Legal Handbook for the New Starts Process (2010)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

19 useful tool for a project sponsor to use as it seeks FTA approval to enter PE. Legal Capacity Requirement. The “Administrative Requirements” section of the PE checklist includes “Le- gal Capacity (Authority to Implement Proposed Transit Mode).” Before making a capital grant, FTA must make a determination that the applicant has or will have the legal capacity to carry out the project. FTA generally relies on a certification to this effect. The applicant must have authority under state or local law to be eligi- ble to apply for, receive, and spend federal funds and to carry out the project. Moreover, those acting on behalf of the applicant must be authorized to do so by the ap- plicant.108 Given the significance of a New Start project, it is important to have an Opinion of Counsel prepared at this point of the FTA process citing relevant statutes and authorities, discussing any pending or threatened litigation affecting the applicant or the project, and demonstrating that the project sponsor has the legal, technical, and financial capacity to complete PE. This document should be updated during the project devel- opment phase as necessary. Formal Request to Enter PE In sum, before proceeding into PE, FTA reviews documentation on the scope of work; the problem statement, goals, and objectives; definition of alterna- tives; and study assumptions, results, and methodolo- gies. FTA must select the New Starts Baseline Alterna- tive, and the locally-preferred alternative must be adopted in the region’s financially-constrained long- range plan. The project sponsor must demonstrate its technical capacity to undertake PE, and FTA signals that the project sponsor has made that demonstration by accepting the Project Management Plan (PMP). As discussed in Chapter II, this is the point where a project sponsor should consider asking the FTA to enter into a PDA that would set schedules and timelines for both FTA and the project sponsor for the project devel- opment process. The formal request to enter PE is submitted by the project sponsor to its FTA Regional Office. The FTA regulation on Major Capital Investment Projects pro- vides that “…FTA will approve/disapprove entry of a proposed project into preliminary engineering within 30 days of receipt of a formal request from the project sponsor(s).”109 The emphasis on “formal request” is im- portant. All required information must be submitted before FTA deems the request to be formal, and FTA will notify the project sponsor when it believes that the appropriate information has been submitted and the 30- day clock starts ticking. 108 See FED. TRANSIT ADMIN., FTA CIRCULAR C 9300.1A, ch. VI: Requirements Common to All Capital Program Grant Ap- plications, 4 b, available at http://www.fta.dot.gov/laws/circulars/leg_reg_4128.html. 109 Id. CHAPTER IV: PRELIMINARY ENGINEERING PHASE A. FTA Approval to Enter Preliminary Engineering/Blanket Pre-Award Authority to Incur Costs FTA approval is necessary to enter PE. Once that is granted and a project sponsor proceeds, the project re- ceives blanket pre-award authority to incur project costs for PE activities before grant approval.110 All fed- eral requirements must be met before incurring costs to retain eligibility of the costs for future FTA grant assis- tance. This pre-award authority does not constitute a commitment by FTA that future federal funds will be approved for the project. Note, moreover, that pre- award authority for real estate acquisition activities is not available until the NEPA process has been com- pleted. B. Purpose of Preliminary Engineering PE essentially is a phase during which the project sponsor further defines the locally-preferred alterna- tive’s scope, schedule, and budget to complete the NEPA EIS process and finalizes the project scope with an accurate cost estimate, a comprehensive PMP to carry the project through construction, and a good fi- nancial plan with a significant portion of local funding committed to the project. An FTA Fact Sheet on PE111 notes the “Guiding Prin- ciples” of PE by stating that it provides a basis for the management of risk of project implementation, includ- ing • Identification of all environmental impacts and adequate provision for their mitigation in accordance with NEPA. • Design of all major or critical project elements to the level that no significant unknown impacts relative to their costs or schedule will result. • Completion of all cost estimating to the level of confidence necessary for the project sponsor to imple- ment its financing strategy, including establishing the maximum dollar amount of the New Starts financial contribution needed to implement the project. • Definition of procurement requirements and strategies to deliver project service. • Solidification of local funding commitments to the project. C. Project Management Plan; Project Management Oversight As noted above, FTA requires a PMP for a project to proceed into PE. This is based on federal transit law, 110 Id. 111 FED. TRANSIT ADMIN., FTA MAJOR CAPITAL INVESTMENT FACT SHEET, PRELIMINARY ENGINEERING (2007), available at http://www.fta.dot.gov/planning/newstarts/planning_environme nt_218.html.

