In Texas, even losing bidders on toll road projects get paid

June 25, 2007

By GORDON DICKSON, FORT WORTH STAR-TELEGRAM

Unsuccessful bidders have received $4.1 million since 2002 for intellectual property, Texas Department of Transportation records show. The state began making payments several years ago so that private companies would compete more vigorously for toll projects.

"It's not a consolation prize," agency spokeswoman Gabriela Garcia said. "We're not just paying for paper. We take their proposals and, even though they're an unsuccessful proposer, we use pieces of it and incorporate those ideas into the final product."

The Texas Transportation Commission could pay as much as $2.25 million to three companies that bid on the Texas 121 toll road project in Denton and Collin counties.

The commission, which meets Thursday in Austin, is expected to consider awarding the project to a public body, the North Texas Tollway Authority. Metroplex leaders endorsed the tollway authority's bid during a Regional Transportation Council meeting last week.

Three companies that submitted Texas 121 bids would then be eligible for up to $750,000 each -- although a final decision on the amount may take several months.

Australia-based Macquerie and Sweden-based Skanska were eliminated in February. Spain-based Cintra is still in the running for Texas 121.

A stipend won't come close to covering costs, said Jose Maria Lopez, Cintra director of U.S. projects. He estimated that the company and its adviser, JPMorgan Asset Management, spent $5 million in the past year trying to win the Texas 121 deal.

"It's 20-some people in our office working on that," Lopez said in a phone interview from New York, where he met with investors to talk about, among other things, the Texas 121 project. "If you add up the auditors, consultants, it could be well north of 100 people."

What if Cintra wins?

State transportation commissioners have said they would abide by the region's decision on Texas 121, despite worries that selecting the tollway authority could scare off private bidders for future projects.

If the state commission were to select Cintra, Macquerie and Skanska would still be eligible for stipends -- but the North Texas Tollway Authority probably would not, officials said. The tollway authority was not part of the yearlong bidding process won by Cintra in February. Instead, it was allowed to submit an 11th-hour proposal in March at the insistence of Dallas-area lawmakers who opposed a private toll project.

Whether it was fair to allow the tollway authority to enter the competition late is a key issue before the state commissioners, who on Thursday may discuss the state's vulnerability to lawsuits in the matter.

Violation of federal law

Allowing the tollway authority to bid after the process had ended violates federal rules and effectively killed any further federal money for the Texas 121 project.

It's unclear whether Texas will be asked to repay $237 million in federal funds already spent on the Lewisville-Carrollton portion of the toll road that was completed last year.

In May, the Federal Highway Administration sent a letter to the Transportation Department warning that awarding the project to the tollway authority would violate federal procurement rules, making the project ineligible for federal funds.

But the letter didn't address funds already spent. State transportation officials are trying to get a clarification from federal officials before Thursday's meeting.

Tollway authority officials say federal procurement laws aren't an issue, because they don't need federal funds to finish the road.

"It's a public roadway right now. We're a public agency. The project is never out of the public's hands," said Jerry Hiebert, tollway authority executive director.

Time to move dirt

Regional Transportation Council members will attend Thursday's meeting and request commission approval of the tollway authority's proposal, said Michael Morris, transportation director for the North Central Texas Council of Governments.

RTC members were split on the matter, with the tollway authority beating Cintra by a 27-10 vote, but they are now eager to build the remaining section of the road between Carrollton and McKinney.

"At some point," Morris said, "we've got to move on."

If you go

The Texas Transportation Commission is expected to decide Thursday whether to accept a proposal from the North Texas Tollway Authority to build and manage the Texas 121 toll road for 50 years. In exchange, the tollway authority will pay $3.3 billion for use on other area road projects.

A competing proposal from Cintra and its U.S. partner, JPMorgan, offered $2.9 billion.

When: 9 a.m.

Where: 125 East 11th St., Austin

Public comment: Yes

Online: Visit www.txdot.gov to watch streaming live video.

Source: Texas Department of Transportation

Losing bids

Losing bidders who have been paid for their intellectual property since 2002:

-- Texas 130, Georgetown to Austin, 49 miles: Two unsuccessful bidders were paid $1.3 million each. Winner: Lone Star Infrastructure.

-- Trans-Texas Corridor, master plan for the TTC-35 Oklahoma-to-Mexico route (including Dallas-Fort Worth), 600 miles: Two unsuccessful bidders were paid $750,000 each. Winner: Cintra Zachry.

-- Texas 121, Denton and Collin counties, 26 miles: As many as three private companies could be eligible for $750,000 each if the contract is awarded to the North Texas Tollway Authority. The tollway authority, which is a public body, likely would not be eligible for funding.

Source: Texas Department of Transportation