Port of Miami Tunnel

PORT OF MIAMI TUNNEL
SUMMARY
The Port of Miami Tunnel is one of the frst public-private
partnership (PPP, generally referred to as P3 in North
America) projects in the State of Florida. The Port of Miami
had only one access point through the city of Miami and was
the cause of major traffc congestions in the city. A solution
was needed to divert the incoming traffc away from the city
centre. The solution was to connect the interstate network
with the port through a tunnel. This would divert incoming
traffc from the network away from the city.
Being one of the early PPP projects in the State of Florida, the
Procuring Authority, the Florida Department of Transport, did
not have signifcant experience in managing PPP contracts.
In addition, the state and city could not provide the fnancial
contribution necessary for the project. The support needed
for the realisation and success of the project was provided by
the federal government. The Florida Department of Transport
provided all the technical, legal and fnancial expertise
needed to manage and deliver the project. The Federal
Highway Administration provided a loan of over USD $340
million out of its Transportation Infrastructure Finance and
Innovation Act (TIFIA) credit assistance programme.
As a result, the signifcant federal support in combination
with the state, county, and city local knowledge ensured
the success of the project. Despite challenges faced in
unforeseen ground conditions leading to a dispute, the
project was completed ahead of schedule and under budget.
OVERVIEW
Location
Port of Miami, Florida,
United States of America (USA)
Sector
Transport – Roads
Procuring Authority
Florida Department of Transport
Project Company
MAT Concessionaire, LLC
Project Company Obligations
Design, Build, Finance, Operate and Maintain
Financial Close
15 October 2009
Capital Value
USD $920 million
Contract Duration
35 years
Key Event
Dispute due to unforeseen ground conditions
Port of Miami Tunnel
USA
Image: “Port of Miami Tunnel entrance from MacArthur Causeway” by Pietro / CC BY-SA 4.0
SUMMARY LESSONS LEARNED
• Active community outreach and involvement is vital
to the success of any major infrastructure project.
• Collaboration between different levels of government may
be required to successfully deliver large infrastructure.
• Sharing of risks beyond the control of either party
can have a positive impact on the working relationship
between the parties.
• Involving the operations contractor during design and
construction can assist from an operational perspective
to ensure operations KPIs are understood and achievable.
• Early discussions on the interpretation and practicality
of operations KPIs with the operations contractor can
make for a smoother transition between construction
and operations and help to avoid misunderstandings.
• Upfront consideration of signifcant construction and
fnancial risks through the establishment of a contingency
fund enabled a satisfactory outcome after the risks
materialised during the construction period.
• There are some risks, which although allocated to the
Project Company under the PPP contract, will still need
to be closely managed by the Procuring Authority to avoid
reputational damage.
• Both parties may need some time for adjustment
between the construction and operations phases to
settle into managing the operations phase obligations.
• Frequent (even weekly) meetings with all relevant
stakeholders can assist the Procuring Authority to keep
a close watch on the construction activities and manage
any potential challenges.
• Dispute Resolution Boards may be costly to set up,
however, they can also be an effective way of settling
disputes and have the advantage of reducing the risk
of litigation.
PROJECT INCEPTION
Goals and Objectives of the Partnership
The Port of Miami is located on an island in Biscayne Bay
between the cities of Miami and Miami Beach. Before the
construction of the Port of Miami Tunnel, the only access
to the port was via a single bridge between the island and
the city’s central business district (shown on the bottom
left of Figure 1). Over 16,000 vehicles were using the roads
surrounding the port every day, with cargo trucks making
up a quarter of that number.
With the expansion of the Panama Canal due to be
completed in 2015, as well as the Port of Miami acting
as the “cruise capital of the world”, it was clear that better
access was required. Congestion was inhibiting the
operations of the port, and the commercial growth of the
city. This was exacerbated by the traffc patterns of Miami,
where congestion is an issue not just during weekday rush
hour, but also in the evenings and on the weekends during
peak nightlife hours. By connecting the port directly to the
interstate network, a tunnel would help remove up to
1.5 million trucks per year from the roads in the downtown
region of the city. It was partly for this reason that it was
decided not to toll the tunnel; applying user fees would have
introduced the risk that some drivers would avoid the tunnel
and continue to use the existing bridge.