20 which requires that for every major capital project, a project sponsor must “prepare and carry out a project management plan approved by the Secretary of Trans- portation.”112 The statute further provides that the plan must provide for the following: 1. Adequate recipient staff organization with well- defined reporting relationships, statements of func- tional responsibilities, job descriptions, and job qualifi- cations. 2. A budget covering the project management or- ganization, appropriate consultants, property acquisi- tion, utility relocations, systems demonstration staff, audits, and such miscellaneous costs as the recipient may be prepared to justify. 3. A construction schedule for the project. 4. A document control procedure and recordkeeping system. 5. A change order procedure that includes a docu- mented, systematic approach to the handling of con- struction change orders. 6. Organizational structures, management skills, and staffing levels required through the construction phase. 7. Quality control and quality assurance functions, procedures, and responsibilities for construction, sys- tem installation, and integration of system components. 8. Material testing policies and procedures. 9. Internal plan implementation and reporting re- quirements. 10. Criteria and procedures to be used for testing the operational system or its major components. 11. Periodic updates of the plan, especially related to project budget, project schedule, financing, ridership estimates, and the status of local efforts to enhance rid- ership where ridership estimates partly depend on the success of those efforts. 12. The recipient’s commitment to submit a project budget to the Secretary each month. 13. Safety and security management. This section of federal transit law also provides that a portion of funds from FTA’s various programs, includ- ing New Starts, is made available each year for FTA to provide oversight activities, and it is from these funds that FTA assigns Project Management Oversight Con- tractors (PMOCs) and Financial Management Over- sight Contractors (FMOCs) to projects. As noted above, a project sponsor must have a PMP to seek entry into PE. At that point, the PMP is focused on the ability of the project sponsor to complete PE. FTA recognizes that as additional data become avail- able, the PMP will be updated and revised. Like much about the project development process, the plan should be frequently updated and revised as more detailed in- formation about the project becomes available. PE is also when FTA assigns PMOCs to projects. The PMOC serves as an extension of FTA staff and assesses 112 49 U.S.C. § 5327(a)(1)-(15). the project sponsor’s project management, construction management, and technical capacity. The PMOC moni- tors project progress, reviewing schedule and budget, conformity to design criteria, and construction to ap- proved specifications. The contractor produces written deliverables to FTA during all phases of the project. FTA provides that the objectives of the PMOC are to assist it in monitoring and ensuring that the develop- ment and implementation of each project: • Complies with all applicable statutes, regulations, and FTA guidance. • Proceeds in accordance with the terms of grant agreements, including the agreed-upon scope, budget, and schedule. • Conforms with sound engineering and project management practices. • Meets the requirements of the approved plans and specifications. D. Project Sponsor Updates Data for New Starts Criteria; Standard Cost Categories; Third-Party Agreements During PE, the project’s alignment is refined and project costs are honed, and this updated information is considered under the New Starts Criteria. Note that in 2005 FTA implemented a new capital costing format, the Standard Cost Categories, to estab- lish a consistent format for the reporting, estimating, and managing of capital costs for New Starts projects.113 These 10 cost categories were designed by FTA to help expedite the review and decision process. “We don’t need two sets of books,” is how one FTA staffer de- scribed the creation of its cost categories. Also during PE the project sponsor should be negoti- ating and completing to the extent possible third-party agreements. These include utility agreements, public– private partnerships and agreements, joint develop- ment activities, and railroad and right-of-way agree- ments. It may not be possible to have completed agree- ments in PE, but the negotiation process should be underway. E. FTA Makes Environmental Finding During PE, the final EIS is developed, and a Record of Decision (ROD) is issued by FTA. Recall that the EIS may be started concurrent with Alternatives Analysis, in which case the final EIS will be completed during the PE stage. In some instances, a draft EIS may not be prepared as part of Alternatives Analysis, in which case the draft and final EIS stages of the environmental process would both take place during PE. 113 FED. TRANSIT ADMIN., STANDARD COST CATEGORIES FOR CAPITAL PROJECTS (2005), available at www.fta.dot.gov/planning/newstarts/planning_environment_25 80.html.

