Two Hundred Years of American Public Private “Partnerships”

  • John B. Miller
Chapter
Part of the The Springer International Series in Infrastructure Systems: Delivery and Finance book series (ISDF, volume 101)

Chapter Summary

At the end of the twentieth century, both owners and producers are experimenting broadly with “public private partnerships,” “public private ventures,” and “alternative delivery methods.” While trade associations within the construction industry boldly claim that “their” preferred method — Design-Build, Detail-Design-Build, or Design-Build-Operate-Maintain — is “new” or “better,” none of these claims are true. In fact, just the opposite is true. There is no project delivery method that is uniquely and consistently best for the delivery of all infrastructure projects. Inflated marketing claims about the limitless advantages of Design-Build, Design-Build-Operate, or Design-Bid-Build have done more harm than good to a construction industry struggling with its clients (and their constituents) to deliver value for money in infrastructure facilities and services.1

For the first 150 years, America’s infrastructure collection was delivered through contracts between public and private entities along two basic tracks. Track 1 is a “direct” finance strategy that employs the delivery methods in Quadrants I and IV. Track 1 was used by Congress to finance river and harbor improvements throughout the first 150 years of our history.2 Congress relied very heavily, throughout the first 150 years, on a second basic approach to project delivery. Track 2 is an “indirect” finance strategy that employs other people’s money and the delivery methods in Quadrant II. Track 2 was used by Congress to obtain private sector financing for public transportation, energy, and water supply projects.

The logic behind the dual track strategy was both political and practical. Some projects, such as the removal of obstructions to river and harbor navigation were clearly of general interest to the national government, and would only be accomplished through “direct” funding of contracts and projects to clear such obstructions. However, many of the nation’s infrastructure challenges required joint government and private sector response, because the federal and state governments simply did not have sufficient resources to pay for all projects directly. In addition, after a series of spectacularly poor investments by Pennsylvania, Maryland, South Carolina, and Virginia in the first half of the 19th century, federal and state governments were no longer inclined to speculate in the deployment of new technologies such as steam, rail, auto, airplane, telegraph, telephone, and electricity. Having nearly bankrupted several of the states through unwise investments in public infrastructure, the appetite of public officials was small for committing limited tax revenues into infrastructure projects.

America’s two hundred-year experience with joint public and private investment in infrastructure provides several very practical solutions to problems that are still with us today. The first lesson relates to the role of the federal government in funding non-military infrastructure improvements inside the several states. President Andrew Jackson’s 1830 Maysville Veto, describes the dilemma and confirmed Jackson’s view that the federal government should not fund “internal [infrastructure] improvements” that benefited one section of the country [the mid-Atlantic States] over another [New York and New England]. Jackson’s solution was to shrink direct federal cash support for “internal improvements” to avoid divisive sectional conflicts over the allocation of limited federal resources. Jackson’s theory was that regional projects were best produced regionally.

A second, very practical lesson was provided by an 1837 United States Supreme Court decision relating to a “perpetual” franchise to operate a ferry across the Charles River granted to the Trustees of Harvard College by the colonial legislature of Massachusetts. The court found that because the franchise was silent as to whether the state could build or authorize a competing ferry or bridge, the state was free to construct or authorize a competing bridge, even if it destroyed Harvard’s franchise. The decision created doubt in the private sector as to the ability of a current legislature to bind a subsequent legislature. As a result, perpetual franchises (or very long franchises) have never been popular in the United States because both governments and financial markets are looking for security only over a reasonably short period of 20–30 years.

A third lesson was learned in another decision of the United States Supreme Court in 1824, Gibbons v. Ogden. The dispute involved the Robert Livingston/Robert Fulton monopoly in New York and Louisiana of steam engine technology to ferry boats operating first in the Hudson River, and later, New Orleans. Competing franchises from different states claimed to give either Fulton or his competitors “exclusive” rights to use the new technology in each state’s waters. The result was a confusing patchwork of states that supported or denied Fulton’s right to monopolize steamboat technology for interstate trips. Gibbons possessed a federal coasting license, upon which the Supreme Court relied to strike down each state’s franchise. The decision established the practice that contracts between local governments and private contractors should be structured around results, not on monopoly use of technologies, materials, or equipment. American governments are still uncomfortable awarding private franchises tied to particular technologies, since there is usually a better, more effective technology just around the corner.

America’s historical infrastructure experience also confirms a variety of different roles for the public and private sectors over the years. Depending on the situation, the government’s interest has fluctuated between “direct control” and “general regulation.” On other occasions, the government’s focus has fluctuated between “public” and “private” ownership. The strategy for deployment of new technologies has fluctuated between “exclusive” and “non-exclusive” rights. These fluctuations in infrastructure strategy were produced by changes in politics, technology, economy, and international relations. Between 1789 and 1933, the dual track strategy served the nation well by offering a rich combination of public and private sector expertise and investment in American infrastructure. There is every reason to expect that similar changes will continue in the next century. Different combinations of project delivery and finance methods will produce new solutions to changing public infrastructure needs.

Keywords

Infrastructure Project Public Infrastructure Carnegie Institution National Road Interstate Highway 
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Notes

  1. 1.
    Even worse, ad hoc experimentation has driven up the costs to CLIENTS and producers of the procurement process, discarding much of the gains in quality and cost performance CLIENTS so desperately need to meet tight financial constraints.Google Scholar
  2. 2.
    Since 1956 this track was used to deliver thousands of wastewater treatment plants, and forty thousand (40,000) miles of interstate highways.Google Scholar
  3. 3.
    All of these delivery and financing methods available to private sector CLIENTS, who routinely use Design-Build, Design-Build-Operate, and Design-BuildFinance-Operate as delivery options for private sector projects.Google Scholar
  4. 4.
    Appendices A through E provides hundreds of examples.Google Scholar
  5. 5.
    Two examples illustrate this point. Today’s passengers on the New York subway system do not trace the system’s origin to a competitively awarded private Design-Build-Finance-Operate contract concession. Clifton Hood, 722 Miles: The Building of the Subways and How They Transformed New York, 1993, Simon & Schuster, New York. Passengers on Boston’s subway system are generally unaware of its private sector origin as a Design-Build-Finance-Operate franchise.Google Scholar
  6. 6.
    The “dual-track” arises from two fundamentally different strategies for funding public infrastructure, described in Chapter 2, supra, as “direct” and “indirect.” The federal government has consistently relied on private sector firms to design and build infrastructure projects. Rarely has government itself designed infrastructure works, and in only a handful of situations has government itself constructed such facilities.Google Scholar
  7. 7.
    For example, in the first half of the 19`h century, when federal appropriations were tiny, the government was a persistent supporter of projects that were indirectly financed by the private sector. In the decades following World War II (a different time, with different economic conditions) the federal government chose to appropriate $120 billion dollars to pay directly for the Interstate Highway System and the EPA Construction Grants program (for wastewater treatment plants).Google Scholar
  8. 8.
    See Appendix D for a complete list of the 800 plus acts identified in this search.Google Scholar
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    The year 1933 was chosen as the end of this study period, since it represented a fundamental change in government.Google Scholar
  10. 10.
    The results are presented in charts, not as a definitive statistical analysis, but to show that current perceptions that infrastructure development has always occurred in Quadrant IV are nonsense.Google Scholar
  11. 11.