A tunnel had been considered by the region’s planners as
early as 1982, however, it entailed substantial risks. It would
have to be built 40 metres below sea level, under a busy
shipping channel and in an environmentally sensitive area
with uncertain geotechnical conditions.
The project would in fact include two tunnels (one for
each direction of traffc), as well as improvements to the
connecting causeway and port roads. A PPP model was
decided to be the most appropriate procurement model
to ensure value for money for the state, as it would best
allow the transfer of construction risk to the private sector.
Additionally, given the economic uncertainties and hardship
due to the Global Financial Crisis, the state was reluctant to
take on a large amount of debt to fnance the construction
of the tunnel.

PORT OF MIAMI TUNNEL
The Economic and Political Environment during Inception
In the years leading up to fnancial close of the Port of
Miami Tunnel project, the local county had agreed to
spend USD $347 million on a new baseball stadium with
signifcant scepticism from the public. The agreement was
and is still controversial, with the real costs, including cost
of borrowing, being argued to be higher than published.
As a result, government expenditure on construction was
expected to be scrutinised more closely, especially on a
high-profle project such as a new tunnel. This reinforced
the need to prioritise community engagement and
inclusion, particularly during the high-risk construction
phase. There was a great emphasis on the need to include
the local community in the benefts of the project.
This project was tendered in the heat of the Global Financial
Crisis, with the Florida Department of Transport selecting
a consortium, Miami Access Tunnel, as the preferred bidder
in 2008. The majority equity investor at that stage was
Babcock and Brown, who went bankrupt before fnancial
close. Meridiam subsequently joined the consortium as
the majority equity investor to replace Babcock and Brown
and fnancial close was reached with the Project Company,
MAT Concessionaire, LLC, in 2009.
MANAGEMENT OF THE PPP CONTRACT
Construction Phase
The construction process for the Port of Miami Tunnel was
always going to be challenging, as the MacArthur Causeway
Bridge (to which the tunnel was due to connect) could not
be shut down, and the port itself also needed to remain in
full operation. The tunnels were the frst tunnels in Florida
to be completed using a tunnel boring machine (TBM),
which has substantial upfront costs.
The frst tunnel took eight months to complete, which
was longer than originally planned, due to unforeseen
geotechnical challenges. A large amount of coral stone,
a hard material similar to granite, slowed down the boring
from the start. However, more signifcantly, 30 metres below
sea level the construction contractor encountered voids
flled with a semi-liquid slurry which, in some locations,
were the size of a city block. It was not possible to bypass
the voids, nor leave them flled with the slurry. The solution
to this challenge was to pump approximately 200,000
cubic metres of concrete into the voids, allowing the TBM
to tunnel through a stable material. A contingency fund had
been put aside by the Procuring Authority and the Project
Company to cover additional costs due to geotechnical
issues, and this was used to pay for this extra work.
However, agreeing to reimburse the Project Company in
recognition of the additional costs led to a dispute. This is
described in further detail under the heading “Key Events”
below. There were multiple work-fronts open at the same
time, so the construction contractor was able to reschedule
and optimise its work and mitigate the delays caused
by the challenging ground conditions.
A fnal tunnelling challenge to be addressed was the
existence of groundwater, which threatened to disrupt
Figure 1: Port of Miami Tunnel “Yellow” (http://www.portofmiamitunnel.com)
the construction of cross passages between the two main
tunnels. To avoid water pouring into the space that was
being dug out, the construction contractor had to freeze
the area to -30 degrees Celsius and keep it cold for 40 days
to give the salty water time to harden.
Regardless of the challenges faced during construction,
effective management of the construction phase and
collaboration between the key parties resulted in completion
of the project ahead of schedule and under budget.
The construction contractor also faced some challenges
in terms of having a full understanding of and compliance
with federal laws and regulations, particularly labour laws.
It is very important that the Procuring Authority ensures that
the Project Company and its contractors are fully aware of
the federal laws affecting the works. Regardless of the risk
allocation, serious violations of labour or safety laws will have
a negative impact on the project and all parties involved from
a reputation point of view. The Procuring Authority was also
liable for fnes if any of its projects were not compliant with
relevant laws and regulation. In this project, the construction
contractor hired a labour union company to assist it in
complying with the federal labour laws.
