Transportation Secretary Mike Hancock discusses how the state builds and repairs roads using a process called ‘practical solutions’
By Ed Lane
Editors note: On Nov. 18, the Federal Government signed off on a revised plan, as described in this interview by Transportation Secretary Hancock, to reduce the construction cost of the Ohio River Bridges Project between Louisville and Southern Indiana. Federal officials will seek public comment on the bridges plan at meetings set on Dec. 19 and 20 in Louisville. For details go to kyinbridges.com.
Ed Lane: Having been employed by the Kentucky Transportation Cabinet (KYTC) for three decades, what unexpected issues have you had to address in the cabinet’s top executive position?
Mike Hancock: As far as significant and unexpected issues, the KYTC has had a couple of major bridge closures pop up in the last few years. In 2010, the Combs-Hehl Bridge in Northern Kentucky had repairs that required closure of some lanes on the bridge. Frankly, we were concerned that the nature of the problem would close the bridge indefinitely. Fortunately that was not required.
Just recently the I-64 Sherman Minton Bridge between New Albany, Ind., and Louisville was closed. Indiana closed the bridge with KYTC’s agreement. The closure was totally unexpected and something that has been quite a challenge. Over the last 30 years, I’ve found it difficult to be prepared for these kinds of events.
This past spring, seeing the major devastation in the Mississippi River region brought by floodwaters is something you are never fully prepared to witness. Kentucky has had its share of difficulties. I am always amazed at the quality of the people who work for the KYTC around the state and deal with and endure these situations.
EL: How many offices does the KYTC have around the state?
MH: In addition to our central office in Frankfort, we have 12 district offices. It’s the largest cabinet in state government, with about 4,500 employees.
EL: Road Fund revenues in FY 2010 increased about 1.2 percent compared to revenues received in FY 2009. How did a basically flat revenue stream impact the Transportation Cabinet’s planning in FY 2010?
MH: It had a dramatic internal impact on the cabinet. When Road Fund revenues don’t materialize as planned, it requires KYTC to take a step back and analyze the programs, trim expenditures, postpone some projects and constantly monitor cash flows. The recession also affected KYTC dramatically in 2008 and 2009 when road fund revenues took significant declines.
EL: FY 2011 road fund revenues grew 10 percent compared to FY 2010, an increase of approximately $132 million. How was this significant revenue increase allocated to transportation projects?
MH: In 2010, the General Assembly enacted a road plan that essentially banked on future additional revenues. When those revenues began to materialize, the cabinet implemented that plan. This calendar year (2011), the cabinet will let almost $1 billion worth of projects, which is a significant year for KYTC.
EL: How is Road Fund revenue growth trending so far in FY2012?
MH: So far so good; the Road Fund budget is on target. The Consensus Forecasting Group’s (an independent group of economists who forecast tax revenues for state government) projected Road Fund revenues appear to be on target through the first quarter of FY2012 (starting July 1, 2011) and I am hopeful that growth trend will continue.
EL: How does the KYTC set priorities to allocate road funds for new projects?
MH: That is a complicated question. Bottom line is the cabinet works carefully with metropolitan planning organizations, area development districts, members of the General Assembly, the governor and his staff, and the district transportation staff. The KYTC division of planning has the responsibility to get out in the field and evaluate and understand fully highway needs across the commonwealth. As a team, we’re constantly evaluating and working together. When we develop a highway plan, the accumulated list of needs with some relative priority attached is evaluated.
Of course, maintaining the state’s road system and bridges is the top priority. The road plan traditionally has a lot of what I call heavy maintenance work – pavement rehabilitation and bridge replacement – and that’s as it should be.
There are also occasionally those system additions: a new route from here to there. Case in point would be the ongoing Base Realignment and Closure (BRAC) Project with the U.S. Army to facilitate the expansion of the base in the Fort Knox area. The KYTC is constructing new roads to serve this rapidly growing area.
EL: Does KYTC have a unique planning philosophy?
MH: KYTC uses a method called “practical solutions.” When the cabinet evaluates a project, it endeavors to right-size the project. We’re not looking to design everything by the book; it’s also, how can we do things well? For example, on Harrodsburg Road at New Circle Road in Lexington, we had a project to reconstruct the interchange that would have cost $35 million. Instead, KYTC designed a double-crossover diamond interchange. The project will cost about $5.3 million as opposed to $35 million. The design looks kind of crazy, but once you drive through it and understand the design, it is so simple you scratch your head and say, “Why aren’t we doing more of these?” The design eliminates “across” turns in front of other cars and eliminates thousands of turn conflicts. Gov. Steve Beshear has been instrumental and the driving force behind the “practical solutions” concept.
