TEXAS DEPARTMENT OF TRANSPORTATION
I-35 HIGH PRIORITY TRANS-TEXAS CORRIDOR
PREPROPOSAL WORKSHOP

Commission Room
C. Greer Building
125 East 11th
Austin, Texas

August 20, 2003
9:00 a.m.

ON BEHALF OF TxDOT:

Phillip Russell, Director, Texas Turnpike Authority
Robert Nichols, Commissioner
Edward P. Pensock, Director of Planning, Texas Turnpike Authority
Geoffrey S. Yarema, Partner, Nossaman, Guthner, Knox & Elliott
John Bourne, Project Manager, TTC-Corridor Engineer

MR. RUSSELL:

If everybody will find a seat we'll go ahead and get started this morning.

Good morning, and welcome.

My name is Phillip Russell, and I'm the director of the Texas Turnpike Authority Division of TxDOT. And I want to welcome everybody to this, our preproposal meeting for the I-35 High Priority Corridor on the Trans-Texas Corridor System.

Before we get into the specifics on our proposal -- preproposal meeting this morning, I want to go through some housekeeping duties. But even before I do that I want to take a minute to introduce some of our TxDOT team here. I think it's important that you all start attaching names with faces.

And, of course, first and foremost, is Commissioner Robert Nichols. You'll be hearing a little more from Commissioner Nichols here in just a few moments.

Mike Behrens I thought I saw somewhere. Mike Behrens, our executive director of TxDOT, is here. Thanks, Mike. Amadeo Saenz, the assistant executive director to Mike.

We also have Ed Pensock from my office, the Turnpike Division. We've got -- Doug Woodall is here. Doug, are you here? -- also from the Turnpike Division.

Jim Griffin at the back of the room I saw a few moments ago, the turnpike guru. We've got Jack Ingram, general counsel here at TxDOT.

And we've got John Bourne with our Corridor Engineer team. David Williams, the deputy Corridor Engineer.

Stacey Benningfield, our environment coordinator. Stacey here today? Right here at the back.

Geoffrey Yarema with the Nossaman law firm. And Cory Boock, also a partner with the Nossaman law firm.

TELEPHONE PARTICIPANT:

All right. We have Bill Yerbey here and Phil Armstrong and John Larue.

MR. RUSSELL:

And for those that -- wondering where that strange voice coming out of that box is, not

only for you all -- for the benefit of you all who attended the meeting this morning -- we also have a teleconference. We have several groups hooked up so they can take advantage of the preproposal meeting.

We're also having it on webcast as well. And I'll go through some of that data in just a moment. So good morning and welcome to everyone involved in whatever electronic medium.

Okay. Again, some housekeeping things. If everybody has signed in, great. If you haven't please do so before you leave. It's very important that -- again, from our standpoint we start attaching names and companies as we start developing and building our database as well.

We have a bunch of handouts. They're at the back of the room. If you don't have one hold up your hand and we'll make sure make you get one. All the handouts, the agenda items -- all of that will be posted on the web. So, again, if you get back, you lose yours, you'd like an additional copy, you can pull it down off the web.

Also I might mention that we're also taking a transcript of today's preproposal meeting, and that will be posted on the web as well

And, lastly, the -- we usually open these things pretty well up to questions and answers. What we're going to try to do this time, if you would, as we go through the presentation, so that there's some continuity in it, please hold those questions till the end. We're going to have ample time for any questions or clarifications that you all might have. So if you would please hold those.

Okay. Let me try to go through the web broadcast address for those of you that might be interested. It's on the worldwide web, hbmediagroup, one word, dot net, ford, slash, ttc, webcast. One more time -- that's worldwide web dot hb, b as in boy, mediagroup.netford/ttc/webcast, one word.

And, again, it should be -- I haven't gone through the process, but others have. They tell me it's pretty straightforward. You can get into the welcome page, click the button to register, and then you'll be able to join the broadcast and also submit any questions you might have as well.