    Segmented procurement was little used in the fifteen decades between 1780 and 1933. During the period from 1780 to 1860, the frequency was even lower, because architectural and engineering services were almost never segmented by statute from construction services. Beginning in the 1890’s, a few statutes authorized federal agencies to compete separately for architectural services. Toward the end of the 1860 to 1933 period, statutes began to require approval of complete plans and specifications for public buildings by agency heads before an appropriations could be authorized for construction. Segmentation of design from construction became the rule, rather than the exception, with the passage of the federal Brooks Act in 1972. 86 St 1278, The Brooks Architect-Engineers Act, 10/27/1972 codified into the U.S. Code at 40 U.S.C. §§542 to 544. The legislative history of the Brooks Act asserts that the procedures described in the act merely insure the continuation of 30 years of Government practice for obtaining architects and engineers based upon qualifications first and through negotiation. 1972 U.S. Code Congressional and Administrative News, at pages 4767 to 4775. The Act requires all agencies of the federal government to public announce all requirements for architectural and engineering services, and to negotiate contracts for these services first on the basis of demonstrated competence and qualifications, and second, at fair and reasonable prices. The process by which an A/E is selected under the Brooks Act is that all proposers compete with one another on the basis of their experience, qualifications, and capabilities to perform the particular project being advertised. The agency ranks the competitors on the basis of technical competence. Then, the agency attempts to negotiate a fair and reasonable price with the highest ranked firm, in no event more than 6% of the estimated construction cost of the project. Provided that a fair price is agreed upon, the highest ranked firm is awarded the contract. In the event the government cannot reach agreement on a fair price, the highest ranked firm is removed from the competition and negotiations are opened with the second ranked firm in an effort to reach a fair price. In the event a fair price is still not agreed upon, the agency turns to the third ranked firm.Google Scholar
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    A windfall in the sense that state and local governments were able to substantially expand transportation and water treatment systems, essentially for free.Google Scholar
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    New York state is a good example. Public funding of the Erie Canal created the presumption that the state, eventually, would fund the Erie Railroad (a presumption not held by canal supporters). In anticipation of state funding for such a road, real progress on construction of the Erie Railroad was delayed from 1831 to 1838 as the nature of the state’s contribution to the project was debated in the press and the legislature. MacGill, Caroline E., et al, History of Transportation in the United States, 1917, Balthasar Henry Meyer, Series Editor, Published by Carnegie Institution of Washington, Washington, D.C., at 368–370.Google Scholar
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    The 1869 appropriation for rivers and harbors exceeded $2,000,000, and rapidly grew to tens of millions of dollars per year by the close of the nineteenth century. The Rivers and Harbors Acts between 1869 and 1930 are listed for illustrative purposes in this note. Each of these acts identifies hundreds of projects to be built by the Secretary of War under the supervision of the Chief of Engineers of the Army Corps of Engineers. The pattern established the Corps’ close connection to civil works construction. 4/10/1869, Act to Improve Rivers and Harbors for FYE 6/30/1869 and 1870, 16 St 44 ($2,000,000); 7/11/1870, Act to Improve Rivers and Harbors for FYE 6/30/1871, 16 St 223, ($3,900,000 appropriated to a long list of projects that are specified for completion. Congress is identifying particular projects spread around the nation; 6/10/1872, Act to Improve Rivers and Harbors for FYE 6/30/1873, 17 St 370, ($5,800,000); 6/23/1874, Act to Improve Rivers and Harbors, 18 St 237, ($5,150,000); 8/14/1876, Act to Improve Rivers and Harbors (South Pass/Eads), 19 St 132; 6/18/1878, Act to Improve Rivers and Harbors, 20 St 152; 3/3/1879, Act to Improve Rivers and Harbors; 6/14/1880, Act to Improve Rivers and Harbors, 21 St 180; 3/3/1881, Act to Improve Rivers and Harbors, 21 St 468; 7/5/1884, River and Harbor Act of 1884, 23 St 133; 8/5/1886, River and Harbor Act of 1886, 24 St 310; 8/11/1888, River and Harbor Act of 1888, 25 St 400; 7/13/1892, River and Harbor Act of 1892, 27 St 88; 8/18/1894, River and Harbor Act of 1894, 28 St 338; 6/3/1896, River and Harbor Act of 1896, 29 St 202; 3/3/1899, River and Harbor Act of 1899, 30 St 1121; 6/13/1902, River and Harbor Act of 1902, 32 St 331; 3/3/1905, River and Harbor Act of 1905, 33 St 1117; 3/2/1907, River and Harbor Act of 1907, 34 St 1073; 3/3/1909, River and Harbor Act of 1909, 35 St 815; 6/25/1910, River and Harbor Act of 1910, 36 St 630; 2/27/1911, River and Harbor Act of 1911, 36 St 933; 7/25/1912, River and Harbor Act of 1912, 37 St 201; 3/4/1915, River and Harbor Act of 1915, 38 St 1052; 7/27/1916, River and Harbor Act of 1916, 39 St 391; 8/8/1917, River and Harbor Act of 1917, 40 St 250; 3/2/1919, River and Harbor Act of 1919, 40 St 1275; 6/5/1920, River and Harbor Act of 1920, 41 St 1009; 9/22/1922, River and Harbor Act of 1922, 42 St 1038; 3/3/1925, River and Harbor Act of 1925, 43 St 1186; 7/3/1930, River and Harbor Act of 1930, 46 St 918.Google Scholar
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    These projects were undertaken by the Secretary of War under the supervision of the Chief of Engineers for the Army Corps of Engineers.Google Scholar
  76. 77.
