Tennessee’s First Choice Lanes P3 Lands a Blockbuster Bid

Tennessee’s first ever Choice Lanes project finally has a preferred bidder, and their preferred bid has set a new, attention-grabbing benchmark for the U.S. Express Lanes industry. The Tennessee Department of Transportation (TDOT) gave DriveTN, the winning bid team for the I-24 project, a concession value score of $24.8 billion.

That number is turning heads all over Tennessee and all over the U.S. infrastructure investment industry. However, TDOT’s formula for calculating concession values is not yet (as of this writing) public. The I-24 Express Lanes procurement included potential concession payments to the state over the life of the project rather than just at financial close. The winning bid team will pay a much smaller (but still eye-popping) up front payment to the state of $1.5 billion when it finances the project.

That project financing may break the recently-broken record for the largest P3 financing in U.S. history. In addition to the concession fee, the DriveTN proposal includes an estimated $9.2 billion in total construction costs. The current record-holder for largest U.S. financing is the SR-400 Express Lanes project, which is currently under construction north of Atlanta, at $12.18 billion. That project reached financial close last August.

DriveTN is led by Cintra, Transurban and Tikehau Star Infrastructure. The lead construction firm for the team is Ferrovial and AECOM is the lead design firm.

DriveTN was one of four bid teams competing for the I-24 Express Lanes project. The concession value scores as well as the developer construction cost estimates varied widely between the bid teams. The concession value scores for the other three bid teams were $7.4 billion, $7.25 billion, and negative $0.25 billion (i.e. a public subsidy would be required). The proposed construction costs for the proposals also had quite a range. The DriveTN construction cost proposal was middle of the pack, with the other bid teams submitting construction cost proposals of $8 billion, $9.4 billion, and $12.8 billion.

The scope of work for the I-24 Choice Lanes project has evolved somewhat as the project was in procurement over the last year. The core of the project will be to develop two express lanes in each direction along a roughly 26-mile stretch of I-24 south of Nashville. Originally TDOT envisioned a hard-bid stretch of that project for the procurement and a future proposal for an extension project. Now it appears that the entire stretch is in the base project scope, and there are three potential extension projects envisioned in the future.

HNTB was the General Engineering advisor for TDoT for the I-24 Choice Lanes project. KPMG was TDoT’s financial advisor, and Hunton Andrews Kurth was the legal advisor. CDM Smith was the traffic and revenue advisor and Ames & Gough was the insurance advisor.

The 25 Billion Dollar Question

While details remain forthcoming, it appears that the I-24 project will generate significant future transportation funding for the state. How those funds will be invested going forward remains to be determined. In conjunction with the preferred bidder announcement, Tennessee Governor Bill Lee issued an executive order to create a new Tennessee Strategic Transportation Accountability Council (STAC) to advise state officials on investing the funds generated from I-24 and other forthcoming Choice Lane projects.