EL: How did KYTC come up with the double-crossover diamond design?
MH: Our engineers from time to time will attend national conferences, and one of our engineers saw this idea on the ground in a Missouri project. He was familiar with the Harrodsburg Road interchange and thought the crossover design might work there. He came back and sketched up some initial thoughts on the project. I was state highway engineer at the time; when I first reviewed it I said, “You’ve got to be kidding me, I’ve never seen anything like this.” They showed me how the double-crossover interchange would work, the safety aspects and the cost reduction. I was blown away and said, “We’re going to try it.”
EL: How long does it take to research, design and construct a new or upgraded roadway?
MH: Every project has a specific time line. No two are exactly the same simply because no two projects have exactly the same issues. When KYTC looks at widening or extending a road or building a new road, it’s not uncommon for the preliminary engineering design phase to take a couple of years. The acquisition of right-of-way and relocation of utilities can take another two years or longer.
It’s not uncommon for it to take four to five years to get a project from the drawing board to construction. Depending on its complexity, the project may take a year to two years to construct. The timeline is five to six years, and for a major problem that’s “best case.” It could take longer.
EL: In many areas in Kentucky, there is only one road builder. How does the KYTC ensure costs for road construction are competitively priced if only one firm is available to bid?
MH: First of all, the Kentucky Transportation Cabinet likes competition. The cabinet is well aware of areas that only have one contractor that predominately does road work. So what we do in non-competitive bidding situations is to not accept bids that do not meet or match our engineer’s estimates to construct a project. Whenever KYTC lets a project, people in one of our divisions estimate the cost for that project just as a contractor would. As the bids are read for a particular letting, the first bid read is the KYTC engineer’s estimate. Then, we read the contractors’ bids, whether it’s one, two or three bidders. Even if there’s only one contractor that bids, I always say there are two bidders, because one of them is the KYTC. KYTC makes sure its estimates are fair and reasonable. If we see a contractor exceed that estimate, particularly in a single-contract-bid instance, then we analyze that contractor’s bid very carefully. If the bid exceeds the KYTC’s by an unhealthy amount, then the cabinet may reject the bid and go back through the process.
The cabinet is certainly aware of competitive cost trends, since it is bidding projects all over Kentucky. When we put the cabinet’s bid together, we use those cost benchmarks to make sure our estimated cost is going to be competitive. What we can’t anticipate is highly competitive industry conditions when contractors kind of beat themselves up a little bit.
EL: What other ways can KYTC promote more competition?
MH: Alternate pavement is another option. If a project is essentially a pavement reconstruction job, the cabinet will allow companies representing the asphalt and concrete industries to bid against each other. That process tends to increase competition and achieve better bids. However, if a project is truly best with an asphalt pavement, then we’re going to go with asphalt; if it’s truly best with concrete, then we’re going to go that way.
Another option is to bid the grade-and-drainage portion separate from the surfacing contracts. What we found is that the cabinet gets better bids if it lets the grade-and-drain contractors compete against each other, and then lets the surfacing contractors compete against each other. It works out well.
EL: There has been a lot of discussion on new bridge construction to increase traffic capacity between Metro Louisville and Southern Indiana, and between Greater Cincinnati and Northern Kentucky. What is the Transportation Cabinet doing to develop more capacity and new bridges?
MH: The Louisville bridges project is one of the most complex projects in the country in terms of what is being done. We are actually planning to build two new bridges – one downtown and one on the east end of Louisville. Those two projects in their own right would be large projects if they stood alone.
In downtown not only are we building the new I-65 companion bridge for the Kennedy Bridge, but we’re also reconstructing the old “spaghetti junction” interchange that involves three interstate routes (I-65, I-64 and I-71). Out on the east end, we are building another bridge plus a tunnel that will connect the Kentucky side to I-265. The tunnel actually cuts through a river bluff area to avoid destroying a historic site.