    Substantial projects were undertaken in most of the major harbors of the United States, including removal of obstructions at Hell’s Gate in the harbor of New York City. 5/4/1882, Act to Remove Obstruction at Hell’s Gate, New York, 22 St 58.Google Scholar
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    /28/1879, Act Creating the Mississippi River Commission, 21 St 37. $175,000 was appropriated to fund a seven-member commission, with three members from the Army Corps of Engineers, one from the US Coast and Geodetic survey, and three civilians. The general scope of the Commission was to complete all current surveys of the River from its head to its mouth, and to undertake other surveys, examinations, and investigations, topographical, hydrographical, and hydro-metrical of the river, including tributaries. Assistance in money and men was to be provided by Sec. of War and the Sec. of Treasury. The Commission was required to consider and develop mature plans and estimates to correct, permanently locate, deepen the channel, and protect the banks of the Mississippi River; improve and make navigation safe; prevent destructive floods; and promote and facilitate commerce, trade, and the postal service.Google Scholar
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    /18/1880, Act to Abolish All Tolls at Louisville/Portland Canal, 21 St 141. This decision moved the procurement strategy from indirect to direct, i.e. from Quadrant II to Quadrant I. In 1881, the canal at Sault Ste. Marie, too, became toll free when the entire project was purchased by the federal government. New York followed the federal government’s lead in 1882, removing all tolls on the Erie canal, in an effort to provide increased competition to keep railroad freight rates for bulk cargo down.Google Scholar
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    MacGill, Caroline E., et al, History of Transportation in the United States, 1917, Balthasar Henry Meyer, Series Editor, Published by Carnegie Institution of Washington, Washington, D.C., at pages 161 to 194. MacGill’s description contains a wonderful background on political, economic, and social events in the colonies and in the early years of the United States that led to the construction of the Erie Canal.Google Scholar
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    MacGill, Caroline E., et al, History of Transportation in the United States, 1917, Balthasar Henry Meyer, Series Editor, Published by Carnegie Institution of Washington, Washington, D.C., at 170, 172 and 173. These plans apparently date from 1724. In 1773, Christopher Colles gave a series of lectures in New York favoring the development of canal routes through upstate New York to the Great Lakes. After the War, a series of proposals were made, a commission created by the state legislature, and, at Governor DeWitt Clinton’s urging, two private corporations chartered by the state, one to build a canal from the Hudsón to Lake Ontario and the Seneca Lake along the Mohawk River, and the second to the head of Lake Champlain.Google Scholar
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    For an in-depth analysis of the background of government promotion of both canals and railroads between 1783 and 1861, including the Erie Canal, see, Goodrich, Carter. Government Promotion of American Canals and Railroads, 1800–1890. New York, New York: Columbia University Press, 1960.Google Scholar
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    Is it surprising that our predecessors were running comparative spread sheet analyses of expected transportation costs on the Erie canal prior to the decision to build it? Or is the fact that such analyses were prepared merely another indication that “the more things change, the more they stay the same.”Google Scholar
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    In New York City, supporters of the Albany to Buffalo canal route focused on the opportunity the Canal provided to divert commerce from the Ohio River valley away from Baltimore and Philadelphia to New York. The New Yorkers intended to provide a cheaper shipping point for products in and out of the Ohio territory. MacGill recounts how comparative analyses were made at the time showing that, with the Canal, shipping costs to and from New York would be lower than Philadelphia and Baltimore. MacGill, Caroline E., et al, History of Transportation in the United States, 1917, Balthasar Henry Meyer, Series Editor, Published by Carnegie Institution of Washington, Washington, D.C., at 167.Google Scholar
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    Western New York was a strong supporter of the Albany to Buffalo route, because it was booming, in terms of population, commerce, agriculture, and manufacturing. Population increases in western New York were shifting political power away from New York City toward Buffalo. Western farmers, buoyed by the successful development of new fertilizers in Wilkes-Barre, Pennsylvania needed better and cheaper transportation to get surging volumes of their crops to mills in Buffalo and Rochester. These same large flour mills needed easy access to Europe and to the large population of New York City to distribute their products. Northeastern New York had already established trade routes to Montreal. Existing roads were already well established compared to other parts of the state. Northeastern New York did not want a route to Lake Erie, which would divert existing trade, and instead favored a canal to Lake Ontario, which, in the short term would consolidate and strengthen Northeastern New York’s commercial ties with these Canadian cities. Approximately $400,000 had already been spent by private investors and the State (through stock subscriptions made by the state in the shares of the company) in support of the Western Inland Lock Navigation Company’s effort to connect the Mohawk River northward through Lake Oneida to Lake Ontario. The Company was chartered in 1792 to complete this canal. This was the route favored by this section of the state.Google Scholar
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    Schodek, Daniel L. Landmarks in American Civil Engineering. 1 vols.: MIT Press, 1988, at page 15. President Madison vetoed a second bill on March 3, 1817, which would have brought to the state $1,500,000 for the canal. Goodrich, Carter. Government Promotion of American Canals and Railroads, 1800–1890. New York, New York: Columbia University Press, 1960, at page 53.Google Scholar
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    Meanwhile, Congress was funding the National Road, a competing roadway designed to connect Baltimore, Maryland, and Virginia to the Ohio Territory through the Cumberland. More on that below.Google Scholar
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    National security was a strong public policy card, even in 1817. Hood, Clifton. 722 Miles: The Building of the Subways and How They Transformed New York. New York: Simon & Schuster, 1993, page 33.Google Scholar
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    Goodrich, Carter. Government Promotion of American Canals and Railroads, 1800–1890. New York, New York: Columbia University Press, 1960, at page 54.Google Scholar
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    If you are looking for evidence of the close connection to infrastructure and economic performance, the canal is an important data point. The cost of hauling goods from Buffalo to New York City was reduced from $100 per ton to $10 per ton and the time for shipment was slashed from 26 to 6 days. Hood, Clifton. 722 Miles: The Building of the Subways and How They Transformed New York. New York: Simon & Schuster, 1993, at page 34. The Erie canal brought thousands of settlers to the Ohio valley and the Great Lakes: 40,000 people passed through Utica in 1825 alone. Ibid., at 193. Commercial traffic in goods was extraordinary, totaling over 185,000 tons in 1825 alone. Ibid., at 192. Revenues exceeded cost many times over.Google Scholar
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    By 1860, one-third (1/3) of country’s imports and two-thirds (2/3) of country’s exports passed through the Port of New York. Seventy percent (70%) of the 5,458,000 immigrants to the United States that arrived between 1820 and 1860 came through the Port of New York. Volume on the Erie Canal began to rival the entire volume of the Mississippi and Ohio River traffic. After two toll reductions prior to 1836, the annual operating profit from the Erie and Champlain canals was in excess of $1,000,000. Hood, Clifton. 722 Miles: The Building of the Subways and How They Transformed New York. New York: Simon & Schuster, 1993, at pages 34 to 35.Google Scholar
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    The Erie canal connection to the upper Great Lakes indirectly supported the growth of Chicago, first as a port connected to New York through the canal, and later as the rail hub of the Midwest.Google Scholar
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    When the Canal first opened, the entire population of New York was located at the southern-most tip of Manhattan. The city was thickly settled, but compact, with 166,086 inhabitants. The Village of Harlem had a few people, served by a Post Road running the length of the island, but there were no bridges connecting Manhattan with any surrounding community. The island was surrounded by salt water marshes. Between 1820 and 1840, the City’s population doubled, and doubled again between 1840 and 1860. Between 1860 and 1890, population doubled yet again, and by 1900, New York’s population, as reported in the US census, was 3,437,202. Hood, Clifton. 722 Miles: The Building of the Subways and How They Transformed New York. New York: Simon & Schuster, 1993, at pages 36Google Scholar
