Owner of the Year: Florida Department of Transportation

By Scott Judy and Debra Wood

At the recent general session of the annual Florida Transportation Builders Association/Florida Dept. of Transportation Construction Conference in Orlando, Kevin Thibault, FDOT’s assistant secretary of engineering and operations, stepped up to deliver his remarks on the agency’s status.

advertisement

It was late February, just a week after President Barack Obama had signed the American Reinvestment & Recovery Act into law. Nearly $1.4 billion in additional federal funding was poised to flow into the state from the federal stimulus. Some good news, finally.

Thibault started his comments by asking the estimated 1,000 attendees if anyone hadn’t been impacted by the economy. Not a single hand raised, but a few nervous chuckles teetered across the room. It was an opening joke, after all.

But most in the audience understood it wasn’t a joke.

For more than a year now, amid a spiraling recession and increasing budget pressures, FDOT has steadfastly held to the agency’s mission and kept its focus on effectively and efficiently building a transportation system for the state’s traveling public.

It is with that spirit in mind that Southeast Construction announces its selection of the Florida Dept. of Transportation as its first-ever “Owner of the Year.”

Tough Times

Given the current economic picture, with private development declining precipitously, a public owner is an obvious candidate for this designation. And FDOT was a natural contender from the start. It’s the largest state transportation department in the Southeast Construction region, with an estimated $15 billion in construction funding planned for the next five fiscal years.

FDOT has distinguished itself in numerous other ways.

It has pushed for more innovative project delivery methods to build individual projects faster and to accelerate other efforts.

(Photo by Mark Toigo)

Last year FDOT accelerated $1.4 billion of new projects to start by between one and five months earlier—without additional funding. At the same time it is overseeing more than $1.3 billion in additional funding from the federal stimulus.

Southeast Construction’s selection of FDOT as its “Owner of the Year” is based as much on the agency’s future as its past, however. The department’s future is uncertain, and will require change to keep delivering on its mission. That’s because FDOT stands at the center of a daunting national challenge—how to build the nation’s infrastructure network with a broken system of funding.

“As a nation … we have changed the way we travel,” he says. “People have changed their driving habits, and how we’re going to fund transportation is definitely changing. It has to change. What the answer is, I don’t know.”

And without the federal stimulus, he says, “we’d be deferring projects.”

At the same time, Thibault isn’t giving up on FDOT’s leadership mantle.

“We’re just going to keep on plugging along,” he says. “We still have a mission here. We still have a goal of delivering effectively and efficiently a transportation system that moves people and goods. We shouldn’t lose focus on that.”

Recent Accomplishments

FDOT has been an industry leader on many fronts.

Robert G. Burleson, president of the Florida Transportation Builders Association in Tallahassee, a long-time transportation industry veteran, agrees.

“I don’t think there’s a better DOT in the country,” he says. “I don’t feel that there’s a DOT that works better with the industry. We may not always agree with what they do, but they’re always good enough to give us a seat at the table.”

A national leader in the use of alternative-delivery methods for many years, the department recently has utilized even more versions of the design-build approach to accelerate projects.

For example, in 2007 FDOT moved forward with its first design-build-finance effort to deliver the $430.4 million Interstate 75 Road Expansion Project in southwest Florida. The project, which widens 30 mi. of I-75 in Lee and Collier counties, provides in a single contract what would have taken an estimated 15 years to deliver using a traditional design-bid-build approach. The contract, nearly a year ahead of its December 2010 scheduled completion, has so far delivered on its promise.

Earlier this year, the agency signed a $1.8 billion agreement with a joint-venture consortium to finance, build, operate and maintain the Interstate 595 Corridor Improvement Project in Broward County, after concessionaire ACS Infrastructure Development of Spain secured financing from an international banking consortium.

This single contract—itself larger than the state’s $1.3 billion in stimulus funding—will create or retain an estimated 33,600 jobs. The federal stimulus funding, in comparison, will create or retain more than 24,000 additional jobs, the department estimates.

“Florida has put together one project, of [nearly] the same value (as the stimulus),” says Gerry O’Reilly, director of transportation development for FDOT district 4.

 “Yet Florida will not have spent a penny on the construction until everything is finished, approximately five years from now.”

There’s also the nearly $1.4 billion in stimulus funding that Florida is receiving. An estimated $1.35 billion will go to highway and bridge construction. Also, urban transit systems will receive $290 million in funding, while rural transit systems will get about $20 million. An additional $5.4 million is directed to fixed-guideway systems. The stimulus also funds $50 million in airport improvements.

Continuing Innovation

Before the passage of the federal stimulus, there was Accelerate Florida. Last October, at the behest of Gov. Charlie Crist, FDOT implemented his economic stimulus plan by accelerating new projects through a streamlined permitting process. The program accelerated roughly 180 projects, totaling $1.4 billion, by between one and five months.

“I applaud the Florida Department of Transportation for accepting the challenge to move up the timeline for getting shovels in the dirt faster and reducing congestion on Florida’s roads,” Gov. Crist said in a statement.