For the Louisville bridges project, if you would have asked me a year ago I would have told you the cost for the project is $4.1 billion. In the past year, we’ve re-evaluated the “spaghetti junction” interchange and decided to scale back the scope of the project so it can remain within its existing footprint. This change and a couple of other cost-saving moves have reduced the cost to $2.9 billion. We are looking to continue to work through the contracting process and any other way we can to get the lowest and best possible bids for the project.
EL: How is the federal government involved in funding?
MH: The financing of this project is very unique. Not only are state and federal aid dollars involved, but the financing may also include tolls. Kentucky and Indiana share in the cost; right now we are estimating that’s on about a 70-30 basis (70 percent Kentucky, 30 percent Indiana).
One of the factors that we have noted is the vast majority of traffic that uses these bridges is expected to be local.
EL: The Sherman Minton Bridge between New Albany, Ind., and Louisville is currently closed. Companies like UPS, Ford, GM, Toyota, Amazon and hundreds of smaller firms depend on reliable interstate transportation since on-time delivery of retail products or just-in-time delivery of components for manufacturers is how business is done today. One estimate indicated that delays and re-routing costs for UPS, Louisville’s largest employer, were significant. Similar issues have been raised by other trucking services – “delays are eating up our bottom line.” Gaming casinos and retailers in Indiana say the bridge closing is “bad luck for their businesses.” Is the economic impact of adequate bridge capacity accelerating the KYTC’s timelines to take action?
MH: A contract was recently let with Hall Contracting of Kentucky Inc. to repair the Sherman Minton Bridge. The contract is for six months but has a financial incentive for early completion.
KYTC is pleased that Hall is a Kentucky contractor. There were three or four bidders. The base contract price is $13.9 million, and the contractor has the potential to earn a $5 million bonus. So the ultimate cost could be $18.9 million, but the same contractor loses $100,000 a day for each day over 135 days. Frankly, we want Hall Contracting to earn the early completion bonus because it’s good for businesses in Kentucky and Indiana.
The repair cost is shared 50-50 because Indiana and Kentucky have an agreement that one state will lead, but both will share the maintenance and replacement costs. Kentucky is the lead state on the Kennedy Bridge, and Indiana is the lead on the Sherman Minton Bridge. Indiana is managing this project, and Kentucky will participate in the cost. Indiana made the decision to close the bridge; I’m sure it wasn’t a pleasant decision for Gov. Mitch Daniels.
EL: Does KYTC need legislation by the Kentucky General Assembly to move forward in solving the bridges issue?
MH: One of the things that KYTC needs with the bridge project in Louisville is legislative authorization to do additional design-build projects. KYTC was previously authorized to contract up to 10 design-build projects across the state. KYTC has used that allotment and needs an additional authorization from the General Assembly to do more.
EL: Why does KYTC need authorization?
MH: I assume the General Assembly seeks to be judicious by setting an allowance. The cabinet would love to have design-build as a routine tool in its toolbox. When applied correctly with the Louisville bridges project, there are opportunities to use design-build process for cost savings and faster delivery of the project. In 2009, the General Assembly created a bi-state authority to deal only with transportation projects for Kentucky and Indiana. So when we talk about the Brent Spence Bridge (to Cincinnati) we’re talking about a project that has yet to have any sort of bi-state development agreement with Ohio.
EL: Do you envision the possibility of authorizing private investors to construct new bridges and licensing the investor to collect toll charges to pay for them?
MH: I honestly don’t know just yet how everything is going to play out, specifically for the Louisville bridges. Our goal would be for the bi-state authority to always maintain control over the investment. In other words, the bridges would be a Kentucky-Indiana-owned enterprise. A concession lease for some period of time for an investor in the project might be a possibility. We don’t ever envision a private entity owning these roads and bridges.
EL: Do you have a closing comment?
MH: As consumed as it seems KYTC is with these major projects, it still has a number of smaller projects all across the state, from Pikeville to Paducah. The cabinet’s routine maintenance efforts touch every county; our employees are spread all across the state doing their jobs every day in a way we believe is respectful of the public for whom we all work.
KYTC is doing its best to be the type of organization that the public appreciates. We’ve tried to set standards that are very high, and (former KYTC Secretary) Joe Prather started this; I’m not going to take full credit. When Joe walked in the door, he said, “We’re going to take the Transportation Cabinet to a place where each decision we make is the right decision.” I feel like we’ve done a good job of that.
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