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    For centuries, this relatively simple portage route had been used by “native Indians, European adventurers, traveling through the region, [to] easily traverse the water gap by portaging, or carrying, their canoes across it.” Conzen, Michael P. and Kay J. Carr (eds.). The Illinois & Michigan Canal National Heritage Corridor: A Guide to its History and Sources. 1 vols. DeKalb, IL. 60115: Northern Illinois University Press, 1988, at page 4.Google Scholar
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    Before Illinois was admitted as a State, Congress moved the proposed boundary of Illinois northward to include the Chicago portage within the State of Illinois. Ibid., at page 7.Google Scholar
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    /30/1822, Act Authorizing Illinois to Open a Canal Connecting Lake Michigan, 3 St 659. The 1822 act authorized Illinois to survey and mark the proposed route of the canal through federal public lands within three years of the date of the statute. The statute reserved from sale a right of way between the Illinois river and the southern bend of Lake Michigan up to ninety (90) feet on each side of the route surveyed by the State. No federal commitment was made to fund construction of the canal, and any grant would require that the canal be and for ever remain a public highway for the toll-free use of the government of the United States. The grant would be effective if the State completed the survey and returned a complete map of the proposed canal route to the Treasury Department, within three years, and completed a canal along the route which was suitable for navigation, within twelve years of the act. This first attempt to induce Illinois to arrange for the construction of the canal failed.Google Scholar
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    /2/1827, Act To Assist Illinois Open a Canal Between Lake Michigan & Illinois R, 4 St 234. The 1827 statute offered the State of Illinois alternating sections of land within five miles on either side of the surveyed route. Sales of the land, to be made by the State for not less than $1.25/acre, were to be used to fund construction of the canal. Five percent (5%) of the proceeds from sales of the land reserved to the United States would be paid by the federal government in Illinois 5% fund for internal improvements. In effect, the federal government joined with the State in speculating that the value of the holdings along the canal route would more than double as the canal was developed. Land granted to the state was subject to disposal by the State Legislature, on condition, however, that work on the canal be commenced within five (5) years, and completed within twenty (20) years. If this condition was not met, the state would be required to return to the United States all unsold land plus all receipts for sales of land granted for construction of the canal. In 1833, this offer was extended to include a Railroad option. 3/2/1833, Act Allowing Illinois to Open a Canal or RR Between Lake & Illinois R, 4 St 662.Google Scholar
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    Conzen, Michael P. and Kay J. Carr (eds.). The Illinois & Michigan Canal National Heritage Corridor: A Guide to its History and Sources. 1 vols. DeKalb, IL. 60115: Northern Illinois University Press, 1988, at page 7.Google Scholar
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    Until the opening of the canal, Saint Louis drew farm produce, wheat, and other grains from Illinois farms. Lumber and goods from the East moved westward to markets along the canal all the way to the Mississippi. Goods from New Orleans, grain, wheat, and produce moved eastward to Chicago for processing and onward to the East.Google Scholar
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    Congress was directly funding road construction in the territories, where improved infrastructure increased the dollar value of federal land. An early example is the Mullan Road from Fort Walla Walla, Washington, to Fort Benton, Montana. “Mullan” was an 1852 graduate of West Point who volunteered, in 1853, to participate in the exploration and survey of a potential railroad route from the Mississippi to the Pacific. During this exploration, Mullan discovered a pass suitable for a wagon road. On March 18, 1859, the War Department assigned $100,000 for the building of this 600 mile military road along the route Mullan had discovered, appointing him as officer in charge of construction (OINCC). The road was built between June, 1859 and August, 1860 by Mullan, 100 enlisted men, and 100 civilian workmen, including a few surveyors and engineers. Schodek, supra, at page 38. Another example is the system enacted by Congress in 1905 to quickly establish roads and trails in the Territory of Alaska. 1/27/1905, Alaska Road and Trail Act, 33 St 616. Congress established a separate fund of all the money collected for liquor, occupation, or trade licenses in Alaska, known as the “Alaskan Fund.” The 1905 Act required that 25% of the fund be used to establish schools. Five (5%) of the fund was required to be used to care for the insane, and all of the balance of the fund, i.e. 70%, was to be used to construct and maintain wagon roads, bridges, and trails in the Territory. A Board of Commissioners was established by the act to locate, lay out, construct, and maintain wagon roads and pack trails from points on navigable waters to towns, mining or other camps, and between them. The Board was required to produce maps of all the trails and roads built, and required to award contracts to the “lowest responsible bidder, upon sealed bids, after notice” if any project’s cost was expected to exceed $5000. Military roads were routinely constructed using design/build processes, including roads between Fort Hawkins, Georgia and Stoddard, Alabama, 3 St 412, 3/27/1818; the reopening of the King’s Road between Georgia and St. Augustine, Florida, 4 St 227, 3/2/1827: and numerous others, for example, 4 St 132; 4 St 303; 4 St 602; and 5 St 67.Google Scholar
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    This model was also used in connection with the Cumberland (National) Road, the Chesapeake and Ohio Canal, and other federal projects where an apolitical route or site selection was required.Google Scholar
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    For example, in the case of the National Road, the statute instructed the commissioner to lay out a “path from Cumberland, Maryland to the Ohio River, a little below Wheeling, Virginia.” The commissioners were also to lay out a route for the National Road which was four rods wide (4x16.5 feet) wide, with plain marks on trees or stakes or monuments, every 1/4 mile.Google Scholar
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    The Three Commissioners model is an early version of the Base Re-Alignment Commission model (BRAC’s) established by President Bush in the early 1990’s. There appears to be some truth to the old adage: the more things change, the more they stay the same.Google Scholar
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    St 100, 3/3/1825, Act to Authorize Surveying, Making Road Missouri to New Mexico. The Act authorizing laying out of a road from Missouri to New Mexico Act used three commissioners, who were required to explore, survey, and mark, in the most eligible course, a road from the western frontier of the state of Missouri to the boundary of the United States, in a general direction toward Santa Fe, Mexico. The Act gave the commissioners authority to treat with the Indians for the unmolested construction and use of the road by citizens of the US and of Mexico. Congress appropriated $20,000 to pay the commissioners and to treat with the Indians. $10,000 was appropriated toward making the road.Google Scholar
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    St 135, 3/3/1825, Act to Authorize Surveying, Opening Road from Detroit to Chicago. The Act authorizing laying out of a road from Detroit to Chicago also used three commissioners, who were required to explore, survey, and mark the most eligible course. Congress appropriated funds to pay the commissioners and $3,000 toward making the road.Google Scholar
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    The general route followed from Cumberland to Wheeling was first known as Nemacolin’s Trail. Washington had followed it with the British army and a group of Virginia militia sent to Fort Duquesne in 1854 (the site of present day Pittsburgh). In 1755, with General Braddock in command, Washington returned along the same route, this time ahead with 600 workers, who cleared a road twelve-foot wide for the army. The route, then known as Braddock’s road, was used continuously thereafter to traverse the Appalachians to the Ohio River valley. The road was originally built from Cumberland, Maryland to Wheeling, Virginia, where it intersected with roads previously begun by Ebenezer Zane (and since improved). Eventually, the National Road was extended through Ohio and Indiana to Vandalia, Illinois.Google Scholar
  109. 110.
