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Q&A With the Experts: P3 Digest Talks with Virginia’s P3 Director

Q&A with the Experts” is a new feature in P3 Digest that regularly will highlight leaders from throughout the public-private partnership world. If you would be interested in participating in a Q&A interview, please contact Barbara Bryant at bbryant@ncppp.org or (202) 962-0555.

Virginia recently celebrated 20 years of using public-private partnerships to conduct a variety of innovative infrastructure projects and has more projects in several stages of development. Successful examples include the open $925 million 95 Express Lanes project with 29-miles of managed toll lanes on Interstate 95 and the $1.7 billion 495 Express Lanes project in the metropolitan Washington area. Virginia also has under construction in the Hampton Roads region a new tunnel and a new roadway as well as an improvement to another tunnel that will significantly improve traffic flow in the region. The state also is exploring the feasibility of obtaining public financing to reduce congestion on heavily traveled Interstate 66 and is considering projects to develop alternative energy sources and enhance communications networks.

P3 Digest recently sat down with J. Douglas Koelemay, executive director for the Virginia Office of Public-Private Partnerships (VAP3) to discuss the state’s success with P3s, the lessons learned along the way and the types of projects his office hopes to pursue.

P3D: Tell us about Virginia’s overall philosophy toward P3s.

JDK: The state is committed to conducting a disciplined, consistent, open and transparent P3 process that produces value for Virginia taxpayers and users of new transportation options.

We also want clear accountability — decisions that are made in public — and more robust competition for projects. And that is happening. Years ago, we would see one firm submit bids for a project, which made the process more of a negotiation than a competition. Now we’re seeing four or five bidders for a project.

Virginia P3 is looking for what value we can expect by expediting priority projects. Will they result in lower net life-cycle costs, transfer major project risks, advance wider policy objectives or free up public resources for us on projects that do not have P3 potential?

P3D: Tell us about the authorizing legislation and how the amendments passed earlier this year have changed/improved the process and your approach toward P3s.

JDK: In accordance with Virginia’s original P3 legislation, the Dulles Greenway toll road was developed under the public utility model of the Virginia Highway Corporation Act (VHCA), which allowed private developers to submit applications to the Virginia State Corporation Commission (SCC) to build and operate toll roads in the Commonwealth. Under these terms, the SCC regulated toll rates and rates of return. It quickly became apparent that this way of administering these projects was needlessly complex and overly regulatory. As a result, the Public-Private Transportation Act of 1995 eliminated the role of the State Corporation Commission as the P3 project regulator and increased the public sector’s flexibility in developing and delivering them. Later amendments, including several introduced this year, have opened and strengthened the process to build consensus on projects among all stakeholders and the public up front and ensure revalidation at every stage.

 P3D: What have been some of the key lessons learned over the last 20 years?

JDK: We’ve learned through launching an independent, permanent office of dedicated professionals focusing on P3 projects, that it can be an effective champion of and catalyst for these types of projects and help to guide them toward successful conclusion. We also recognize the need for consistent guidelines and key review points to ensure that projects stay on target but also evolve if necessary to meet changing needs while, above all, increasing benefits for the public — who are not just taxpayers but customers. They need to perceive and understand how these projects serve them. So, outreach is very important. With that comes the need for strong leaders who can identify opportunities and ensure that both internal and external communications that on benefits produced occur. Finally, we have to keep in mind that Virginia is now in strong competition for private sector interest in projects in other states and countries so ours have to be, not only feasible but reasonable in terms of both scope and implementation.

P3D: What projects are on the horizon and which ones do you think will employ public-private partnerships?

JDK: We have a number of road projects that are in the planning or assessment stages and the potential for other, exciting ones that could leverage other types of resources and diversify the types of benefits P3s offer the Commonwealth. For example, the I-66 multi-modal project from I-495 west to U.S. 15 is in the P3 project development stage now and could move into the two-part request for qualifications/request for proposals procurement stage this fall. We’re also discussing additional links to extend the I-495, I-395 and I-95 HOT lanes.

We’ve also identified two transportation projects in Hampton Roads with attributes that suggest a P3 approach could be successful. One involves preliminary engineering on the High-Rise Bridge and the other is the beginning of the environmental process for Patriots Crossing.

Finally, Virginia P3 is screening opportunities for solar power, cell tower, parking concessions and other types of development projects to make the highest and best use of state assets such as buildings, facilities and rights-of-way.

P3D: What advice would you have for states and communities that are just entering the P3 realm?

JDK: I strongly urge newcomers to establish a permanent office that is dedicated to recruiting and building staff with specialized P3 experience and a strategic program in this area. They should look for professional program managers who have vision, discipline and imagination and who are pragmatic and collaborative by nature. Also be prepared to challenge department of transportation leadership to improve the agency’s contract management and risk management skills and build in flexibility to meet the challenges of change that is almost certain to occur over the decades of a P3 project’s life. This is the only way to actually realize the value of a P3.

Attendees at P3 Connect 2015 in Boston on July 20-22 will have a chance to learn more about these projects and about Virginia’s success in forming P3s. Koelemay will be a featured panelist twice during the conference, the three-hour “Introduction to P3 Bootcamp” and the “Recent Innovative Transportation Transactions” concurrent session.

Information about P3 Connect 2015, including registration, sessions and speakers, is available on the conference website.

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