A $5.2 Billion Bridge to Somewhere

Photo illustration by Emily Keegin and Tracy Ma; Photos: Alamy(3); Brett Weinstein(1); Getty Images(1)

Just 13 days after winning the 2010 election, New York Governor-elect Andrew Cuomo put on a hard hat, boarded a tugboat on the Hudson River, and took a tour beneath the Tappan Zee Bridge. “Should you continue to repair this bridge or replace the bridge?” he said once back on shore. “The answer is not going to be more money, more money, more money.”

March 22 (Bloomberg) -- Thomas Madison, executive director of the New York State Thruway Authority, speaks with reporters on Feb. 23 about construction of the new Tappan Zee Bridge. New York Governor Andrew Cuomo is seeking legislation that would allow private-equity firms to help finance construction of public-works projects, including the three-mile Hudson River span.

The 3-mile span carries 40 percent more traffic than its design intended and, at 56, is six years past its projected life. After a decade in which New York spent almost $750 million fixing the bridge, Cuomo has made his decision. He’s building a new one, and he’s doing it fast, helped by a procurement method that puts the private sector in charge of designing and building, and by President Obama, who fast-tracked federal approvals. “The Tappan Zee will be a model for the future on large projects,” says Victor Mendez, head of the Federal Highway Administration.

The model taking shape relies on a public-private partnership called design-build to deliver important cost savings, a priority during this time of tight budgets. Cuomo, a Democrat, has pushed the $5.2 billion project forward even as he’s had to close more than $12 billion in budget gaps in his first two years in office.

“The international market is watching this very carefully,” says William McGuinness, executive vice president for Skanska USA Civil. Skanska is among the companies short-listed to compete for the Tappan Zee project. “This is going to help mature the design-build market across the country.”

Traditionally, the state would design a facility and put it up for bid, limiting the engineering and architecture to ideas generated in-house and putting taxpayers on the hook for cost overruns, McGuinness says. With design-build, several engineering, architecture, and construction teams compete to develop the most creative and economical idea. The winning team typically takes on the risk of extra costs.

Cuomo only won the right from lawmakers to use design-build in December. As New York has played catch-up, Obama’s fast-track designation has meant help from federal officials well-versed in the process, says Tom Madison, executive director of the New York State Thruway Authority, which is overseeing the project. “We have folks at the deputy-secretary level meeting regularly with us to discuss issues and obstacles,” Madison says.

Cuomo has applied for a $2 billion loan through the Transportation Infrastructure Finance and Innovation Act (TIFIA). Loans available through this federal program typically have terms of about 35 years and an interest rate tied to U.S. Treasuries. New York’s chances of getting the loan improved after Congress passed a transportation bill in June that provided $1.7 billion in funding for TIFIA over two years, up from $120 million in fiscal 2012. The extra cash will allow the highway administration to issue $17 billion in loans, it said in a July statement.

The project’s rapid development has engendered opposition, mainly among local elected officials and public transportation advocates who want mass transit included with the new bridge. “The fast pace is leaving the public out, and moving forward without transit gives the feeling the government isn’t listening,” says Veronica Vanterpool, executive director of the Tri-State Transportation Campaign, a group of environmentalists and urban planners.

Incorporating a mass transit system now would double the price of the project, Cuomo has said. Nonetheless, the design request to the three teams competing for the contract, which also include Fluor and Bechtel Group, asks that they imagine a bridge that could eventually handle rail and rapid buses as part of the governor’s vision of a span to last 100 years. “A big project will always have opposition and controversy,” Cuomo said in a July interview on an Albany radio station. “If controversy wins, we build nothing.”

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