    /29/1806, Act to Regulate Laying Out the National (Cumberland) Road, 2 St 357. Costs for the survey and marking, together with construction were to be paid directly by the government, and Congress appropriated $30,000 for the task. Congress provided a general description of what it wanted in the project, including an outline of the route to be followed and a short set of specifications. The route was to follow a “Path from Cumberland, Maryland to the Ohio River, a ”little below Wheeling.“ As for specifications, the road was to be four rods wide (4x16.5 feet), with a maximum grade of 5%, with a raised middle, and with drainage ditches on the sides. Plain marks were to be made on trees, stakes, or monuments every one-quarter mile. The statute also required that after the commissioners work was done and the road laid out, a full report was to be presented to the President with maps, the commissioners’ recommendations, a plan for construction, and an estimate by the commissioners of the cost to build the road. Surveying and marking were done separately from construction of the road. The project has been classified in Quadrant IV, based upon this limited segmentation of design from construction, and the direct funding of the project by the government.Google Scholar
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    The Tenth Amendment states that powers not enumerated and given to the federal government are reserved to the several states. The Tenth Amendment has seldom been relied upon by constitutional scholars for guidance as to the distribution of powers between the federal government and states, probably because of the breadth given to the federal power to regulate commerce. Several Presidents relied on the Tenth Amendment to veto statutes that contemplated the expenditure of federal appropriations on projects of“local significance” inside the States.Google Scholar
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    Again, not much has changed. Why should Californians’ tax dollars pay for the Central Artery/Third Harbor Tunnel (193/190) project in Boston?Google Scholar
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    /15/1820, An Act to Authorize Commissioners to Extend National Road, 3 St 604. Controversy over the national government’s funding of a road which did not “benefit” all states was increasing. The 1820 act was for a survey only, and the states themselves were expected to fund extension of the road. Section 2 of this act so provided. “Nothing shall be deemed to imply any obligation on the part of the United States to make, or to defray the expense of making, the road..”Google Scholar
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    A surveyed route for the National Road through to the Mississippi was viewed as a good signal for the government to send which would increase land values. Indeed, the Act begins this way: “Whereas, by the continuation of the Cumberland road from Wheeling in the state of Virginia, through the states of Ohio, Indiana, and Illinois, the lands of the United States may become more valuable,Chwr(133)”Google Scholar
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    Schodek, Daniel L. Landmarks in American Civil Engineering. 1 vols.: MIT Press, 1988, pages 35 to 38. Congress turned around again, and in 1822, passed a bill to appropriate federal money to repair the National Road, which Monroe vetoed on Constitutional grounds.Google Scholar
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    /3/1825, Act for Continuation of the National (Cumberland) Road, 4 St 128Google Scholar
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    /2/1829, Act for Continuation of the National (Cumberland) Road, 4 St 351Google Scholar
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    /3/1829, Act for Preservation of the National (Cumberland) Road, 4 St 351. The similarities to the end of federal interstate highway funding are striking, and became more so over the next ten years.Google Scholar
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    /31/1830, Act Appropriating for Internal Improvements (Cumberland) Road, 4 St 427Google Scholar
  119. 120.
    /2/1831, Act for Continuation of the National (Cumberland) Road, 4 St 351; 3/2/1833, Act Appropriating for Internal Improvements (Cumberland) Road, 4 St 648; 6/24/1834, Act Continuation & Transfer of the National (Cumberland) Road, 4 St 680.Google Scholar
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    /24/1834, Act Continuation & Transfer of the National (Cumberland) Road, 4 St 680.Google Scholar
  121. 122.
    /2/1836, Act Continuation & Transfer of the National (Cumberland) Road, 5 St 71.Google Scholar
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    /3/1837, Act Continuation & Transfer of the National (Cumberland) Road, 5 St 195.Google Scholar
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    /25/1838, Act Continuation & Transfer of the National (Cumberland) Road,5 St 228.Google Scholar
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    /11/1848, Act Surrendering Part of the National (Cumberland) Road to Indiana, 9 St 283; 1/20/1853, Act Surrendering Part of the National (Cumberland) Road to Ohio, 10 St 152; 5/9/1856, Act Surrendering Part of the National (Cumberland) Road to Illinois, 11 St 7.Google Scholar
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    Public Law 519, 83rd Congress, 1954.Google Scholar
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    These procurements are combined procurements, directly funded by the federal government, the equivalent of “Design-Build-Operate” contracts that fit squarely into Quadrant I. The government’s contractual commitment to lease the resulting facilities from the developer (“contractor”) is the functional equivalent of direct funding. The Lease Purchase delivery method is clearly not a Design-BuildFinance-Operate arrangement in Quadrant II, because the contractor’s investment in the project is not at risk. The contractor’s investment is 100% secured (if the project is properly estimated and completed) by the revenue stream associated with the government’s long term lease payments. Lease Purchase contracts were awarded through a competitive proposal process. Architectural and engineering design services were furnished to the developers (`contractors“) by private design firms hired by the developer.Google Scholar
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    See, Public Buildings Act of 1959 legislative history, 1959 U.S. Code Congressional and Administrative News, at page 2291 et seq.Google Scholar
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    /20/1893, 27 St 468. Architects might also be employed to assist federal employees prepare plans and specifications. Not less than five architects wereGoogle Scholar
  129. 129.
    The Public Building Act of 1959, 73 St 478, 9/9/1959.Google Scholar
  130. 130.
    Most of the 1959 Act remains effective.Google Scholar
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    The Public Building Act of 1959, 73 St 478, 9/9/1959, at §13 (1). Other exclusions are listed in the act, though less significant for purposes here.Google Scholar
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    The prospectus was to contain a brief description of the proposed building, the location of the project, and an estimate of maximum cost. Congress was clearly exploring alternative project delivery methods in the 1959 Act. Unwilling to delegate real control over federal building construction to the GSA, the 1959 Act required that each and every building constructed by the GSA be approved by separate resolutions of both the House and Senate Committees on Public Works “[i]n order to insure the equitable distribution of public buildings throughout the United States”. Congress has had difficulty settling upon a stable procurement policy for public buildings. Once the decision has been made by Congress to commit a specific amount of federal resources to directly fund large infrastructure programs such as the Interstate Highway System, or state and local waste water treatment plants, or mass transit system extensions, Congress repeatedly find itself in the position of being unable, in the end, to find enough money to fill all national needs. The number, size, and cost of projects within the program quickly outstrips the committed federal funds. The Interstate Highway System, the EPA Construction Grants Program, the Urban Mass Transit Agency program, and Housing and Urban Development programs all “ran” out of appropriated funds. The result is a never-ending competition among states, districts, and regions to influence Congress, the Executive, and regulatory agencies as to the allocation of insufficient federal resources among too many projects. The Public Building Act of 1959 is just one example. Congress was unable to define the circumstances under which it would approve particular public buildings, leaving the GSA to develop plans and prospectuses for too many buildings to be funded by too few federal dollars. The procurement process included an unwieldy, political step that guaranteed delays in project delivery, while Committees of the Congress evaluated which proposed projects would produce “equitable distributions of public buildings.” Congress’ belief that only it could construct an “equitable distribution” of federal buildings raises, rather than answers the same questions that Jackson dealt so forcefully with in the Maysville veto. Is an “equitable distribution” of federal spending a strategic goal worthy of the national government.Google Scholar
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    See, the legislative history to the Public Buildings Amendments of 1972. 1972 U.S. Code Congressional and Administrative News, at page 2370 et seq.Google Scholar
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    Testimony of the Administrator, described at 1972 U.S. Code Congressional and Administrative News, at page 2372.Google Scholar
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    St 219, Public Buildings Amendments of 1972, 6/16/1972.Google Scholar
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    U.S. Code Congressional and Administrative News, at pages 2374 and 23 75. required to be invited to compete. Congress did not dictate the basis upon which a selection was to be made.Google Scholar
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    William Barclay Parsons was yet to serve the Rapid Transit Commission as Chief Engineer for the New York subway. Edwin S. Webster, of Stone and Webster, was yet to work on designing and constructing the Keokuk dam. See, infra, for more about Parsons and Webster, the founders of Parsons Brinckerhoff and Stone & Webster.Google Scholar
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    /11/1916, Act for Federal Aid to State Hwy. Depts. for Rural Post Roads, 39 St 355.Google Scholar
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    A 1921 amendment to the Federal Aid Act required surveys, plans, specifications, and estimates to the Secretary before federal review of requests for funding. This amendment, in effect, guaranteed a segmented process in Quadrant IV, since completed design was a required step in the federal approval process. These plans and specifications had to be prepared before the project was approved. In addition, half the costs were paid by the government. As the volume of design work rose, an increasing percentage was performed by outside designers.Google Scholar
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    This model was extended incrementally by a series of federal statutes. Advance approvals of complete plans and specifications were required by the Federal Water Power Commission [for private or public development of water power, water storage, and navigation improvements]. 6/10/1920, Federal Water Power Act, 41 St 1063. After 1926, such advanced approvals of complete plans and specifications were required by the Secretary of the Treasury [for publicly funded federal buildings in the District of Columbia]. 5/25/1926, Public Buildings Act, 44 St 630.Google Scholar
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    U.S. 132 (1918). In Spearin, a unanimous Court, speaking through Justice Brandeis, found an implied warranty that runs with the delivery of a set of plans and specifications by the government to a construction contractor. The Spearin decision has been followed in thousands of cases where the CLIENT furnishes design documents (developed itself or by an agent) to a construction contractor. [Additional Citations]Google Scholar
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    /25/1926, Public Buildings Act, 44 St 630. Also in 1926, three weeks before the enactment of the Public Buildings Act, Congress passed the Foreign Service Buildings Act. 5/7/1926, Foreign Service Buildings Act, 1926, 44 St 403. The Act gave the Secretary of State the authority to build and remodel facilities in foreign countries for the use of the government, including the option but not the obligation, to contract for special architectural and technical services. The Foreign Service Buildings Act of 1926 put a cap on architectural and engineering fees of 5% of the cost of construction.Google Scholar
  143. 144.
