Congressman Nick Lampson:
Secretary Peters, I would like to raise an issue that is very contentious in Texas at the moment, and that is whether Texas elected officials can proceed to make policy decisions without interference from the Federal Highway Administration.
Let me refer to a letter dated April 25, 2007 from the Chief Counsel of FHWA ostensibly in response to inquiries from Texas Department of Transportation, in which Mr. Ray stated, "we urge you to support the spirit of a fair and open competitive process in whatever procurement procedures are adopted." (p. 3)
Mr. Chairman, I ask unanimous consent that the April 25 letter from Mr. James Ray of FHWA to Mr. Michael Behrens of TxDOT be included in the record.
Mr. Ray was referring to legislation (HB 1892) that has passed the Texas House and Senate and is now awaiting the Governor's signature. The focus of Mr. Ray's concern is the SH 121 project in the Dallas area.
Secretary Peters, you are in favor of "a fair and open competitive process" in procurement, aren't you? In fact FHWA, the U.S. Department of Transportation, and the federal government are all supportive of a fair and open competitive procurement process, is that not true? So am I.
Mr. Ray may not be familiar with some of the relevant events leading up to the decision by the North Texas Tollway Authority ("NTTA") not to bid on the SH 121 project. So allow me to provide the background.
In January 2006, NTTA announced it was preparing to submit a proposal for the SH 121 project. Soon after, the Texas Transportation Commission unexpectedly began a TxDOT Comprehensive Development Agreement ("CDA") process for two significant projects that NTTA had spent years designing and shepherding through the environmental review process. These projects are the Eastern Extension to the Bush Turnpike and the Southwest Parkway in Fort Worth. By starting a CDA process, NTTA would be precluded by Texas law from carrying out the projects. This sent an unmistakable message to NTTA concerning the consequences of its attempt to compete on the SH 121 project. This occurred after private companies had complained that they could not and would not compete against NTTA on SH 121. Left with no tenable option, NTTA capitulated, signed a controversial agreement (the TxDOT/NTTA Regional Protocol) barring a bid on either SH 121 or SH 161, and received back the two other projects.
Madam Secretary, NTTA did not bid on SH 121 because of extortion by TxDOT, not out of its own free will. In February, TxDOT awarded a preliminary 50-year concession on the project to Cintra of Spain. Cintra's bid price was $2.8 billion.
Sensing that Cintra's bid might not have been in the public interest, Senator John Carona, Chairman of the Senate Transportation and Homeland Security Committee, asked NTTA how it might have responded if TxDOT had not denied it the opportunity to do so. NTTA responded informally that it could generate $6.3 billion for the region. It is able to generate so much more than Cintra because it has significantly lower cost of capital.
Secretary Peters, I don't think you would argue that the original procurement process was "a fair and open competitive process." That was clearly not the case. HB 1892 is Texas Legislature's attempt to correct significant mistakes and improper action by TxDOT. It provides an opportunity to NTTA to submit a formal bid on the SH 121 project.
We don't know what NTTA's formal bid may be. That will be forthcoming in the next week or so. But this process provides an excellent opportunity to test the hypothesis that has been stated so often that it takes on the aura of unquestioned truth - that is, the private sector can deliver transportation projects faster, better, and cheaper and can deliver greater value to the public. Now we can road test that proposition to see if it is indeed true. If NTTA's initial estimate turns out to be anywhere close to its formal bid - hundreds of millions, if not billions, of dollars higher than the highest bid from a private firm - then we know that the public-sector agencies can compete well against its private-sector counterparts. The original hypothesis is more an article of faith than a proven fact.
TxDOT also received a letter from Ms. Janice Brown, Texas Division Administrator of FHWA. In her letter dated April 24, 2007, Ms. Brown stated that "in our view, any arrangement with NTTA would be a government to government agreement, and we would treat the arrangement as a publicly owned and operated toll facility. Should TxDOT wish to re-compete the CDA after terminating the current CDA procurement process and seek Federal highway grant or loan assistance, we would be forced to closely examine the circumstances of the new competition, to ensure it met Federal requirements for fair and open competition." (p. 2, emphasis added)
Mr. Chairman, I ask unanimous consent that the April 24 letter from Ms. Janice Weingart Brown of FHWA to Mr. Michael Behrens of TxDOT be included in the record.
Secretary Peters, is a government to government arrangement treated differently by FHWA than an agreement involving a government and a private firm? If that is so, how are they different and what are the justifications for the differential treatment? And what are the ramifications of such differential treatment?
In addition, did FHWA not "closely examine" the original procurement process to "ensure it met Federal requirements for fair and open competition?" Or is Ms. Brown now raising the bar for NTTA and TxDOT?
Ms. Brown went on to observe that "should TxDOT wish to obtain TIFIA assistance for the SH 121 project after re-procuring the CDA, that request would have to be evaluated on its own merits as a totally new TIFIA application." If NTTA gets the contract to develop the SH 121 project, and if TIFIA is part of NTTA's financing package for the project, I would concur wholeheartedly that a new TIFIA application would be in order. But Secretary Peters, can you give me assurances that SH 121, NTTA, and TxDOT will not be prejudiced in the new TIFIA application simply because it is an application for federal financial assistance for a project that involves a government to government agreement?
On the 9th, you sent a letter to Senator Hutchison in response to her expression of concern over actions by FHWA - specifically Mr. Ray's April 25 letter - that she viewed might have overstepped its proper bounds from providing legal analysis to policy advocacy. The entire Texas congressional delegation received copies of that letter, and we appreciate very much your clarification that "HB 1892 would not affect the State's eligibility for funding under the Federal-aid highway program."
Unfortunately, your letter was followed within hours by another letter from Mr. James Ray of FHWA to Mr. Amadeo Saenz of TxDOT, dated May 10, 2007. In this letter, Mr. Ray first observed that the safeguards included in H.B. 1892 could be implemented to make the legislation "technically compliant with Federal requirements." But then he followed with this pronouncement: "The FHWA believes that implementing HB 1892 in [a] manner that fully complies with Federal requirements, [even with appropriate implementation of savings clauses included in the legislation,] will be very difficult." (p. 5)
Mr. Chairman, I ask unanimous consent that the May 10 letter from Mr. Ray to Mr. Saenz be included in the record.
No one argues that implementing fundamental changes embodied in HB 1892 will be easy. But isn't it the job of Texas legislators to make policy decisions? Isn't the job of implementing transportation laws enacted by the Texas government one that belongs to TxDOT? Proffering policy advocacy by FHWA at this delicate juncture in our legislative process is highly inappropriate.
Mr. Ray reminded Mr. Saenz that "[FHWA] would hold TxDOT responsible for any failure to comply with the Federal-aid Highway Program." Then he issued this ominous threat: "Failure by a local public entity to comply with these requirements could expose the entire State program to sanctions." (p. 5)
Secretary Peters, I must confess I am confused. Statements by Mr. Ray in his May 10 letter seem to run counter to - if not directly undercut - the position you expressed to Senator Hutchison in your letter to her. Can you give me your reassurance that TxDOT can implement HB 1982 in such a way that would not affect Texas' eligibility to receive Federal-aid highway funds?
Legislative Director
Congressman Nick Lampson (TX-22)
436 Cannon House Office Building
Washington, D.C. 20515
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