Operations Phase
The tunnel began operations in August 2014, almost fve
years after fnancial close. Approximately 14,000 vehicles
use the tunnel each day, and an estimated 80% of portrelated truck traffc has been diverted away from the central
business district.
A number of operational innovations were introduced
to the project to improve traffc flow and user safety. An
automatic incident detection system scans the roadway for
atypical events, such as a stopped vehicle, and then alerts
workers. The tunnel’s internal surfaces are freproofed, and
a deluge sprinkler system was installed to suffocate any
fres. A system of sensors and alerts exists to warn oversize
trucks not to enter the tunnel, including infra-red scanners,
ship horns and emergency messages. Additionally, there
are floodgates at each entrance, which can completely seal
the tunnel off from a storm surge. The operations have so
far been free from fatalities, and in July 2015, the project
received the 2015 Infrastructure Project Award from the
National Council for Public-Private Partnerships.
Performance Monitoring and KPIs
The KPIs for this project are around lane availability,
incident detection and response time, maintenance,
lighting, vents and safety features. The operations
contractor was actively involved during the design
development and construction phase, which allowed it to
suggest improvements and ensured that it was satisfed
that the proposed design would meet the availability and
performance standards. As part of this engagement,
KPIs were also reviewed in terms of their practicality
from a performance standards point of view. The
engagement of the operations contractor in this process
was quite important to ensure the practicality of the
operations obligations.
Construction performance is monitored by two third party
consultants, supporting the Procuring Authority’s team:
a Construction Engineering Inspection (CEI) consultant,
and the owner’s (i.e. the Procuring Authority) representative.
These consultants submitted regular monthly progress
reports and have attended regular progress meetings with
the Project Company and the construction contractor.
The Procuring Authority did not have the relevant
operations and maintenance expertise on tunnels and
it therefore had in place an operations and maintenance
oversight contract with relevant third parties to help
with independent performance monitoring and contract
management. The Procuring Authority’s team conducts
spot checks of performance standards, reported failures
and the workings of the operations control room.
The Procuring Authority found the frst three months of
the operations phase to be the most challenging, as they
presented a learning curve for both the Project Company
team and the Procuring Authority team. During this period,
many operational procedures and staffng requirements
were adjusted to suit actual conditions.
Payment Mechanisms
The payment mechanism for the Port of Miami Tunnel
is split between milestone payments for the construction
phase and ongoing availability payments during the
operations phase, both paid by the Procuring Authority.
The availability payments were set at USD $32.5 million
a year, not including inflation adjustments or deductions.
During construction, external consultants were hired by the
Procuring Authority under an owner’s representative contract
and a CEI contract. In addition to verifying compliance with
the design, quality of works and overall progress (which was
independently done by the CEI team with on-site presence),
the owner’s representative was responsible for certifying
milestone payments to the Project Company.
Availability payments for the operations phase were
set at a maximum annual payment. The payments are
broken down into monthly unitary availability payments.
Deductions attached to certain KPIs are enforced through
a performance-points calculation, which are also linked
to the events of default and termination.
The availability payment largely consists of the operations
and maintenance (O&M) fee, fxed for 30 years with
inflation adjustments. The objective is to ensure the asset’s

PORT OF MIAMI TUNNEL
condition would meet the required specifcation throughout
the duration of the contract and at handback. The parties
agreed to share the risk of changes in O&M insurance
costs, as these were seen to be dictated by global trends
outside the control of either party. Savings made or
additional expenses incurred on these premiums by the
Project Company arranging the insurance cover are shared
with the Procuring Authority.
Community Engagement
One of the clear strengths which has led to the success
of this project is the ongoing community engagement,
which was carried out by the Project Company. This was
particularly important given the public criticism over
the recent construction projects, which were seen to
disadvantage local residents, and also because this project
had a high profle in the city and a wider region.
The primary method in which local support was encouraged
was through Operation 305 (referring to the local area
code), which was a commitment to not just hire people
from the local area, but also to source materials from local
vendors. Approximately 83% of staff positions went to
people from the county, and 400 locally-owned businesses
were involved in the development of the tunnel.
The Project Company’s team also put a lot of emphasis
on community outreach, developing traffc management
plans in association with local authorities to balance the
demands of locals with those of the construction activities.