    Armed services were defined to include the Army, the Navy, the Air Force, the Coast Guard, and the National Advisory Committee for Aeronautics (forerunner to NASA).Google Scholar
  144. 145.
    The Armed Services Procurement Act of 1947, 62 St 21, 2/19/1948. The Act also announced that the policy of the United States was to set aside a “fair portion” of the total purchases and contracts for supplies and services for “small business concerns.” See, §2.(b).Google Scholar
  145. 146.
    The Federal Property and Administrative Services Act of 1949, 63 St 377, 6/30/1949.Google Scholar
  146. 147.
    Ibid., at §3.(a). The same requirements appear at §303(a) of the FPASA.Google Scholar
  147. 148.
    Ibid., at §3.(b). The same requirements appear at §303(b) of the FPASA. The legislative history underlying the ASPA indicates that the Senate Armed Services Committee was aware of highly competitive conditions in the construction industry, which would tend to keep prices low for armed services construction. See, U.S. Code Congressional Service, 80th Congress, 2nd Session, 1948, at page 1063.Google Scholar
  148. 149.
    Ibid., at §4.(a) and (b). Professional engineering and architectural fees were capped at 6% of the estimated cost of construction. The same requirements appear at §304 (a) and (b) of the FPASA.Google Scholar
  149. 150.
    Ibid., at §§ 102 and 103.Google Scholar
  150. 151.
    The legislative history underlying FPASA expressly confirms Congress’ intent to use identical structure and language to describe procurement procedures in both ASPA and FPASA. U.S. Code Congressional Service, 81st Congress, 1st Session, 1949, at page 1495. Congress was obviously interested in promoting full and free competition in 1949, an outward expression of policy that continues today. It did not, however, specifically define how agencies should provide this “competition” in the procurement system. For example, there was no statutory requirement that competition for the construction portion of projects be based on price alone. There was no statutory requirement for price competition only among general contractors proposing to build a particular piece of infrastructure. There was no statutory requirement that competition only occur after a single design had been produced by an architect or engineer hired by the government.Google Scholar
  151. 152.
    Named for former Congressman Jack Brooks of Texas.Google Scholar
  152. 153.
    St 1278 The Brooks Architect-Engineers Act, 10/27/1972 codified into the U.S. Code at 40 U.S.C. §§542 to 544. The legislative history of the Brooks Act state that the procedures described in the act merely insure the continuation of 30 years of Government practice for obtaining architects and engineers based upon qualifications first and through negotiation. 1972 U.S. Code Congressional and Administrative News, at pages 4767 to 4775. The Act requires all agencies of the federal government to public announce all requirements for architectural and engineering services, and to negotiate contracts for these services first on the basis of demonstrated competence and qualifications, and second, at fair and reasonable prices. 40 U.S.C. §§542Google Scholar
  153. 154.
    The 6% limitation is retained.Google Scholar
  154. 155.
    In the event the government cannot reach agreement on a fair price, the highest ranked firm is removed from the competition and negotiations are opened with the second ranked firm in an effort to reach a fair price. In the event a fair price is still not agreed upon, the agency turns to the third ranked firm. If a “fair” price still cannot be negotiated with the third ranked firm, a new competition is announced, and the process begins again.Google Scholar
  155. 156.
    See, 1972 U.S. Code Congressional and Administrative News, at page 4767. Prior to the 1972 Brooks Act, the federal government could have solicited proposals to “design, construct, finance, maintain and operate” specific infrastructure projects, based upon schematic documents only. There was no legislative requirement that complete plans and specifications be prepared for projects as the first step prior to a price competition for construction services. Prior to 1972, each of Hong Kong’s well-known DBFO (“BOT”) tunnel projects -- the Central Harbor Tunnel, the Eastern Harbor Crossing, the Western Harbor Crossing, and the Tate’s Cairn Tunnel -- could have been procured in the United States through a proposal process similar to that used in Hong Kong. See, Chapter 5, infra.Google Scholar
  156. 157.
    These methods -- Design-Build, Design-Build-Operate, Design-BuildFinance-Operate -- are well known in the private sector. They are extensively used overseas in the public sector.Google Scholar
  157. 158.
    Section 36.103 accomplishes this result with two [unusually] short paragraphs: 36.103 Methods of Contracting. (a) Contracting officers shall acquire construction using sealed bid proceduresChwr(133) except that sealed bidding need not be used for construction contracts to be performed outside the United States, its possessions, or Puerto Rico. (b) Contracting officers shall acquire architect-engineer services by negotiation and select sources in accordance with applicable law [namely, the Brooks Act, described above].Google Scholar
  158. 159.
    See FAR, Section 36.207. A short primer on references to the FAR may be helpful. The entire FAR is found in title 48 of the Code of Federal Regulations, at Chapter One. Individual agency supplements to the regulation are also contained in title 48 of the CFR, at chapters 2 through 28. Part 36 of the FAR contains all government wide procurement regulations directed specifically at public construction. To find whether DOD has any supplements to the government-wide regulations relating to construction, one would look at 48 CFR Chapter 2 (DOD’s supplement to the FAR) at Part 236. The DOE supplement to the FAR is contained in Chapter 9 of 48 CFR. To find DOE’s supplements to government wide construction regulations, one would look at 48 CFR Part 936. Because there are twenty-eight supplements to the FAR, to determine the regulations applicable to any particular contract, one has to check the government wide regulation, at 48 CFR Chapter 1, Part 36, and Part 36 in the appropriate agency supplement. Generally, the agency supplements do not represent significant differences from the FAR.Google Scholar
  159. 160.