The Florida DOT embraced the design-build delivery method early on and has led the nation in awarding such projects. The Florida Legislature approved alternative delivery methods in 1996. By 2003, according to the Design-Build Effectiveness Study prepared for the U.S. Department of Transportation-Federal Highway Administration, Florida had awarded 66 design-build projects, more than any other state. Not only were there more projects, its $1 billion in design-build work was more than double any other state.  

“Florida has been one of the premier DOTs with respect to measuring and evaluating the right places, methodologies and approaches to design-build,” says Jim Avitabile, design-build market leader with Jacksonville, Fla.-based RS&H.

Current design-build projects include the $43.4 million A. Max Brewer Bridge replacement in Titusville, awarded in December to Lane Construction, and the $37.7 million, SR 46 Lake Jessup bridge replacement, awarded to Johnson Brothers/Misener Marine in January 2008. RS&H is preparing the package for FDOT to let the SR A1A/Little Blue Heron Bridge Lake Worth Bridge replacements as a design-build project.

Brian Blanchard, FDOT’s chief engineer, says design-build will be a popular choice for stimulus projects.

“There will be significant design-build used,” Blanchard says. “Not only design-build as we’ve traditionally used. But you’ll see a lot of design-build low-bid. A lot of the local agencies are going to be using that mostly for resurfacing-type projects.”

This design-build low-bid approach differs in that the winning bid does not hinge on the technical proposal, but on a low price. Like traditional design-build, however, it accelerates the project and provides a single point of responsibility for permitting, design and construction.

Florida legislators see the benefits of design-build, too. Some are pushing legislation that would mandate that 25% of all capacity projects utilize design-build. Blanchard says currently about 15% of these capacity projects utilize design-build.

Public-private partnerships are another part of FDOT’s success. The massive $430.4 million I-75 iROX project in Southwest Florida is one such example.

In the long-term, the department will continue to use design-build-finance. But the current situation of evaporating revenue streams is causing FDOT to pause on new contracts of this type.

“For the immediate, you won’t see the department approve any design-build-finance projects,” Blanchard says. “Our revenue projections are down, so we’re not sure we’re going to be able to pay back the financing portion if we make the commitment today. We’re backing away from design-build-finance until our revenues look more positive.”

Thibault adds: “In the case of (design-build)-finance, most of the private sector would want to know when they’re going to get paid back. It’s difficult for me to tell them that (now).”

The Problem: Future Funding

That looming budget gap was hammered home a month after the FTBA/FDOT conference, when Thibault attended two state revenue estimating conferences—occasions in which state agencies are given a heads-up on future funding. The news was bad: $2 billion gone from the five-year work program due to declining revenue.

Thibault reports that the first conference indicated that FDOT’s traditional funding sources such as the motor vehicle fuel tax, the diesel tax and motor vehicle registration fees resulted in “more than $800 million cash reduction in our five-year work program. Since we’re a commitment-based, cash-flow agency, that translates to more than $1.2 billion in commitment, which means budget that we have to get rid of.”

The second conference, which addressed documentary stamp fee revenues, resulted in an additional cash reduction of more than $700 million.

“We haven’t determined what the (exact) commitment impact is,” Thibault says. “It’s safe to say, though, that within two weeks we had to reduce more than $2 billion from the five-year work program.”

Thibault adds: “From what we know, we haven’t reached bottom yet. I don’t see an uptick.”

Funding problems are not isolated to transportation, but pervasive throughout the state budget. And that causes further problems, such as raids on road funds.

According to Dan Cashin, FDOT budget officer, the most recent budget proposal from Gov. Crist contained a “small sweep” of funds from the state road fund into the general fund.

FTBA and FDOT were seeking increases in tag and title fees for the state road fund.

“We propose to increase tag fees anywhere from $10 to $20 a year for the next three years, and then indexing that tag fee to the CPI (Consumer Price Index),” FTBA’s Burleson says. “We propose a similar increase of about $17 a year for title fees.” This combination of fee increases, he says, would raise almost $1.5 billion in new revenue by the third year. “Certainly that’s money we need.”

Crist recently proposed similar fee increases in the 2009-2010 budget plan he released in late February. So far, Burleson says, there has not been any pushback on that increase from the public, media or legislators. However, Crist’s budget directs these fee increases to the state’s general fund, and not to the road fund.

It would seem tough times are on the horizon for the Southeast’s Owner of the Year. But FTBA’s Burleson is confident that FDOT’s leadership is up to the challenge.

“It’s much easier to run a DOT when there’s lots of money,” he says. “When the money is dwindling, and the demand for projects is going up, you’re bound to frustrate and upset people.

“But I have a lot of confidence in the people leading the department,” Burleson continues. “Nobody is happy that the work program is being cut, but if they hadn’t been paying attention to how they were managing the money, the program would’ve been cut even more.”

Navigating the current financial conundrum of declining revenues and increasing demands is the task ahead, Thibault says.

“That’s our challenge,” he says. “How do we fix this broken mechanism? There’s no real easy answer. It’s going to take a lot of discussion, a lot of leadership.”