Okay. At this time I want to go ahead and kick it over to Commissioner Nichols. I might mention that Commissioner Nichols was an appointee six years ago of then-Governor Bush, now-President Bush. And it's great for us that he's been reaffirmed for another six-year term by Governor Perry. So we've asked Commissioner Nichols to come in and give a few sage words of wisdom. Thank you, Commissioner.

COMMISSIONER NICHOLS:

Thanks, Phil. Welcome and good morning. I wanted to be here myself to try to emphasize the importance of what we're doing this morning. It -- we consider it extremely serious, and we are really looking for opportunities for you to make proposals and to come help us work on this thing.

In 2002 Governor Perry, during his reelection campaign, cast a vision for the state of a new set of corridors to run across Texas. It's roughly a 4,000-mile concept. We think it is extremely important.

The corridor is composed not only of roadways for cars and trucks, but rail, both passenger, high speed, commuter rail, freight rail, and it is -- will also include in that right-of-way, which would be roughly 1,200 feet a provision for a number of different type of utilities -- could by fiberoptic, electrical transmission, water, oil, gas. We think eventually in Texas water distribution will be a critical component of the future as our population increases.

Today we are going out and officially, you know, looking for procurements for the I-35 corridor -- the priority corridor -- to begin the process of implementing that vision.

The Governor, the Texas Transportation Commission, the TxDOT, the administration -- our staff -- we are all committed to implementing this plan. We believe it is real. We think it is also necessary.

All we need now is you to come forward with interest, proposals, qualifications -- things of that nature. We look forward to it and we encourage it. We want you to participate.

And, like I said, I wanted to be here today myself to try to emphasize from the Commission's standpoint that we do want you to participate -- come forward with this.

I'm going to turn it back over to Phil. And then I've got to go. Thanks.

MR. RUSSELL:

Thanks, Commissioner. Appreciate it. Before I get into the meeting itself I -- as I'm scanning the audience I notice there are three or four folks out there that weren't on my list. And I want to take that opportunity now.

Bob Daigh, my able and stalwart deputy there at the back of the room. Bob is the new deputy -- or the new district engineer in the Austin district. So congratulations to you, Bob.

I also note Gaby Garcia, our public information officer; Helen Havelka, Commissioner Nichols' executive assistant; and Mary Ann Griss, executive assistant to Commissioner Rick Williamson as well. Thank you all for attending.

Okay. Let me go through -- spend a few moments on amplifying perhaps Commissioner Nichols' comments. As far as the Trans-Texas Corridor plan itself, again, as many of you know, and you probably read up on some of the literature, it's a system of 4,000 miles of interconnected roadway elements. And we have four high priority corridors which the Commission and the Governor have delineated.

The corridor -- for those of you that can see the map -- the I-35 corridor, of course -- I'm probably biased, but I think it's probably the highest priority of all of the corridors -- I drive it every day. And, of course, that's the subject of today's pre-proposal meeting.

This one, of course, is the first procurement that we're unveiling, but I anticipate we'll have further procurements that will be rolling out over the next couple of years.

The Trans-Texas Corridor itself, of course, is a large undertaking. We understand it's not going to be done or accomplished overnight. It will take years and years and years to accomplish the full build out. But that being said, we are very aggressive, we're very serious about it, and we are going to move forward on it.

So, again, the I-35 corridor is the subject of today's meeting. It's the first one in line. I would anticipate the I-69 corridor will probably be teed up in the next couple of years as well.

This one coming to us today was through the unsolicited proposal process. We may very well be jumping on out on I-69 and some of the others through the solicited process, similar to what we used on State Highway 130.

And, of course, the subject of the -- what's initiating this, we did receive a unsolicited proposal from the Fluor Group back actually in November/December of last year. We looked at it -- in fact, I brought it up to the Commission in their February Commission meeting.

And at the time the Commission looked at it -- really thought that there was some merit to the proposal. However, we discussed it and the Commission realized that we still needed some statutory abilities before we could fully take advantage of this proposal. And, again, the proposal generally parallels the I-35 corridor, with portions of I-37 and the I-69 corridor as well.