Project Company representatives visited local schools
to assist with Science, Technology, Engineering and
Maths (STEM) activities, and have continued this into the
operations phase. The TBM was even named Harriet by
a local girl scouts group, after the 19th century abolitionist
Harriet Tubman. Finally, the excavated material from the
tunnel was deposited over landfll to create a recreational
area on a nearby island. The ongoing focus on the
community is seen by all parties as an important enabler
of success.
ROLE OF GOVERNMENT
The relationships between governments at different
levels are vital to the ongoing success of this project.
This began in the project structuring phase, where funds
were provided by federal, state, county and city sources,
with the City of Miami also granting land access. The
USD $150 million contingency fund set up by the Procuring
Authority to mitigate the risk associated with unforeseen
ground conditions was jointly funded by the Procuring
Authority and the Miami-Dade County. The promise of
ongoing funding to the Procuring Authority is particularly
important given the decision not to impose tolls, as
this increased the amount of money required from the
government. The Procuring Authority executed a funding
agreement with the city and county, but these authorities
had no direct oversight over the project.
The Transportation Infrastructure Finance
and Innovation Act (TIFIA)
The TIFIA programme was established to provide credit
assistance to qualifed infrastructure projects in the
United States (US). According to the Florida Department
of Transport:
“The TIFIA credit program is designed to fll market gaps
and leverage substantial private co-investment by providing
supplemental and subordinate capital.”
The programme’s main goal is to assist in improving
transportation infrastructure in the US and close the
increasing gap by attracting and enabling private
participation. The programme does not provide a grant
to states and cities; it offers loans with favourable terms
to assist in securing the required capital from the private
sector. The programme’s flexible loan repayment terms
allow the delay of repayments for up to fve years after
substantial completion. The programme also provided
credit guarantees to lenders and offers standby lines
of credit to assist with project cash flows.
RELATIONSHIP BETWEEN THE PROCURING
AUTHORITY AND PROJECT COMPANY
Team Set-Up and Stafng
During the construction phase, the Procuring Authority’s
team reached 21 at the peak of the works, which was
reduced to six as the construction phase came to an end.
The Procuring Authority appointed one person to manage
the PPP contract, with the authority and flexibility to recruit
the internal and external Procuring Authority resources
needed. As the Procuring Authority did not have substantial
tunnelling experience, it relied on the expertise of the
CEI consultant and the owner’s representative.
At the start of operations, two full time staff members
were appointed, and one was part time. Once the team
became more familiar with the operations phase, the team
was reduced to one full time employee and one part time
employee. No structured PPP training was given to the
Procuring Authority’s contract management staff, however
they gained relevant skills through “on the job” training.
Communications
The level of communication between the Procuring
Authority and the Project Company stakeholders during
construction was seen as benefcial to the project,
particularly during periods of disagreement. Weekly
meetings were held which included the Procuring Authority,

the Project Company and the construction contractor,
as well as representatives from city and county
governments. These meetings were focussed on day-today issues arising. This helped the Procuring Authority keep
a close watch on the construction activities and helped
mitigate the delays caused by disputes and challenging
geotechnical conditions. In addition, there were monthly
and quarterly meetings between the Project Company
and Procuring Authority focussed on matters of strategic
importance and any issues escalated from the weekly
meetings. During the claim settlement period, quarterly
meetings between the Procuring Authority and the Project
Company were also joined by representatives from the city
and county.
Information Management
The Procuring Authority had an internal, department-wide
document control system in place. The PPP contract did
not prescribe any specifc information management system.
However, the owner’s representative introduced software
which facilitated document control and management during
construction, which was considered an improvement on the
system that the Procuring Authority had in place. All parties
had access to this system to submit and upload documents
for the contract management team to review and approve.
KEY EVENTS
Dispute – Unforeseen Ground Conditions
The geotechnical challenges encountered, in particular the
existence of soft voids in the rock, led to a dispute over the
additional costs of pumping in extra concrete (i.e. grouting)
to allow tunnelling to continue. A contingency fund had been
created as part of the PPP contract as a way of sharing the
risk of increased tunnelling costs. The risk was shared by
structuring the overall contingency fund in a way so that
the Project Company would be liable for the frst USD $10
million of additional costs, then the Procuring Authority
would be liable for any costs above USD $10 million up to
a total of USD $150 million. Where cost overruns exceeded
USD $160 million, the Project Company would be liable for
another USD $20 million. If USD $180 million was exhausted,
the parties would have the right to terminate the contract.
