Skanska: Virginia Excels in PPP Policies

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RICHMOND-An increasing number of states are recognizing the viability of using public-private partnerships to finance and build necessary infrastructure—indeed, that is one of the key observations of the Urban Land Institute/Ernst & Young newly-released "Infrastructure 2012: Spotlight on Leadership” report. 

However, the truth is that some states are further along than others in using this structure for maximum effect. Leaders in this area are arguably Virginia, Texas and Florida, with Virginia in particular serving as a role model for other states that are still grappling with political and logistical issues.

“I think most governors now are recognizing or have recognized that they must do something along these lines to spur investment in their infrastructure,” Karl Reichelt, EVP of Skanska USA Infrastructure Development, tells GlobeSt.com.

Virginia has become especially adept at the PPP process thanks in part to its history with it, he says. The Commonwealth passed legislation supporting PPPs in 1995, Reichelt says and since then has developed a formulaic approach to deciding which projects fit best under the structure and how to market and award the projects to the private sector. “They’re closing on these projects,” Reichelt says. “That’s what separates them from other states.”

One of these projects is the Downtown Tunnel/Midtown Tunnel/MLK Freeway in Norfolk and Portsmouth, VA, which was awarded to a Skanska/Macquarie consortium in 2011 by the Virginia Department of Transportation. The project’s value is $2.08 billion and billed as one of the largest greenfield/brownfield transportation PPPs in the US—and certainly the largest undertaken by Virginia. Under the agreement, Skanska and its partners will finance, build, operate and maintain the project for the 58-year concession agreement period. Virginia announced the project’s financial close in mid-April.

Reichelt calls it a bellwether project for the PPP market. “A lot of people hope to see other states take on projects of this size and complexity.”

Skanska is competing for PPP deals in several states at the moment, Reichelt adds. “We are one of three firms shortlisted and working on active procurement for the Goethals bridge project in New York,” he says. “We are competing for a project called the East End bridge in Indiana. We have been shortlisted for the Hampton Roads bridge tunnel in Virginia and we are interested in a project in Texas called Travis County Courthouse.”