But I want to emphasize that those connections are only to the extent necessary for connectivity and financing purposes. This is not a pre-proposal meeting for I-69. Again, that's going to be later down -- within the next couple of years probably. But, to the extent necessary, all of that is included in the proposal.

Now, I'm not going to go into the details on that Fluor proposal. There's one thing that we've always considered very, very important here -- is a confidentiality of those proposals that we receive. We're not going to go into a lot of the details, but we want to at least allow you the general constraints, I guess, on that proposal.

But the proposal, as I said, we brought to the Commission's action in February. We had to wait until we had that sufficient legislative authority. And, of course, here in Texas the legislative session -- the regular session runs from January to essentially June 1.

So, throughout that legislative period, we obviously monitored very closely. And out of that process came House Bill 3588. It's not a quick read, but I would strongly suggest, if you haven't perused it -- if you haven't looked through it you should. By all accounts it's probably the most revolutionary transportation legislation that's come out of anywhere in the last 40 or 50 years, probably all the way back to the interstate years and perhaps beyond.

It gives us all of the authority and all of the power we need on a state level to move forward on the Trans-Texas Corridor, plus some. Truly revolutionary, and I would strongly suggest again that you look at it.

That legislation, of course, was approved by the Legislature. The Governor signed it I believe on June 19. And within the week we brought it back to the Commission on June 26 and said, Okay, you remember the proposal that we brought up in February; now we have the legislative ability to act upon it. What say you?

And the Commission strongly endorsed it. The Commission authorized the issuance, of course, of the RFPQ, which is now moving on out. That RFPQ, of course, was issued on July 25, within 30 days.

So, again, I think you see that trend of a Governor and of a Commission and of a Department that's going to be very aggressive moving forward. We don't want any grass to grow under our feet, and so we will be moving very, very aggressively forward on this project.

You know, the goal here really is, from the Governor and the Commission on down, is they want a contract executed -- a developer selected and a contract executed next year. And they want to get down to the business of this as soon as possible.

We have already issued an addendum. You guys should have gotten it by now. If you haven't, again, we'll provide copies. That came out on August 12. And, really, that was in response to a lot of the good feedback that we've been receiving from the industry. We've had a lot of questions, a lot of discussions that are going back and forth, and I think you'll see that that will be a commonality through this process.

You know, we went through the -- at the time it was called an exclusive development agreement, now called a comprehensive development agreement, on our State Highway 130 project. And one of the things that we thought was of the most value -- and, frankly, the feedback that we got from the industry was the same -- was that those one-on-one industry sessions where we sit down and really get some good feedback from you guys was extremely valuable to us.

And the feedback and the comments we got from the private sector were also positive. So we intend to have many more of these one-on-one meetings with the proposers and anybody else really that is interested in the project. We've come upon some great ideas and great theories and ideas as we move forward.

Again, we're going to keep those ideas and those comments confidential. But it helps us in the overall process.

One other thing I want to touch upon a little bit -- as part of that feedback and those questions that are coming back is, you know, Phil, why 60 days? That seems awfully quick to us. We can put a proposal together in 60 days, but it does take some time and putting together your team, building those relationships, and moving forward with it.

And, again, we did -- I guess in February we disclosed the Fluor proposal. And so I think it -- in a lot of people's minds that's when the opening gun -- when the flag was brought up that, Hey, we've got a proposal and we're serious about it.

Since that time when we actually got the ability through House Bill 3588 and then authorization from the Commission to move forward -- as I said, the Commission and the Governor are very, very serious and excited about an opportunity like this. They don't want to wait around.

And, again, if you look at the needs on 35, they're critical; they're becoming more critical as we speak. And so I think, again, you will see that throughout the process. We're going to be moving very, very aggressively.

And, again, as we sit down with the industry and through various meetings, we want to hear your comments and your concerns. But from the outset let me just say that that's the reason. We're going to move these elements and the individual milestones on this procurement as quickly as possible without shortchanging the process.

Okay. Let me go ahead and kick it over to Ed Pensock. And, Ed, if you want to come up and go through some of the details on the RFPQ.

