Legal Update

Lessons from the Utah I-15 Core Protest

By Tom Porter, J.D., DBIA

In December 2009, the Utah Department of Transportation (UDOT), following a best-value competition, awarded a $1.1 billion design-build contract for the I-15 CORE highway project to Provo River Constructors (PRC). The runner-up team, Flatiron/Skanska/Zachry (FSZ), quickly protested. UDOT — while maintaining the validity of its selection — settled the complaint by paying FSZ $13 million cash. Here are six lessons from this fascinating case.

1. Major project pursuits are expensive. The estimated proposal cost for each team was $10 million to $15 million. FSZ certified that its actual costs for pursuing the project were in excess of $13 million. Thus, the settlement was merely a cost recovery for FSZ, not a windfall.

2. Good projects attract quality proposals. UDOT short-listed three teams (a DBIA best practice). The Selection Recommendation Committee (SRC) deemed all three proposals as excellent and the top two were closely rated. A tight competition—making it difficult to select between outstanding teams, with much higher quality proposals than anticipated—is a good problem for government officials to have.

3. Evaluators don’t always agree. The SRC disagreed with certain judgments contained in the reports it received from the Evaluation Teams. The differing viewpoints are well-documented and explained in the SRC materials. The disagreements do not mean that the selection process was irregular. Actually, they reinforce that the SRC members were doing their job properly and not serving as a rubber stamp.

4. Transparency helps. UDOT has posted the documentation of its decision process online (www.udot.utah.gov), including the proposal evaluations, the final selections and the reasons for settlement. Reviewing the information suggests that UDOT’s process was thorough, thoughtful and competitive. The Federal Highway Administration, participating in an Evaluation Oversight Team, reported that the selection was “fair and objective.”

5. Settlement is less costly than delay. If there was nothing wrong about the selection, why did UDOT agree to pay FSZ such a large settlement? On a project of this magnitude and importance, delay resulting from the protest could have been much more damaging to the public than reimbursing FSZ’s proposal costs. A project delay exceeding six months would have entitled PRC to a price increase of $33 million per year. On a previous Utah highway project, after a court-ordered delay, construction costs increased more than $200 million.

6. Design-build competition brings value. Protests may seem scary, especially when a great deal of money is on the line, but design-build nevertheless ultimately delivers tremendous value for the investment. In this case, the enhancements offered by the winning team include a longer road, longer pavement life (40 years) and completion two years earlier than required, while keeping existing traffic lanes open during the majority of construction. Best-value selection is more complex than low-bid and complicated issues can therefore arise, but the positive benefits from this approach still yield powerful results.