Recap: Accelerating Project Delivery through Innovative Procurement, Partnerships, and Financing Methods: Part 1
The U.S. DOT’s Project Delivery Center of Excellence's thought leadership event on “Accelerating Project Delivery through Innovative Procurement, Partnerships, and Financing Methods: Part 1” featured Dr. Morteza Farajian, U.S. DOT Build America Bureau Executive Director; Maria C. Lehman, PE, ENV SP, F.ASCE, American Society of Civil Engineers (ASCE) President; and Adie Tomer, Senior Fellow at Brookings Institution. The October 12 event was part of the thought leadership series on Delivering the Benefits of the Bipartisan Infrastructure Law. The session was hosted and moderated by U.S. DOT Volpe Center Director Anne D. Aylward.
Dr. Morteza Farajian serves as a senior executive leading the Build America Bureau at U.S. DOT. He is responsible for credit programs and loan guarantees with $29 billion in the existing portfolio and more than $22 billion allocated, issued, or pending in private activity bonds that support development of large-scale and multimodal transportation infrastructure.
Prior to this position, Dr. Farajian served as acting Deputy Secretary of Transportation and Director of Public-Private Partnerships (P3) Office in Virginia. He led procurement, financing, and contract negotiation of multiple multimodal transportation projects totaling $10 billion. Dr. Farajian co-founded a crowd-financing platform that provides local and small investors the opportunity to invest in infrastructure projects as equity or subordinate debt. He has proven experience in successfully leading multi-disciplinary teams and diverse expertise in P3 transaction structuring and negotiation, organizational transformation, business development, public policy, stakeholder management, and project planning and finance.
Maria Lehman is President of ASCE. She has been GHD’s infrastructure market leader for the United States since May 2020. She was the former vice president for critical infrastructure for Parsons, COO and acting executive director of the New York State Thruway Authority, and commissioner of public works for Erie County, NY. She has over 40 years of multi-disciplinary technical and leadership experience, both in the private and public sectors and in traditional and alternative delivery.
Lehman has served as principal-in-charge, project executive, program and project manager, and project engineer on more than 700 projects, ranging in size from $10,000 to $3.9 billion. She has successfully led alternative delivery projects, such as design-build, best value, and public-private partnerships. Following the historic passage of the Bipartisan Infrastructure Law, she was appointed to serve on President Biden’s National Infrastructure Advisory Council in 2022.
Adie Tomer leads the Metropolitan Infrastructure Initiative at Brookings Metro. His team aims to better understand how infrastructure policies—from the federal through local level—impact economic development, social prosperity, and environmental resilience. Tomer is an expert in infrastructure policy and urban economics, with a particular focus on transportation and digital technology issues. His work has received coverage and citations in international print publications and other media outlets, including The Economist, Wall Street Journal, New York Times, Washington Post, National Public Radio, and the BBC. Tomer has testified in front of the U.S. Congress about the future of American infrastructure and has advised staffs of presidential candidates.
This post provides a recap of the conversation. You can watch the full event video here.
Unlocking Innovative Financing for Transportation Projects: U.S. DOT Build America Bureau's Role
Dr. Morteza Farajian, Executive Director of the U.S. DOT Build America Bureau, shared insights on financing and promoting innovative project delivery. The Bureau serves a crucial role as a one-stop shop, offering a consolidated resource for project sponsors to access various credit programs, grant programs, and technical assistance. By offering various funding programs, flexibility, and technical support, the Bureau aims to make projects more cost-effective and comprehensive.
“Project sponsors who are trying to learn a little bit more about innovative project delivery, innovative funding, and financing options don't have to go to different operating administrators. ...They can come to us, and we'll be able to help them.”
Leveraging Financing Programs
Farajian highlighted several financing programs offered by the Build America Bureau:
- Lending Capacity: The Bureau has over $100 billion in lending capacity, making it a valuable resource for project sponsors. The financing programs are not oversubscribed, ensuring that eligible projects can secure funding.
- Savings through Loans: The Bureau's loans can save project sponsors substantial amounts, ranging from 20 percent to 40 percent, compared to market financing options. This is especially beneficial for projects with long lifespans like bridges and tunnels.
- Flexible Payment Options: Project sponsors can structure loans with deferred payments, sometimes up to 5 years after project completion. This flexibility is ideal for revenue-generating projects.
