Penn Pike lease/concession end of week deadline

Pennsylvania DOT has set a new deadline for bids on the Pennsylvania Turnpike concession at the end of this week. But while there is a real intention on the part of the state to make the new deadline stick it may slip again like last week's, according to people who can only be characterized as insiders.

Last week a couple of intending bidders told the state they needed more time. The extension was announced in time for all the ready bidders to withhold their bids. In these kinds of procurements bids are generally not submitted until an hour or so before the deadline. So if the deadline is extended say 8 hours before the deadline, no bids are submitted.

There is therefore no significance in that fact no bids were received. However the talk we hear is that the state won't get anywhere near the $16b high number being thrown around.

One observer said: "This lease has been oversold, perhaps for political reasons. The (concession/lease contract) agreement being bid has many provisions - toll setting formulas, state powers to instruct the concessionaire, labor provisions and other requirements which reduce its value. They may be necessary for the state. They can be worked with (by concessionaires), but they extract a price in (subtracting from) the amount which can be offered. I don't think the cost of some of these provisions has been fully understood."

We have the impression from the talk we've heard that the bids will be somewhere in the range $7b to $11b rather than $12b to $16b mentioned as the likely range for high bids. But this is a guess and only time will tell.

Meanwhile deadlines pushed back, once or more, is not out of the ordinary for these deals. 407ETR, Chicago Skyway, Indiana Toll Road, Northwest Parkway, and the Texas concessions - all the major competed concessions had their deadlines extended, in some cases several times.

TOLLROADSnews 2008-05-05