21 1. Final EIS 114 (i) Consideration of Comments.—As noted above, the draft EIS is circulated for comment for a period of at least 45 days. Once that period closes, work begins on developing the final EIS. The final EIS discusses and responds to substantive comments received, summa- rizes public involvement in the EIS process, and de- scribes mitigation measures to be incorporated into the proposed project. The project sponsor will normally need to satisfy the FTA Regional Office that all com- ments have been adequately addressed. (ii) Identifies Preferred Alternative.—The final EIS identifies the preferred alternative and evaluates all reasonable alternatives considered. (iii) Describes Mitigation Measures.—The final EIS describes any mitigation measures and how they will be incorporated into the proposed project. (iv) FTA Reviews for Legal Sufficiency.—The final EIS must be reviewed for legal sufficiency before agency approval.115 The final EIS, thus, should document com- pliance to the extent possible with all environmental laws and Executive Orders or provide assurance that their requirements can be met. (v) FTA Headquarters Review.—FTA Headquarters review is required for major urban mass transportation investments as defined by FTA’s regulation on major capital investment projects, including New Starts pro- jects. (vi) EIS Approval, Not Agency Action or Grant Ap- proval.—It is important to emphasize that the approval of an EIS does not commit FTA to approve any future grant request to fund the preferred alternative. (vii) Final EIS Availability.—The final EIS is filed with the EPA, its availability published in the Federal Register, and copies should be made available to anyone who made substantive comments on the draft EIS or requested a copy. Notice of its availability should be published. 2. ROD (i) Timing.—The FTA is to complete and sign a ROD at least 30 days after notice of the final EIS has been published in the Federal Register. (ii) Presents Basis for Decision.—The ROD presents the basis for the decision embodied in the EIS, summa- rizes any mitigation measures that will be incorporated into the project, and documents any required 4(f) ap- proval. The ROD is the FTA’s final action with respect to the NEPA process; it is not a decision to proceed to fund a New Starts project, which comes later in the project development stage. (iii) The ROD and the New Starts Evaluation Proc- ess.—One source of ongoing criticism is that the FTA holds up its completion of the ROD as it continues to evaluate the project under the New Starts criteria. A number of project sponsors have urged FTA to improve 114 This discussion is based on 23 C.F.R. § 771.125 and 127 (2008). 115 23 C.F.R. § 771.125(b) (2008). this aspect of the process, perhaps by using the NEPA process more as part of the evaluation process. 3. Supplemental EIS116 (i) When Required.—A supplemental EIS would be required if there are changes to the proposed action that were not evaluated in the EIS or new information or circumstances relevant to environmental concerns and the project would result in significant impacts not evaluated in the EIS. In particular, a supplemental draft EIS may be required for a New Starts project if there is a substantial change in the level of detail on project impacts during project planning and develop- ment. The supplement will address site-specific impacts and refined cost estimates that have been developed since the original draft EIS. (23 U.S.C. § 771.130(e)). (ii) When Not Required.—A supplemental EIS will not be required if changes or new information or cir- cumstances result in a lessening of adverse environ- mental impacts evaluated in the EIS, or the agency decides to approve an alternative fully evaluated in the final EIS but not identified as the preferred alternative. In the latter instance, however, a revised or amended ROD must be prepared and circulated. (iii) When Uncertain.—If it is not clear whether a supplemental EIS would be required, the applicant should develop environmental studies, or an environ- mental assessment may be necessary, upon which a decision can be based. (iv) Same Process as an EIS.—A supplemental EIS follows the same process generally as an EIS—draft EIS, final EIS, ROD—but scoping is not required. F. Legal Issues During the Preliminary Engineering Phase/Early Systems Work Agreement 1. General The key legal issues during the PE phase involve completion of the federal and state environmental re- view process in accordance with all of the procedural requirements, and matters surrounding the procure- ment process for project delivery. Regarding the procurement process, as noted, it is during PE that certain third-party agreements should be negotiated and completed to the extent possible. These include agreements on utilities, interagency mat- ters, public–private partnerships, joint development, and railroad and right-of-way matters. It is also during the PE process that a project spon- sor will be dealing with matters that require long lead times to resolve. These include safety considerations, such as the sharing of railroad right-of-way with freight trains, highway–railroad grade crossings, provisions for pedestrian facilities, transit–airport interfaces, and design of community fences, walls, and noise barriers; 116 23 C.F.R. § 771.130 (2008).