The PPP contract also specifcally allowed for 8,000 cubic
yards (6,116 m³) of concrete for grouting. However, due
to the soft ground conditions (including the voids), an
additional 250,000 cubic yards was required. As a result of
a claim by the construction contractor, the Project Company
submitted a claim to the Procuring Authority for the costs of
pumping in additional concrete. This was, however, disputed
by the Procuring Authority. As no agreement could be
reached on the cause of the claim, nor its value, the claim
was escalated to the project’s Dispute Resolution Board
(DRB), which decided in favour of the Project Company and
the construction contractor. However, the DRB’s decision
was only on entitlement for compensation and not the
amount, which was later negotiated between the parties.
The value of the settlement fgure was well below what the
overall contingency fund allowed for the project, and the
Procuring Authority was satisfed with this outcome.
The contract did not provide for arbitration as a dispute
resolution mechanism, and disagreements are generally
escalated to the DRB if negotiations fail to resolve the
dispute. The DRB is still used regularly on the project by
the parties as a way to resolve disputes. It is costly to set
up, however the parties have found it to be an effective way
of settling disputes and it has the advantage of reducing
the risk of litigation. The DRB also helps with dispute
avoidance when used as a regular tool on this type of
project. The parties meet with the DRB on a regular basis
to discuss potential issues that could become disputes.
These meetings are a forum for the Project Company and
Procuring Authority to proactively resolve issues before
they escalate into disputes.
LESSONS LEARNED
Active community outreach and involvement is vital
to the success of any major infrastructure project.
Support from the local community is vital to the success
of any major infrastructure project, especially in an
environment where PPPs may be subject to increased
public scrutiny and possibly be perceived as controversial.
In the Port of Miami tunnel project, both parties made
it a priority to pro-actively involve the local communities
in the project and use the project to address their needs.
The parties agreed that in order for the project to succeed,
it needs to have a notable impact that can be felt by the
local community. As a result, the community engagement
plan went beyond just media and public relations into
delivering real economic, social and commercial benefts.
The community outreach plan involved three aspects:
a) minimise nuisance to the local community caused by
the construction works; b) identify opportunities to beneft
the community through education and social activities;
c) train and hire labour locally and use local contractors.
With the plan in place, the project managed to address
the local community’s social and economic concerns, and
the challenges of their daily lives. A comprehensive traffc
plan made in collaboration with the cities of Miami and
Miami Beach ensured minimum effect on commuters.
The inclusion of local programmes like the girl scouts
and involvement in science, technology, engineering, and
mathematics education mentorship helped the community
with its social improvement initiatives. Finally, by upskilling
local labour and the use of local contractors, the community
was able to share in the economic benefts.

PORT OF MIAMI TUNNEL
Collaboration between different levels of government may
be required to successfully deliver large infrastructure.
The involvement of governments at four different levels
(federal, state, county and city) was vital to the success
of this project, from the structuring and signing through
to implementation and operation. Joint funding and ongoing
engagement and political support from different public
bodies helped overcome challenges in construction, as well
as improved community engagement.
Sharing of risks beyond the control of either party
can have a positive impact on the working relationship
between the parties.
It was recognised by both parties in this project that
risks associated with O&M insurance cost changes are
affected by global trends beyond their control. The risk
was addressed proactively by both parties agreeing to
share savings or cost increases in the premiums. This
approach ensured a fair and optimised risk allocation
and helped the relationship between the parties.
Involving the operations contractor during design and
construction can assist from an operational perspective
to ensure operations KPIs are understood and achievable.
The operations contractor should be involved during the
design development and construction phase. As the party
with the most expertise in operations, it will be able to
suggest improvements which can reduce whole of life costs
and help the service to be delivered to a high level. The
structure of the PPP contract should incentivise the Project
Company to do this regardless, however it is still important
for the Procuring Authority to ensure it takes place. This may
have more relevance if the operations contractor is not an
equity investor in the Project Company. There may otherwise
be a tendency for the considerations of the construction
contractor to outweigh operational demands. In this project,
the operations contractor was involved during the design
and construction phase, which allowed it to highlight design
defciencies early enough for them to be rectifed.
