News Source: Achieving Business Excellence Magazine, May 2008 edition
May. 5, 2008
A private construction company financing a public sector highway project? It's happening out in the West Texas town of El Paso, and Gary Toushek has a closer look.
Forty-two years after being founded by James D. Abrams Sr. in El Paso, Texas, heavy civil construction firm J.D. Abrams, L.P. is deeply entrenched in the city, building infrastructure for an expansion of the area.This is partly to accommodate a coming influx of some 21,000 military personnel and their families to Fort Bliss, in support of the Base Realignment and Closure decision to move the 1st Armored Division there.
As well as El Paso, Abrams has area offices in Dallas and Houston, with its headquarters in Austin. It has two subsidiaries, Transmountain Equipment and Austin Prestressed; the latter operates a concrete precasting operation. Owned and managed by members of the Abrams family, the company's major focus is public sector highway and road projects, but it has also worked on flood-control dams, reservoirs, concrete waterways, railroad test tracks, airport taxiways, and other infrastructure projects in Texas, Mississippi, New Mexico, and Florida. But since the early 1990s it has stayed in Texas, where projects continue to materialize.
While the Army Corps of Engineers is Abrams' second-largest client, its largest is the Texas Department of Transportation (TxDOT), and the centerpiece of the El Paso development is the $268 million Spur 601 Inner Loop project, a new 7.5-mile freeway that will connect the Patriot Freeway, US Highway 54, and the Purple Heart Memorial Freeway (Loop 375). Abrams' vice-president of project development, Bill Burnett, has been working on it since 2005.
"We turned our proposal in to TxDOT, unsolicited, in December 2005, and the department agreed it had merit. There was one other proposal competing against us, and after a long process of evaluating the two, TxDOT determined that ours provided the best value in December 2006, and we signed the contract in August 2007."
The Spur 601 project is the first transportation project of its kind in the US in which a private sector developer is financing the up-front cost to build a public sector freeway via "pass-through financing," by which the transportation bond issuers will be reimbursed by the state as the freeway is used by motorists. Although drivers won't have to pay a toll to use the freeway, traffic will be monitored, and the transportation bond issuers will be repaid the amount they financed, based on the volume of traffic the freeway carries after it is built. This agreement between a private investor and El Paso makes it possible to build the needed transportation project faster than the state could by itself, according to a TxDOT press release.
"Since we promoted the financing of the project through transportation bond issuers," says Burnett, "we got involved with the financial aspects of raising bonds for it, which is a new business aspect for us. We went to New York City two times in 2007 for meetings and discovered we have very good financial standing with the credit-rating agencies Standard & Poor's and Moody's. Our contract with TxDOT says that once the project is complete in 2011, the transportation bond issuers will be paid a fee per mile for every vehicle using it for the next ten years, which will be used to retire the bonds. And while we had the contract with TxDOT, we worked with the local El Paso Camino Real Regional Mobility Authority, which issued the transportation bonds for us, so that we could issue tax-exempt bonds." The project is slated to be completed in 39 months.
Meanwhile, in the desert around El Paso, adjacent to the freeway construction, other Abrams crews are building the infrastructure for the new army barracks and related structures at Fort Bliss, beginning with underground utilities"gas, water, sewer, communications, electrical"then the streets and pads for buildings. The first phase of the 1,200-acre development, called Brigade Combat Team 1 (BCT 1), the first 400 acres, is nearly complete. BCT 2 is in progress, and BCT 3 will begin in May 2008.
Burnett says that normally on a highway project this size Abrams would have a construction partner, "but because our company started in El Paso in 1966, and most of us at Abrams have worked there, we didn't see where a construction partner on the Spur would add any value. So we were willing to take on all the risk ourselves. We have more than 300 of our 900 employees there, led by a project manager, a design manager and a construction manager, and we've been able to bring other Abrams talent in as needed, to supplement our local El Paso workforce.
"We've been able to use our personnel and equipment resources very efficiently," he continues, "so the craftsmen, the operators and the machines are all there in the area, working side by side. We don't have to bring dirt-hauling equipment all the way from Austin, Houston or Dallas; we're just moving it from one part of the highway construction zone to the BCT sections or vice versa. It's all confined to the same area. And the climate conditions have been nearly ideal, allowing us to work on schedule without weather interruptions." The commitment is to have part of the Spur open by August 31, 2008, then the second part by May 31, 2009.
Burnett has been at Abrams for more than 10 years; before that he was at TxDOT for 29 years, most recently as executive director. He says Abrams' core business is design-bid-build, as well as design-build, for which he puts teams together, including design engineer firms and specialty firms for right-of-way appraisal and acquisition or utility accommodation work.
"TxDOT has been a good partner to work with," Burnett says. "They did the early legwork on the Spur project, in terms of preparing their schematic and getting it environmentally approved for construction. And since this highway cuts through Fort Bliss, our other partners, the Army Corps of Engineers and the US Army itself, have also been very cooperative, as have the local utility companies, the city of El Paso, and the international airport. It's not just an Abrams project or a TxDOT project or a US Army project; it's an El Paso project, and everyone involved has put the project first, instead of looking after their own interests first. We're all pulling the same way, not against each other."