    CFR ¶36.501 through 36.521. See 48 CFR Part 52.36 and 53.36 for the actual text of clauses and contract forms required for use on federal construction projects in the United States.Google Scholar
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    CFR ¶36.6. This Subpart also define the contractual relationship between the government and its designers. 48 CFR ¶36.608 makes the A/E responsible to the government for the professional quality, technical accuracy, and coordination of all services required under their contracts. Section 36.609, which lists other clauses to be included in design contracts, including a requirement that all designers be registered engineers or licenses architects, until the project is outside the United States, or located in a jurisdiction where there are no licensing requirements.Google Scholar
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    For example, see: Walker Holderness and Butler (Eds.), State-by-State Guide to Architect,Engineer, and Contractor Licensing, 1999, Aspen Law & Business, A Division of Aspen Publishers, Inc., A Wolters Kluwer Company.Google Scholar
  162. 163.
    Published by the Sections of Public Contract Law and the Urban State and Local Government Law, 1980, American Bar Association, Washington, D.C.Google Scholar
  163. 164.
    A major effort is underway to update the Code, including the addition of design-build, design-build-operate, and design-build-finance-operate delivery methods for infrastructure facilities and projects was completed in early 2000.Google Scholar
  164. 165.
    Congress was granted the following Powers in Article I, Section 8, all critical to the development of an infrastructure base: to lay and collect Taxes, Duties, Imposts, and Excises; To Borrow Money on the Credit of the United States; To Regulate Commerce with foreign Nations and among the several States, and with the Indian Tribes; To Fix the Standard of Weights and Measures; To Establish Post Offices and Post Roads; To promote the Progress of Science and useful Arts, by securing for limited Times to... Inventors the exclusive Right to their... Discoveries.Google Scholar
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    St 51, 7/13/1787, Northwest Territory Ordinance of 1787. The “Ordinance” adopted a number of “principles” that would be repeated many times over as the number of states grew from thirteen (13) in 1787 to thirty-three (33) in 1860, and forty-eight (48) by 1933.Google Scholar
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    The first major effort at settlement west of the Appalachian barrier came in March 10, 1775, when Daniel Boone commenced blazing the trail from Fo rt Chissell in the Shenandoah Valley, Virginia, through the Cumberland Gap and into Kentucky. Boone had been hired to blaze this trail by a land company that had purchased the land between the Ohio, Cumberland, and Kentucky River from the Cherokees. MacGill, Caroline E., et al, History of Transportation in the United States, 1917, Balthasar Henry Meyer, Series Editor, Published by Carnegie Institution of Washington, Washington, D.C., at pages 7, 8, 10. The road was intended to allow purchasers of the company’s land to reach it more conveniently. Although not improved for wagon traffic until 1795, the Wilderness road made it much easier for settlers to reach the Ohio River valley. By 1790, the population of Kentucky was nearly 75,000, more than 90% of who had traveled the Wilderness road.Google Scholar
  167. 168.
    The logic of the Northwest Ordinance remains with us today, in the form of the Interstate Highway System. Congress has kept the “highways” open, while the private sector has supplied the vehicles.Google Scholar
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    St 232, 2/20/1792, Act to Establish Post-Office & Post Roads within the U. S. The initial statute was followed by a number of extensions to the post road system,projects. throughout the years between 1880 and 1860. See, for example: 1 St 354, 5/8/1794; 1 St 419, 2/25/1795; 4/23/1800.Google Scholar
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    Now known as U.S. Route 1. Postage fee revenues were to be split between the successful bidder along a particular route and the United States. Congress picked the initial post roads, and subsequent extensions, based upon the traveling condition of the road and the postage fees proposed to be charged along the route. The practical effect was to subsidize local development of roads, bridges, ferries, taverns, and lodging along post road routes. For areas not yet served by post roads, the system offered the prospect of such subsidies to those who could clear and establish viable new routes for the delivery of the mails. With these incentives, the postal system expanded rapidly, which led to the establishment of the “Post Office of the United States” as an executive agency in 1799. 1 St 733, 3/2/1799, Act Establishing the Post Office of the United States. This statute added a number of features to the procurement system that are still in use today. Congress expanded the advertisements required before bids to carry the mail could be received, and required that all proposals received for such contracts would be published in newspapers of wide circulation. The act also precluded postal employees from receiving fees or perquisites, indicating an early concern with organizational conflicts of interest. Uniform postage rates were set by the act, based upon distance mailed and the weight of the letters sent. The act also provided the fines of $100 per offense for postmasters charging more than these rates, and provided for the debarment of such postmaster from any office or appointment by the United States government.Google Scholar
  170. 171.
    St 80, 7/2/1836, Act to Change the Organization of the Post Office; 5 St 271, 7/7/1838, Act to Further Alter and Establish Post Roads and RR Post Routes.Google Scholar
  171. 172.
    U.S. Constitution, Article I, Section 8, subparagraph 6.Google Scholar
  172. 173.
    In 1819, Congress authorized the Post Office to conduct a competition to hire steamboats to carry the mails between Louisville and New Orleans over four year terms. Rates for carrying the mail were not to exceed the rates charged on post roads. 3 St 496, 3/2/1819, Act for Steamboat Postal Service from New Orleans to Louisville. The act indirectly subsidized steamboat construction and operation on the Ohio and Mississippi by guaranteeing income streams to successful competitors for the franchise. Congress then extended this same indirect funding strategy to the development and operation of American steamships by providing for long term mail contracts to deliver mail to Europe, to other American ports, to South America, and to Asia. Long-term postal contracts provided steady income streams that private sector firms could use to obtain private financing for building, operating and maintaining steamships.Google Scholar
  173. 174.
    See, Appendix A for more details.Google Scholar
  174. 175.
    See, Chapter 5, infra.Google Scholar
  175. 176.
    See, Chapter 4, infra., which describes a number of recent American DBFOGoogle Scholar
  176. 177.
    The Washington Bridge Company, authorizing construction of a bridge over the Potomac. 2 St 457, 2/5/1808, Act Authorizing the Erection of Bridge Over the Potomac. The Washington and Alexandria Turnpike Company, 2 St 485, 4/21/1808. Georgetown and Alexandria Turnpike Road, 2 St 539, 3/3/1809. The President, Directors and Company of the Columbia Turnpike Roads, 2 St 570, 4/20/1810. The Alexandria and Leesburg Turnpike Company, 3 St 5, 7/13/1813. The Georgetown and Leesburg Turnpike Company, 3 St 12, 7/13/1813. The Columbia Turnpike Road Company, 3 St 391, 3/3/1817. The Rockville and Washington Turnpike Road Company, 3 St 482, 2/15/1819.Google Scholar
  177. 178.