Early discussions on the interpretation and practicality
of operations KPIs with the operations contractor can
make for a smoother transition between construction
and operations and help to avoid misunderstandings.
It is important that the parties reach agreement early on
what each KPI means from an operational point of view, and
how it will be measured. Agreement on the interpretation
of the KPIs is key to minimising disputes relating to
performance evaluations during the operations phase.
On this project, the operations contractor, in collaboration
with the Project Company and the Procuring Authority,
started reviewing the KPIs one year before the start of
the operations phase to assess their achievability and
predict any challenges. The main issue that the operations
contractor raised was regarding incident response
times. The Procuring Authority had made this a priority,
however, based on the fnal design there was a question
over whether the KPIs were achievable. The Procuring
Authority managed this by analysing the resources that
the operations contractor had described in its operations
manual and assessing whether its concerns were valid. The
Procuring Authority concluded that the KPIs for dealing with
a breakdown of a large truck were too onerous, given that
it would be diffcult to bring a certain size of tow truck into
the tunnel. The timings for this were then adjusted, while all
other KPIs remained as prescribed in the PPP contract.
Upfront consideration of signifcant construction and
fnancial risks through the establishment of a contingency
fund enabled a satisfactory outcome after the risks
materialised during the construction period.
Although in many PPP projects involving construction
works the majority of the construction risks are allocated to
the construction contractor, tunnelling projects can present
particularly high risks in terms of unforeseen ground
conditions, delays and cost increases. In this project,
although a dispute occurred with respect to unforeseen
ground conditions, the availability of a contingency fund
enabled a successful outcome that was acceptable to both
parties and the delivery of the project.
There are some risks, which although allocated to the
Project Company under the PPP contract, will still need
to be closely managed by the Procuring Authority to avoid
reputational damage.
The construction contractor faced some challenges in terms
of its full understanding of and compliance with federal laws
and regulations, in particular labour laws. It is very important
that the Procuring Authority ensures that the Project
Company and its contractor are fully aware of the federal
laws affecting the works. Regardless of the risk allocation,
serious violations of labour or safety laws will have a
negative impact on the project and all parties involved from
a reputation point of view. The Procuring Authority was also
liable for fnes if any of its projects were not compliant with
relevant laws and regulation. In this project, the construction
contractor hired a labour union company to assist it in
complying with the federal labour laws.
Both parties may need some time for adjustment between
the construction and operations phases to settle into
managing the operations phase obligations.
The Procuring Authority found the frst three months of
the operations phase to be the most challenging, as they
presented a learning curve for both the Project Company

team and the Procuring Authority team. During this period,
many operational procedures and staffng requirements
were adjusted to suit actual conditions.
At the start of operation, two full time staff members
were appointed by the Procuring Authority and one was
part time. Once the team became more familiar with the
operations phase, the team was reduced to one full time
employee and one part time employee.
Frequent (even weekly) meetings with all relevant
stakeholders can assist the Procuring Authority to keep
a close watch on the construction activities and manage
any potential challenges.
The level of communication between the Procuring
Authority and the Project Company stakeholders during
construction was seen as benefcial to the project, in
particular during periods of disagreement. Weekly meetings
were held which included the Procuring Authority, the
Project Company and the construction contractor, as well
as representatives from city and county governments.
These meetings were focussed on day-to-day issues
arising. This helped the Procuring Authority to keep
a close watch on the construction activities.
Dispute Resolution Boards may be costly to set up,
however they can also be an effective way of settling
disputes and have the advantage of reducing the risk
of litigation.
A Dispute Resolution Board (DRB) was set up to resolve
a dispute between the parties related to geotechnical
challenges encountered by the construction contractor
during tunnelling. The DRB is still used regularly on the
project by the parties as a way to resolve disputes. It is
costly to set up, however the parties have found it to be an
effective way of settling disputes and it has the advantage
of reducing the risk of litigation. The DRB also helps with
dispute avoidance when used as a regular tool on this type
of project. The parties meet with the DRB on a regular basis
to discuss potential issues that could become disputes.
These meetings are a forum for the Project Company and
Procuring Authority to proactively resolve issues before they
escalate into disputes.