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Va. Hopes to Privatize
Dulles Rail Project By Lyndsey Layton After a year of exclusive and confidential negotiations, Virginia hopes to turn over to a private partnership the $4 billion project to build a rail line to Tysons Corner and Dulles International Airport. It would be the first time a Metro segment was not built by the public transit agency. Virginia officials call it an innovative plan that would save tax dollars and set an example for other transit projects across the country. Opponents say it is a sole-source deal that would benefit Bechtel Corp. and Washington Group International, which entered into a partnership to build the rail line. The stakes are high; the Dulles project is the third most expensive rail proposal in the country, surpassed only by two projects in Manhattan: a $17 billion plan to build a subway along Second Avenue and a $5.2 billion plan to extend the Long Island Rail Road from the East River to Grand Central station. Metro officials are to discuss Virginia's unusual approach to the project this morning, when the state will ask them to agree to the deal with the partnership. Metro's consent is needed because it would ultimately own and operate the line. The state also wants Metro to act as a technical manager to make sure the project is compatible with the rest of the subway. The project would extend Metrorail about 23 miles from West Falls Church to Dulles. The work would be done in two phases, with the first ending at Wiehle Avenue in Reston. Although much of the recent public discussion about Dulles rail has focused on how local governments would pay their share, state officials have been holding confidential negotiations with Dulles Transit Partners since January 2003. There is no opportunity for public review until the deal is signed and becomes binding. Dulles Transit Partners is made up of Bechtel and Washington Group. Until last month, the West Group, the largest landowner in Tysons Corner, was also in the partnership. The state has a draft agreement with Dulles Transit Partners for the firm to perform preliminary engineering but wants approval from the Federal Transit Administration before finalizing it. Federal officials, who have never approved a similar deal, have been studying the plan for months and hired outside expertise to help. Federal Transit Administrator Jenna Dorn declined to comment for this article. The Dulles deal would add to the number of Virginia transportation projects financed in part by the private sector. The state enacted the Public-Private Transportation Act in 1995 to get transportation projects built more quickly and efficiently and to encourage private investment. Virginia is a leader among states in striking deals with companies to build road projects. Results have been mixed. One of the first projects, the Dulles Greenway, was built for $340 million by a private firm and has struggled financially since its 1995 opening. The Greenway has never made a profit, according to the General Accounting Office. But the state did not have to pay anything toward the cost of the 14-mile road and will eventually assume ownership. Motorists who use it can cut travel time by 50 percent, according to its developers. "Virginia made a conscious decision in the '90s to go toward private participation. It was a political philosophy," said Steve Cohen, who co-wrote a recent study of public-private funding of transportation projects for the GAO. "Governor Warner embraced it and modified it, but it's something that has roots in the state. It's unusual." Typically, a company pays for a road or other improvement and, in exchange, gets the right to collect toll revenue to pay back its costs and make a profit. The Dulles project differs because it is a transit project, and a private contractor would not be able to recoup costs and make a profit by collecting fares. In this case, the partnership agrees to build the project at a "firm, fixed price" that includes a built-in profit margin, said Karen Rae, director of the state's Department of Rail and Public Transportation. "They agree to build the project on time and on budget," Rae said. "That's the risk that haunts most of these big projects." In the Dulles case, the public would provide the money for the rail project. The federal government would pay 50 percent, and state and local governments would pay the rest. The local share would come from a special tax district in the Dulles corridor and the state's share from tolls paid by motorists who travel the Dulles Toll Road. The federal government has not decided whether to fund the project. Every piece of the 28-year-old, 103-mile Metrorail system has been designed, built and operated by Metro. Typically, Metro applies for the federal construction funds on behalf of Virginia, Maryland and the District and then awards construction contracts to private contractors through competitive bidding. In every case, Metro has managed environmental permitting, legal issues, right-of-way acquisition, purchasing and construction. Officials at the transit system have been unhappy that Virginia wants to hire a company to perform much of the work that Metro would normally do. Metro Assistant General Manager P. Takis Salpeas says he would be forced to lay off 55 people from the construction and engineering department as a result. Virginia wants to hire Metro as its technical consultant for the Dulles project, at a cost of about $11 million, but that is less than what Metro would have been paid had it been running the project. Virginia officials say a private firm would be more accountable and more affordable and would share in the financial risk. "What we have looked for, and insisted upon, is a deal that will be good for the taxpayers and a deal that is better than one that will be reached through conventional procurement methods," Virginia Transportation Secretary Whittington W. Clement said. The partners have agreed to perform preliminary engineering for about $48 million, 20 percent less than the $60 million that Metro estimated the work would cost, said sources close to the negotiations. Opponents say the closed nature of the negotiations -- participants signed confidentiality pledges that prohibited them from talking -- coupled with the fact that Dulles Transit Partners is not facing competition for the contract, raise questions about whether the public interest is being served. "The biggest fundamental issue is the lack of competition," said Bill Vincent, who runs a think tank that promotes bus rapid transit, an alternative to rail. "The best solution is to issue a request for proposals and get bids from several companies to come up with the best technical solution and best price." Vincent said that Bechtel and Washington Group International are getting a sole-source contract and that the arrangement gives the appearance of a "pay to play" mentality in state government. State officials and the Dulles Transit Partners said there was competition six years ago, when Virginia received two unsolicited proposals to build transit in the Dulles corridor. After the state selected one of the proposals and began discussions, the lines of competition blurred, with some players dropping out and others merging to form a partnership that became Dulles Transit Partners. That group submitted its current proposal in 2000. Forrest "Frosty" Landon, executive director of the Virginia Coalition for Open Government, said it is worrisome that the state is negotiating privately to spend billions of tax dollars. "My biggest concern is that it can all be fait accompli before the public gets an opportunity to have input and hold the government accountable for how public money is spent," he said. Vincent said that one problem with negotiating with one company is determining a fair price. "How do you know that's the best price when you don't have anything to compare it to?" he said. "As a taxpayer, how do I know this contract is in my best interest if there isn't another competing proposal? There's just no way to know." Bechtel, he said, is involved in one of the worst examples of cost overruns in the country, Boston's Big Dig project. In partnership with Parsons Brinckerhoff, Bechtel was hired to build a harbor tunnel and highway beneath Boston streets for $2.5 billion, but the price escalated to $15 billion. This spring, Massachusetts filed suit over the costs against the two companies. Washington Group International is an Idaho-based, global construction company that has been awarded more than $1 billion in reconstruction contracts in Iraq. Bechtel, with headquarters in San Francisco, is one of the world's largest engineering-construction companies, and the Bush administration has awarded it about $3 billion worth of reconstruction work in Iraq. John G. Milliken, Bechtel's lobbyist and a spokesman for Dulles Transit Partners, is a former state transportation secretary and a longtime friend of Gov. Mark R. Warner (D). He led Warner's transition team as Warner was settling into Richmond. Milliken said he has been vigilant about keeping his work for Dulles Transit Partners separate from his relationship with Warner. "I've been careful not to let my professional responsibilities to the project and whatever personal ties I may have interconnect," he said. "I've never talked with him personally about the merits of this project since he's been in office." © 2004 The Washington Post Company |