MR. PENSOCK:

Thank you, Phil. My name's Ed Pensock. I'm the director of planning for the Turnpike Authority Division of TxDOT. And I'm here to talk about our request for competing proposals and qualifications, or the RFPQ that was distributed and broadcast on July 25.

A big thing that we want to underscore is 60 days is not a long period of time. With that, we have fashioned the RFPQ around that, trying to request information that is reasonable in 60 days.

We are asking for qualification statements. Statutes require conceptual development plans and conceptual financing plans. But, mostly, we are interested in your brains, in your expertise, and in your willingness.

What we are looking for is an ability to form a long-term strategic development partnership to develop the Trans-Texas Corridor and to develop the I-35 element of the Trans-Texas Corridor.

In 60 days we do not expect full facility development plans. We do not expect tremendous amount of specifics on project financing. We realize that this process will evolve through its prosecution and that your conceptual development plans and your financial plan will evolve. We want to give you the flexibility to modify those plans and to modify ideas -- what would become part of the financing plan and the development plan.

Our goal is not to hold you to extensive schedules and cost estimates that are provided in your proposal -- or in your qualification statement, but to give us enough ideas of understanding your qualifications and be able to pick a best value partner for the long term.

As far as teaming is concerned, again, we recognize 60 days is not a long period of time. We really expect that the proposers will flesh out their teams following shortlisting. We're not requiring comprehensive commitments at this time.

What we really want to do is get your ideas, get your brains, and be able to leave you the room to demonstrate your qualifications and not dictate to you exactly how to demonstrate those qualifications, keeping in mind that the process will evolve.

I want to walk through the schedule for the RFPQ right now and talk about a couple of specific key dates. The qualification statements are due on September 23, 2003. We anticipate a 30- to 60-day shortlisting process that is going to get us from probably fall -- October '03 to late November or early December 2003.

I'm going to talk about our industry review process here in a minute, but we expect about -- probably about a three-month -- about a 90-day industry review process that we want to try to capitalize on.

We expect to issue the -- a request for detailed proposals in early 2004 -- spring 2004 -- March to April 2004 time frame. We anticipate a 120-day response period with detailed proposals being due in summer of 2004.

We expect about a 60-day or a two-month evaluation process, getting us into fall of 2004. And we anticipate a 30 to 60-day negotiation period.

Our goal is to award -- our plan is to award and execute the CDA by late 2004. We stand committed to that schedule, and we're going to work very hard to try to maintain that schedule.

Again, the due date for your qualification statements will be September -- is September 23. We are accepting questions about the process or about the qualification statements. Last day for questions will be August 30 of this year. Please don't wait till August 30 to send us your questions. If you have questions send them now and we'll get answers out now -- as soon as possible.

We are fully open and hope to have one-on-one meetings with specific individuals considering submitting qualification statements. We want to have them, we're encouraging them, we want you to ask for them. We won't post -- we won't schedule those until you request them, so please ask.

At the one-on-one meetings -- a very important issue Phil touched on is we respect the confidentiality of the things that are discussed at those meetings. We feel that we can keep a secret, and we've demonstrated that through our process on past projects.

We fully do not anticipate shopping ideas around. A good idea from one person is not something to be discussed with another team. We will keep that -- those ideas confidential.

We do have to reserve the right on general items and points of clarification -- being able to distribute those, post those on the web, and answer very broad-based general questions that will benefit and will be information needed by all participants.

Talked about the industry review process. We really hope to get an awful lot out of industry review, and we anticipate a -- really an unparalleled industry review process.

We want your input in many things, including what will go into the final request for detailed proposals. We plan to schedule monthly workshops to discuss specific topics and specific items, some which you may have presented to us, some that we might think are important.

An example of a monthly workshop -- we might try to get people together to discuss the structure of developer compensation. We'll talk a little bit more about developer compensation here in a minute.

We will issue a draft RFP, draft contract, and draft scope of work. And with those issuance we want your comments on what they consist of.