- Private Activity Bonds (PABs): The Bureau allocates PABs for transportation projects financed through the private sector. This serves as a valuable resource for public-private partnerships.
Key Initiatives and Benefits
Farajian emphasized that the Bureau is more than just a funding source; it also encourages projects that align with the U.S. DOT’s strategic goals. He shared a few initiatives that stimulate project development and provide options for critical infrastructure improvements:
TIFIA 49 Initiative: Projects in certain categories receive more substantial financing, increasing project sponsors' funding to 49 percent of total project costs.
Transit-Oriented Development Program: This program extends beyond traditional transportation projects to include public infrastructure affordable housing projects.
- Rural Project Initiative: For projects in rural areas with a population under 150,000 and costing less than $100 million, the Build America Bureau offers reduced interest rates, promoting more cost-effective project execution.
Numerous projects have benefited from Bureau financing, and Farajian took the time to highlight a few, including an Oklahoma rural shoulder lane project, which achieved significant cost savings and reduced crash-related expenses, a public-private partnership project in northern Virginia that transformed an existing highway into express and transit lanes, as well as several multimodal projects with Seattle Sound Transit, the largest single borrower at $4.17 billion.
Farajian noted the Bureau also offers technical assistance and grant programs to help project sponsors strengthen their capabilities and tackle complex challenges. He encouraged project sponsors to explore the opportunities to enhance the success of their initiatives and serve the community's needs while addressing transportation challenges.
Advancing Infrastructure: ASCE’s Blueprint for Timely and Effective Projects
Maria Lehman shared some key insights and perspectives from ASCE, which represents over 150,000 members worldwide. ASCE’s core values prioritize the health, safety, and welfare of the public, and Lehman noted that this commitment to public welfare aligns with the goals of the U.S. DOT and the Project Delivery Center of Excellence in implementing the BIL and turning historic infrastructure investments into a reality.
Lehman referred to the BIL as a down payment on what will be a continuous, multi-decade effort to catch up with our nation's infrastructure needs. She highlighted the need to now deliver major projects and programs on time and on budget. “We need to build public trust and demonstrate that we're capable of delivering big projects and big programs.”
Streamlining Project Execution Focusing on Technical and Financial Capacities
According to Lehman, one of the key indicators of ASCE's long-standing commitment to on-time project delivery is the development of crucial technical and financial capabilities. For example, through partnership with the National Society of Professional Engineers and the American Council of Engineering Companies, ASCE utilizes the Engineers Joint Contract Documents Committee (EJCDC) to simplify and improve construction contracting processes across the nation. The resulting templates help to significantly expedite project delivery and facilitate efficient contracting processes, especially for the vast number of entities eligible for grant funding under the BIL.
“These fill-in-the-blank resources help communities that don't have the knowledge and provides that extra help that they need without having a whole lot of extra people involved.”
Workforce Challenges: Recruiting and Retaining Talent
The growing magnitude of infrastructure projects raises concerns about workforce shortages in civil engineering. Lehman acknowledged these severe workforce shortages affect everything from planning and design to construction and long-term maintenance. She emphasized the need to recruit and retain talent effectively, streamline processes, and ensure that people work in roles that align with their expertise.
"The big issue here is that there is not one minority in our civil engineering space that is represented at half what they are in the U.S. population. …So, it's a math problem unless we start getting better at recruiting women and minorities into this business and keeping them, because they leave the profession in much bigger numbers than others."
To address the diversity gap within the civil engineering field, Lehman noted that ASCE is working with various federal agencies to encourage the recruitment and retention of women and minorities.
Leveraging Innovation and Investments
Lehman reiterated that the BIL and collaborative private sector investments are ushering in an era of innovation. She stressed the importance of leveraging all available tools to achieve infrastructure goals, specifically recommending use of parallel processes, senior advisory teams that meet regularly, and extensive and transparent stakeholder engagement. “The public needs to understand what it is you're doing, and how you're doing it, and how they benefit from it.”
She also noted that as natural disasters are becoming increasingly frequent, it is vital to promote resiliency in infrastructure. Developing resiliency standards for infrastructure can not only bolster project sustainability but also attract investors. Lowering costs through resilience can result in substantial savings that municipalities can reinvest in more resilient infrastructure. “Every day we work on this, there's new challenges, there's new solutions, and so there's best practices to take away.”