22 utility relocation planning; and planning for replace- ment of wetlands that cannot be avoided. In the later stages of PE a project sponsor also de- velops and refines the detailed, comprehensive PMP discussed above to ensure construction quality and fi- nancial control, and a financing plan that includes commitments from the sponsor’s nonfederal funding partners. 2. Early Systems Work Agreements Note also that once a ROD has been issued under NEPA, by statute, FTA may enter into an Early Sys- tems Work Agreement (ESWA).117 The agency has used this commitment authority infrequently but seems likely to begin using it more often. As a legal instru- ment issued before an FFGA pursuant to which federal funds may be drawn down, it represents a strong level of federal commitment to a project and can be very use- ful to a project sponsor. For example, an ESWA was entered into in June 2009 for New Jersey Transit’s Ac- cess to the Region’s Core project. An FTA press release noted that the purpose of the ESWA was to help New Jersey Transit meet key milestones and keep the pro- ject on budget and schedule by allowing the immediate use of federal and local funds for tunneling and related construction work. In another matter in 2006 involving the Second Avenue Subway project in New York City, the project sponsor wanted greater assurances from FTA of a federal commitment to its project because it was involved in two large federally-funded transit pro- jects. Because the project sponsor and the FTA had a clear and defined sense of the project’s scope, budget, and schedule, FTA entered into the ESWA. In this in- stance, the ESWA was used primarily for enhanced Letter-of-No-Prejudice (LONP) authority. The ESWA remained in effect for about a year before an FFGA for the project was completed. An ESWA was also used on a Utah Transit Authority commuter rail project to ad- dress a short-term cash flow problem that arose before an FFGA could be entered into. ESWAs have also been used by Seattle’s Sound Transit and by the New Or- leans Regional Transit Authority. Unlike an FFGA, an ESWA is not required to un- dergo a congressional notification and review process. To use an ESWA, under the statute, FTA must find reason to believe that an FFGA will be entered into for the project and that the ESWA will promote ultimate completion of the project more rapidly and at less cost. FTA staff state that the key issue from their perspec- tive as to whether to issue an ESWA is the ability of the project sponsor to demonstrate a real need for it—that the commitment embodied in an ESWA is necessary to keep a project moving forward. The ESWA may obligate an amount of available funding specified in law and provide for reimbursement of preliminary costs of carry- ing out the project, including land acquisition, timely procurement of system elements for which specifica- tions are decided, and other activities FTA decides are 117 49 U.S.C. § 5309(g)(3). appropriate to make efficient, long-term project man- agement easier. The agreement can cover a period de- termined by FTA, and it may extend beyond the current authorization. Interest and other financing costs of effi- ciently carrying out the ESWA are eligible costs so long as the applicant demonstrates due diligence in seeking the most favorable financing terms. One critical aspect of an ESWA is that if the applicant fails to carry out the project for reasons within its control, all payments made under the ESWA shall be returned to FTA and any reasonable interest and penalty charges included in the agreement. G. FTA Assigns Financial Management Oversight Contractor/Value Engineering 1. Financial Management Oversight Contractor During PE, FTA assigns FMOCs to a New Starts project. Derived from the same authority as PMOCs (see Section IV.C), FMOCs focus on a range of financial issues. FMOCs broadly focus on a project’s financial man- agement system to determine whether it meets the re- quirements of the Common Rule.118 Financial capacity assessments are performed in connection with New Start projects. This type of review assesses the financial capability of grantees to meet FFGA obligations and maintain their existing transit operations. 2. Value Engineering FTA encourages the application of value engineering (VE) to the planning, design, and construction of all federally-assisted construction projects, and FTA policy requires its use on major capital projects.119 FTA notes that VE is the systematic application of recognized techniques that identifies the function of a product or service, establishes a value for that function, and pro- vides the necessary function reliably at the lowest over- all cost. In all cases, the required function should be achieved at the lowest possible life-cycle cost consistent with requirements for performance, maintainability, safety, security, and aesthetics. Generally, a multidisciplinary team, usually of five to seven people, conducts the VE review. Note that the training of applicant staff members in VE techniques is an eligible project cost. Applicants are encouraged to use independent consultants with expertise in VE to prepare VE studies. VE on a project should be per- formed early in the design process before major deci- sions have been completely incorporated into the de- sign, at or near the end of PE. 118 49 C.F.R. pt. 18—Uniform Administration Requirements for Grants and Cooperative Agreement of State and Local Gov- ernments (the Common Rule); 49 C.F.R. pt. 18.20 (2008)— Standards for Project Management Systems. 119 FED. TRANSIT ADMIN., FTA CIRCULAR C 9300.1B, CAPITAL INVESTMENT PROGRAM GUIDANCE AND APPLICATION INSTRUCTIONS, ch. V (2008), available at www.fta.dot.gov/laws/circulars/leg_reg_8642.html.