Again, we've got to restate that we can keep a secret -- we respect your confidentiality. We want to get -- with that, we want to get a lot out of the industry review process. We want to be able to tailor the RFP -- request for detailed proposals in the most efficient manner.

We will be developing an evaluation criteria -- can't talk a lot about that right now. But we anticipate the evaluation criteria as being part of the industry review process.

We do expect and anticipate payment for work product through this process. In fact, Trans-Texas Corridor statutes require payment for work products.

Under the legislation that was passed in House Bill 3588 we will retain the rights to the ideas that are submitted in detailed proposals. That's what the compensation is about. Proposals will not be liable to TxDOT for such ideas.

The amount and the procedures and the process of this compensation have not been approved by the Transportation Commission yet. We hope to get that approval very shortly. The important thing will be that compensation payments will be made to the unsuccessful responsive proposers -- a major element.

As part of the request for competing proposal we want to get your guidance on items, activities, and costs, and time lines, and -- with that, and moving from the shortlisting process into the detailed proposals.

Our evaluation process will be based on the best overall apparent value to the State of Texas. And, again, negotiations we anticipate being completed by late 2004. That's our commitment to you, and that's our promise. With that, I'll turn it over to Phil Russell.

(Pause.)

MR. PENSOCK:

I'm sorry. I'm going to turn it over to Geoff Yarema with the Nossaman law firm.

MR. YAREMA:

Thank you, Ed. Our role here is to work with Jack Ingram in the Office of General Counsel and with TxDOT to help craft the terms and conditions of the contract and help with the RFP documents.

I think it's pretty apparent to those participating in this that the form of contract that will come out of this, while new, has domestic and international precedence.

The idea, of course, is to sign a contract that will cover the Corridor in advance of final need for compliance on all the modes that will be anticipated to be involved in the Corridor. So that will require special approval from Federal Highways Administration, and those applications are in process now. So we have every confidence that we'll be able to achieve that approval from Federal Highways.

The idea behind this, of course, is a multimodal strategic development concept. And that's been clear from the Governor's vision from the beginning.

Different modes within that Corridor have different industry norms about how they'll be developed and about how they'll be operated. The contact will need to be sensitive to that reality.

So the -- while there will be a single contract earlier on there will be different implementation strategies underneath that contract for how elements of the work might be carried out.

Some of that work might be self-performed, either by way of construction or operating concessions. Some of it may be let to others through the development partnership on low bid or comprehensive development agreement strategies.

Those decisions have not yet been made. The idea is to lay out the options and make sure that everybody realizes that TxDOT is flexible. At this point we want to make sure that the industry has every opportunity to give us their best ideas about how that contract should be shaped to achieve the best interest of the State of Texas.

So the idea is to have an industry workshop before anything is really put on paper. Once those ideas are gathered, then to put something together in a term sheet type format, let that out for industry comment and review, again get additional good idea. Once those ideas are incorporated and a common framework seems to be developing then a draft contract would be developed for, again, detailed industry review.

So I think the watch words are, while this is innovative, while it's unusual, it's a departure from the standard design bid build approach to building out a corridor. Nevertheless, there are important domestic and international precedents. Those will be very useful in shaping this, but nothing will be shaped without industry review and industry involvement.

MR. BOURNE:

Good morning. My name is John Bourne. I lead the Corridor Engineer Team that has been hired by TxDOT in support of developing the 35 High Priority Trans-Texas Corridor.

Our team consists of multi-modal experts in freight, in highways, in truck, in utilities, and all the different elements necessary to support the evaluation and really be a team player with you as we move forward.

I'll talk a little bit about our activities that we have underway shortly. But I'd like to say that, by having the corridor engineer group on board now, it really shows a commitment by TxDOT that we're moving forward. Our primary responsibility, frankly, is to get out in front, be a partner with you to help pull this thing off and build I-35 -- the Trans-Texas Corridor.

One of the early elements of work that we are starting right now is the environmental process to go through a tiering approach with our partners. We expect to issue a notice of intent for a Tier I environment process immediately. We will have a record of decision in about 15 months. That will basically take the corridor from a scoping of a couple of mile-wide swath down to a couple of thousand feet. That process, again, is starting immediately. We expect a ROD -- a Record of Decision -- in 15 months.

