How RISKY Is This??

How RISKY is This??

• Buy a lottery ticket• Only 3 will be sold • Cost for a ticket $80 million• Jackpot $2,000,000,000

Where is the F*@%ing RISK!!

The Program

1 lump sum contract 4 years 5 light rail lines 30 miles of

infrastructure 100 vehicles$2,000,000,000 investment

Lets Talk RISKThe Relationship Risk

• Development agreement

• Design/Build contract• Operations & maintenance contract• Financing plan

• Development agreement• Design/Build contract• Operations & maintenance contract• Financing plan

Facility Provider

Integrated Master Development Structure

Lets Talk RISKThe Relationship Risk

The Evolution RISK - Team Building

Civil Engineer +Facility Provider

D/B Contractor(s)Financiers

+Vehicle Supplier

The Evolution RISK - Team Building

Civil Engineer +Facility Provider

Financiers +

Vehicle Supplier

O & M Contractor

Development Agreement

• CE & facility provider marriage• Scope & definition• Transparent costing• Construction sequencing &

schedule• Utility agreements• Property acquisition• Risk register

RISK Register

• 154 Items 92 Facility provider 62 METRO / owner

• 35 Categories• 30% - 15% Project value• $460M - $250M

RISK Register

• Imputed risksReal (equity) risks

• Cost going in = Cost coming out

• Risk take of last resort

The Ultimate RISK

• METRO will not buy/own the project

• Availability payment Debt service – year five (5)

onward Operating – year one (1)

• Avoid latent defect risks• Long term business model

Long term lease•Buy out in increments•Buy out total

Private or public operation

The Vehicle RISK

• METRO takes what industry makes

• No specs• No custom work• No kidding!

Design / Build

• 3,000’ – 5,000’ segments one & done

• No change order• No claims• No litigation• No liquidated damages• Target cost pricing mechanism

Risk vs. Incentives

Would you RISK IT??