Lehman is encouraged by the collaborative efforts taking place. Accordingly, ASCE is actively sharing information with its members and partners to help deliver better, faster, and more cost-effective infrastructure.
Navigating the Challenges of Transportation Project Delivery
Adie Tomer, of Brookings Metro, shared insights on the current state of infrastructure investment and the challenges facing transportation projects in the United States. He offered high-level perspective from a research institution, focusing on the macro-level fiscal environment, core challenges in project delivery, and ongoing innovations and gaps in the transportation sector.
The Macro-Environment: Historic Investments and Fiscal Sensitivity
Similar to previous speakers, Tomer noted how the BIL and the Infrastructure Investment and Jobs Act (IIJA) are increasing federal spending on transportation and other infrastructure sectors at historic levels. This surge in investment brings both opportunities and challenges to the table. Tomer questioned whether the level of investment can continue over the longer term. He also noted sensitivity to rising project costs and inflation—the overall construction cost index—is a growing concern, impacting not only budgets but also the public perception of project efficiency.
"People are starting to wonder if America can still deliver infrastructure, transportation included, at scale."
Another macro concern noted by Tomer is new motivations and new stresses related to surface transportation. He referenced emerging technology and climate, resilience, household affordability, resilience supply chains, and even inclusive economic development as all fundamentally different than they were a decade ago. “Your old projects and their old delivery methods may no longer work in the current macro environment.” In addition, citizenry, constituents, and businesses may no longer support those projects.
Core Challenges: Translating Values into Practical Projects, Ensuring Accurate Asset Inventories, and Addressing Workforce Gaps
Tomer noted that due to these macro concerns, translating societal values and priorities into forward-looking infrastructure projects is critical. He cited the Katy Freeway highway expansion project in Houston as a perfect example of the need to translate our values and priorities into actual projects that we build. Shortly after its completion, the freeway experienced significant congestion, raising questions about the project's objectives. This underscores the need to better align project goals with broader societal values and ensure that projects reflect real needs.
Additionally, Tomer noted the lack of comprehensive asset inventories as an issue that has persisted for years and is exacerbated in the current digitalized environment. Without accurate asset inventories, aligning projects with overarching objectives becomes challenging. Tomer stressed the need to connect project selections, including new and maintenance projects, to broader goals.
Another challenge is institutional memory of past project failures and controversies, which has a lasting impact on project approvals. Tomer suggested the legacy of private finance challenges, exemplified by issues in projects like Chicago's parking meters and the Purple Line, continues to influence project acceptance. This is a vital aspect to consider when seeking project financing and community support.
Tomer also pointed out the disconnect between workforce intermediaries and transportation agencies. Despite the need for more workers in the transportation sector, there is a lack of diversity, particularly involving race and gender. Also, although funding for workforce development is available, it's often bundled with formula capital money at the state level. This disconnect needs to be addressed to ensure that resources are used more effectively for workforce development.
Embracing Innovations to Transform the Transportation Landscape
Amidst these challenges, various innovations are reshaping the transportation landscape and the way projects are conceived, planned, and executed. Tomer highlighted innovations in transportation project delivery such as climate-sensitive capital budgeting, fiscal retails, expanded community engagement, and modernized workforce systems. Climate-connected budgeting is gaining momentum, aiming to integrate resilience and environmental goals into project selection. Fiscal retail approaches offer cost-effective project delivery by pooling resources and utilizing fiscal instruments creatively. Empowering community voices and diversifying the talent pipeline are driving engagement and inclusivity. Finally, Tomer noted that modernizing workforce systems and investing in green careers ensure a skilled and diversified workforce.
“There are a ton of opportunities and innovations underway, but there are still some kind of root and core challenges we need to think differently about if we want to actually deliver the kinds of projects that set up America for long-term success in the transportation space.”
View the event recording for the full discussion.
*The views of the speakers do not represent the views of U.S. DOT.
Sponsored by the USDOT Project Delivery Center of Excellence
Hosted by the U.S. DOT Volpe Center, the Delivering the Benefits of the Bipartisan Infrastructure Law event series is sponsored by the new USDOT Project Delivery Center of Excellence.
The U.S. DOT Volpe Center is committed to principles of accessibility and inclusion. If you require reasonable accommodations, please contact collateral duty Disability Program Specialist Stephanie Chase and carbon copy EEO Manager Eliot Sutler on your request.
Sponsored by the USDOT Project Delivery Center of Excellence