Then the Tier II process would begin immediately after that. We would work with potentially developers in completing that NEPA process.

Another one of the major components -- or major elements of work, as Geoff mentioned -- we are working through the SEP-14 process to amend that working with FHWA, both on a local and a national level. SEP -- the application will be programmatic in nature. It's going to cover, in essence, the entire Trans-Texas Corridor program.

We intend to make it very broad. We intend to work to make it very flexible, both in the guidelines and the approach that we can use as we develop and build the Trans-Texas Corridors.

Frankly, we're going to use the foundation that's been established in Virginia as a starting ground to build the SEP application on the VDOT I-81 project that's currently underway.

We're confident that the approval of the application will, in fact, be a approved by the Federal Highway Administration. With that, I'll turn the time over to Phil.

MR. RUSSELL:

Thanks, John. My gratitude to John and his team. We've successfully lured John away from some previous engagements, not the least of which was a successful I-15 project in Utah, which was completed -- what? -- a year ahead of schedule -- a year ahead of the Olympics? So we are very confident, and I want to reinforce the group and the minds and the team that John brings with him is truly outstanding.

Just a couple of other things that I want to touch up. First off, the idea of compensation and that sort of thing, of course, will come up. And we emphasis -- and, again, you've seen through this preproposal discussion -- we want your best and your brightest to move forward with this Corridor.

A lot of ideas about compensation are coming up. Really, we're going to have a very open mind, whether it's through progress payments or, success or contingent fees, whether it's some revenue sharing.

I think you should take, again, from House Bill 3588 and from the comments of Commissioner Nichols, we're going to be very, very open to bring in those ideas from the private sector, both domestically and internationally, on how these sorts of projects and these concessions are put together. So we want to incentivize you all to bring in your best and your brightest.

A couple of other things I just want to reinforce -- our schedule that we have broadcast -- the days that are, of course, looming out there, not the least of which is September 23 for the pre-proposal -- or for the PQS that's due. Those industry review workshops we think will be critical to the overall success of the Corridor.

The detailed proposals, again, will be -- we're looking at now at about four months on giving the industry to submit those. And throughout that process, as we sit there, we constantly are fighting this schedule. And we were discussing over there a few minutes ago, you know, there may be a couple of areas that we can shave perhaps even a little more time off. Perhaps we don't need that much time.

There may be other areas, as we sit down and start discussing with you all, that you suggest to us, You know, this is really too tight, we need a little more time in this area.

So we're going to be balancing, you know, all those competing interests. We need sufficient information to give you all sufficient time so that we can make good and proper decisions. But, at the same time, we're sensitive to some of the costs and those things that you bear in putting together these concessions and these proposals.

So, again, pretty good draft. That's our goal. Those things may be adjusted slightly as we develop the industry review process.

Let me also mention one more time -- I notice there were several beeps that were coming up on our teleconference. For those that perhaps joined us a little later, let me go through some of the details again.

The handouts and all that sort of information will be posted on our website. Feel free to bring those are. We are being -- broadcasting this via the web broadcast process. That address, if you need it, is worldwide web, hbmediagroup.net ford/ttc webcast.

We're going to have that up, and, hopefully, we'll be able to store that and have it accessible on our website for a couple or three more days for you all that would like to review that.

Okay. At this time I think we'll go ahead and open it up to either folks here in our studio audience -- sounds like Regis, doesn't it -- either in our studio audience or for those that are joining us on the teleconference. Do you have any questions or comments?

(Pause.)

MR. RUSSELL:

Why does that not surprise me? Nobody's willing to jump up and say that great idea they have.

(Pause.)

MR. RUSSELL:

Very well. Thank you very much for your time. We look forward to a successful procurement on this extremely critical Corridor. Thank you.

(Whereupon, at 9:45 a.m., the meeting was concluded.)

[ From the certified TxDOT transcript - ]