuel tax rate increase (3-cent, plus 7-cent) for a $75 billion program by 2021; • a 10-cent rate increase, indexed to Consumer Price Index, for a $82 billion program by 2021; • a 5 percent sales tax on gas (if fuel prices increase 4 percent annually) for a $85 billion program by 2021; or • a 14.2 percent sales tax on gas in lieu of 28.4-cent gas tax (if fuel prices increase 4 percent annually) for a $95 billion program by 2021. The report also outlines a plan to examine alternatives to supplement or replace the fuel tax in the long-term as fuel taxes become less effective as a revenue generator, due to, among other things, improved fuel economy of vehicles. Recommended actions include: • a viability study of Vehicle Miles Traveled (VMT) taxes, 2010 to 2015; • a field test for VMT technologies, 2015 to 2021; • an implementation plan, 2021 to 2027; and • transition to a VMT tax, 2027 to 2033. AASHTO will present to the National Surface Transportation Policy and Revenue Study Commission for consideration as the latter shapes recommendations to Congress about the future of the nation’s surface transportation system. AASHTO Executive Director John Horsley presented research findings from the first three reports at ST separate meetings recently. SURFACE TRANSPORTATION ■ SECOND QUARTER 2007 ■ 21

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