23 After every VE review, applicants must provide in- formation to the FTA Regional Office about the changes recommended by the VE team and the expected savings or other benefits. H. Procurement Process—Methods of Project Delivery A project sponsor normally selects its overall project delivery method and general procurement and contract- ing approaches during the PE phase of project develop- ment. Depending on the method selected, the project sponsor will then refine its procurement plan and de- velop procurement and contract documents in the later stages of PE or in the Final Design phase. The allowable procurement and project delivery methods will derive from the laws, policies, and proce- dures in the state in which the transit project is being built. Some states provide wide latitude, but in others certain methods, such as design-build, have to be spe- cifically permitted by state law on a project-by-project basis. The project sponsor must research and under- stand its state’s applicable public contracting and pro- curement laws as one factor in determining the type of procurement approach to pursue. In addition, for pro- jects funded by FTA, the project sponsor must follow the procurement regulations and guidance applicable to FTA projects, such as the Common Grant Rule120 and FTA’s Third Party Contracting Guidelines.121 Different procurement and project delivery ap- proaches currently used for transit capital projects are identified and described below. 1. Traditional Design-Bid-Build This is the project delivery method that has histori- cally been used for transportation capital projects, and remains widely utilized and in some states even statu- torily required for public construction contracts. Under this method, following the PE phase, the project spon- sor separately procures design services as a professional services contract. This procurement is based on qualifi- cations only; price is not a factor in the award (gener- ally referred to as a Brooks Act procurement). Price for the design services is negotiated with the highest- ranked proposer. The selected engineering/design firm completes all final design work, normally serves as the engineer of record, and produces “biddable” design drawings. These drawings are then used as the basis for the development and pricing of construction bids on the project. The procurement document is normally an Invi- tation for Bids (IFB), and the construction contract is awarded to the lowest responsive and responsible bid- der. Other than standard determinations of responsive- ness, qualifications are not evaluated and scored and are not part of the basis of award. 120 49 C.F.R. pt. 18 (2008). 121 FED. TRANSIT ADMIN., FTA CIRCULAR C 4220.1F, THIRD PARTY CONTRACTING GUIDELINES (NOV. 1, 2008), available at www.fta.dot.gov/laws/circulars/leg_reg_8641.html. The construction contract in a design-bid-build sys- tem is normally awarded in a one-step, low-bid process, although in some cases project sponsors may use a two- step process—a request for qualifications (RFQ), which yields a short list of eligible bidders, followed by an in- vitation for competitive low bids. 2. Design-Build This project delivery method has witnessed in- creased use in recent years, and is viewed by its propo- nents as offering cost and schedule advantages over the more traditional project delivery method. Under this method, following the PE phase, the project sponsor issues procurement documents to select a design-build “team” that will be responsible for completing the final design process and building the project. The team would typically be a joint venture comprised of engi- neering/design firms and construction firms, or a con- struction firm as the prime contractor with engineer- ing/design and other professional services firms as the subcontractors. With a prime contractor and subcontractors, each remains a separate legal entity, and the prime is con- tractually responsible for the performance of its subcon- tractors. In contrast, under a joint venture, the venture itself is normally established as a single, separate, legal entity, with the joint venture members each being jointly and severally liable for all contractual obliga- tions. The most widely used procurement process for de- sign-build project delivery is a request for proposals (RFP), in which the project sponsor sets forth the re- quired qualifications and evaluation factors in its RFP, including the relative “weights” assigned to each, and in response proposers submit both qualifications and price. (The price proposal covers both design and con- struction work.) Award is made to the proposer offering the “best value” to the project sponsor, on the basis of its evaluation and scoring of qualifications and price. In addition, the design-build procurement may in some cases be conducted as a two-step process, either an RFQ followed by an RFP or an RFQ followed by a competi- tive low bid (IFB). The proponents of design-build believe that this method allows for faster project delivery, improves co- ordination of the design and construction functions through use of the team approach, and is more efficient because construction on portions of the project can commence while other portions are still in design. One of the primary identified disadvantages, however, is that proposers are required to develop firm construction price bids for the procurement process at a time when design is only approximately 30 percent complete (the traditional standard for the completion of PE), with the result being that the lack of more complete design ne- cessitates including significant contingency amounts in the construction bid, thereby driving up project costs.

24 3. Construction Manager at Risk (CM@Risk) This project delivery method is also seeing increased use in transit capital projects. Under this method, fol- lowing the PE phase, the project sponsor conducts a procurement for the selection of a firm to provide 1) Phase 1 preconstruction services during design, such as constructibility reviews, design reviews, and cost esti- mating; and 2) Phase 2 construction work, subject to agreement on a fixed price for construction. Under this approach, final design work is performed by a separate firm under a different professional services contract. This method is referred to as “at risk” because the se- lected contractor is awarded the preconstruction ser- vices work, but is not guaranteed the construction work—that work is performed by the contractor only if the contractor and the public sponsor are able to nego- tiate and agree upon a fixed price for the construction work. Normally, these construction price negotiations are conducted on an “open book” basis, which means that the contractor makes available all unit prices, quantities, scope, and pricing detail on which its pro- posed price is based, and the project sponsor makes available all supporting information, estimating tech- niques, and pricing data on which its construction budget was based. If the parties are unable to agree on the construction price, then the contractor’s work con- cludes with the preconstruction services phase and the project sponsor issues bid documents for the construc- tion work. The normal procurement method used for CM@Risk is a two-step process—an RFQ, followed by an RFP (sometimes called a Request for Final Proposals (RFFP)), in which proposals are submitted by only the short-listed firms selected pursuant to the RFP. Pro- posals in response to the RFFP are evaluated and scored on the basis of qualifications, and in some cases price may also be a factor in evaluation and award. There does not appear to be a uniform method for deal- ing with price in this type of procurement. However, one method is as follows: the RFFP is structured so that proposers provide a price for their preconstruction ser- vices and a fee (to cover profit and overhead, expressed as a percentage) that will be applicable to the construc- tion work. The fee is considered in the evaluation and selection process as part of the basis of award. The pre- construction services price, however, is not evaluated; it remains sealed (as in a typical Brooks Act procurement) and serves as the basis for the negotiation of the pre- construction services price with the highest-ranked proposer. The proponents of CM@Risk believe that it offers two primary advantages. First, it facilitates, and even re- quires, coordination between the design firm/architect and the CM@Risk contractor, thereby promoting a more efficient, constructible project design. Second, since the construction price is negotiated at or near the end of final design and negotiated on an open-book basis, and since the contractor has been working with the designer throughout the design phase, the construction price agreed upon should be more accurate and include less contingency and risk amounts for unknowns than a price developed in a standard design-bid-build pro- curement or in a design-build procurement. 4. Design-Build-Finance This project delivery method is basically the same as the design-build method described above in Section IV.H.2, with the addition of a financing component, usually provided by an investment bank or other finan- cial institution member of the design-build team. Again, the team could be structured as a joint venture or as a construction prime contractor with design-firm and banking subcontractors. This project delivery method also falls into the general category of a “public–private partnership.” This method would normally utilize the same type of procurement process and documents as the standard design-build method previously described (i.e., a best-value procurement using an RFP or a two- step procurement). The obvious key additional element in this method is the fact that the design-build-finance team is expected, or more likely required, to provide financing for some portion of the project capital cost. Although projects can clearly differ on this issue, the financing would often contemplate some up-front private contribution to the project capital cost by the bank or other financing part- ner, with that entity receiving in return some specific access to a revenue stream or other means of financial return in the future. For example, in a highway project, the financing partner could be afforded rights to a share of toll revenues for a specified period of time, to recoup and earn a return on its initial capital investment. An- other possibility could be the granting of property de- velopment or rental income rights to the financing partner in exchange for its initial contribution. It should be noted that while there has been significant discussion of design-build finance and “public–private partnerships” as an alternative means for developing and delivering transit capital projects, the actual exam- ples of the implementation of this project delivery method in the United States are quite limited. One of the main challenges seems to be to identify and put in place some type of future revenue stream or repayment source that will justify, from a financing perspective, the up-front private investment. 5. Design-Build-Operate-Maintain The design-build-operate-maintain (DBOM) project delivery method incorporates all of the elements of a standard design-build, as described in Section IV.H.2 above, and then adds an operations and maintenance (O&M) requirement. Normally, the proposing teams would be structured as joint ventures and would in- clude a construction firm, engineering/design firms, and other professional services firms. Unique to this method of project delivery is the fact that the joint ven- ture/proposer would also include an O&M firm, i.e., the “O&M contractor,” a firm in the business of providing transit services for public agencies under contract.