    A tiny percentage of these franchises are listed here: 7/25/1866, Authority to Build Bridges as Post Roads, 14 St 244, including bridges across the Mississippi at Quincy, Illinois, Hannibal, MO, Prairie du Chien (Wis. to Iowa), and at Keokuk; across the Missouri at Kansas City; and across the Mississippi at St. Louis; 3/21/1868, Authority to Build Bridges at Lacrosse, WI as Post Road, 15 St 37; 4/1/1872, Act Authorizing Bridge Over the Mississippi at Clinton, Iowa, 17 St 44, (This statute contains a particularly good procurement plan, since outline requirements for the bridge are established before any company is identified for the franchise. Congress describes navigation requirements, spans, pier separation, and authorizes toll collections. All railroad companies are given equal right to pass over the bridge in exchange for reasonable compensation. This act was later applied to all bridges over the Mississippi, by separate act of Congress, at 6/4/1872, 17 St 215.) Other examples include, 5/25/1872, Act Authorizing Bridge Over Mississippi at Fort Madison, Iowa, 17 St 160; 6/4/1872, Act Authorizing Bridge Over Missouri R. at Nebraska City, 17 St 222; 6/4/1872, Act Authorizing Bridge Over Missouri R. at Brownville, NE, 17 St 223; 6/10/1872, Act Authorizing Bridge Over Mississippi at Red Wing, MN, 17 St 379; 12/17/1872, Act to Authorize Bridges Over the Ohio and Requirements Therefore, 17 St 398; 3/3/1873, Act Authorizing Bridge Over Mississippi at Saint Louis, MO, 17 St 616.Google Scholar
  178. 179.
    A small number of the acts of Congress authorizing grants of land to states in aid of state sponsored franchises for the construction of roads and roadway bridges are described here. Each follows the pattern set forth in the first example. 3/3/1863; Act Granting Land for Construction of Military Road from Fort Wilkins, Copper Harbor, Michigan to Fort Howard, Green Bay, Wisconsin, 12 St 797, which provided a land grant of three alternate sections on each side of a ROW in Michigan and Wisconsin to aid the State in the construction of a military road for the federal government. The granted land was to be sold by the state legislatures solely in support of the construction of the road. Outline specifications provided for the road are set forth in the statute, including drains and ditches, a road surface not less than 40 feet wide, maximum graded area not less than 16 feet wide, with bridges and grading to permit use of the road as a wagon road in all seasons of the year; 6/20/1864, Act Granting Land for Construction of Wagon Roads in Michigan, 13 St 140; 6/25/1864, Act Granting Land for Construction of Military and Postal Road from Wausau to Lake Superior, 13 St 183; 7/5/1866, Act Granting Land to Oregon for Construction of Military Road from Albany, Oregon to the eastern boundary of the Territory, 14 StGoogle Scholar
  179. 179.
    ; 2/25/1867, Act Granting Land to Oregon for Construction of Military Road from Dalles City, on the Columbia River to Fort Boise on the Snake River, 14 St 409.Google Scholar
  180. 180.
    One example that was famous at the time is the Cincinnati Bridge (now known as The John A. Roebling Bridge), which crosses the Ohio between Covington, Ky., and Cincinnati, Ohio. Designed by John A. Roebling, the bridge was the largest in the world when opened, with a river span of 1057 feet and an overall length of 2252 feet. The bridge was a private franchised project developed by Amos Shinkle, a Cincinnati coal dealer. After a series of starts and stops between 1845 and 1855, and after Roebling’s bridge over Niagara Falls was successfully completed and tested, Roebling was hired to design and superintend construction. A Kentucky statute had previously chartered the Covington and Cincinnati Bridge Company, as did Ohio. Roebling developed his innovative traveler system was transporting cables over the tops of his towers at this site. The Civil War interrupted work, which was completed by Roebling’s son, Washington, upon his return from the Civil War. Schodek, supra, at 115; McCullough, The Great Bridge, at pages 68 to 70.Google Scholar
  181. 181.
    In 1836, Congress authorized the Shenandoah Bridge Company to erect a bridge across the river Shenandoah on federal lands at or near the town of Harper’s Ferry, and to connect the bridge by a sufficient road or passageway between the existing road on the east side of the river and the main street of Harper’s Ferry. 5 St 63, 7/1/1836, Act Authorizing Shenandoah Bridge Company at Harper’s Ferry. The company was authorized to erect a toll house adjacent to the bridge on federal lands. The actual site of the bridge was to be submitted in advance to the Secretary of War for approval.Google Scholar
  182. 182.
    For example, see, 7/5/1884, Act Authorizing Dam Across Mississippi River at Saint Cloud, MN, 23 St 154. In 1871, an omnibus act was passed by Congress standardizing the terms under which franchised bridge construction would be conducted over the Ohio River. 12/17/1872, Act to Authorize Bridges Over the Ohio and Requirements Therefore, 17 St 398. The river was divided into two segments, that upstream of the Cincinnati (the Roebling) suspension bridge and that downstream from the bridge. Clearances, lighting requirements, post and telegraph rights and routes were standardized in each of these two segments.Google Scholar
  183. 183.
    /23/1906, Act to Regulate Bridge Construction over Navigable Waters, 34 St 84 (terms include construction start within one year and completion within three years, access to bridge by competing railroads for reasonable fees, tolls for persons and other vehicles, no obstruction to navigation, and lights on structures); 6/21/1906, General Act Regulating Dams Across Navigable Waters, 34 St 386. The act regulating dam construction was modified in 1910. 6/23/1910, Omnibus Dam Construction Act, 36 St 593. Restates the requirements for dams across navigate waters, first enacted at 34 St 386. The advance approval of the Sec. of War and Chief of Engineers is required for all projects, and locks and suitable approaches may be required to be constructed as a condition of permitting dam construction. Congress may revoke a franchise to construct a dam when required for public use, but compensation must be paid to the franchisee of the “reasonable value of the works,” as determined by mutual agreement or in Circuit Court. In any event, authority to operate the dam terminates at the end of a period not to exceed 50 years from the date of the original approval of the project. Franchisees have one year to start construction and three years to finish.Google Scholar
  184. 184.
    These areas were almost always federally owned land (in the District of Columbia, in the Territories of the United States, or on federal land owned in the several States). In addition to federally controlled land, Track 2 was routinely used for infrastructure on the navigable waters of the United States, a federal power expressly assigned to Congress in Article I, Section 8, of the Constitution.Google Scholar
  185. 185.
    In the territory of Hawaii, Congress turned to Quadrant II franchising to arrange for the quick installation of gas, electric light, power, telephone, railroad, and street railway service. 3/28/1916, Hawaii Infrastructure Franchise Acts, 39 St 38; 39 St 57; 39 St 229; 39 St 231; 39 St 232; 39 St 246. These acts authorized the Territory to franchise gas, electric light, power, telephone, railroad, and street railway companies.Google Scholar
  186. 186.
    The Illinois legislature remained interested in the project, and on February 10, 1849, incorporated the Great Western Railway Company and awarded it a 200 foot right of way from Cairo to Galena across state lands. The charter to the Great Western also awarded the company any rights the state might receive in the future in support of such a railroad from the federal government. The Great Western was required to spend at least $200,000 per year until the railroad was completed. Before work commenced, Senator Douglas arranged for the charter to be voluntarily suspended while another attempt was made to obtain a federal grant for the complete Cairo to Galena to Chicago routes.Google Scholar
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    MacGill, Caroline E., et al, History of Transportation in the United States, 1917, Balthasar Henry Meyer, Series Editor, Published by Carnegie Institution of Washington, Washington, D.C., at pages 513 to 547.Google Scholar
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    /20/1850, Act Granting Land In Support of A RR from Chicago to Mobile, 9 St 466. The act granted a 100 foot right of way on each side of the railroad, plus a checkerboard pattern of alternate sections of federal land six miles on each side of the proposed right of way to the states of Illinois, Mississippi, and Alabama to construct the road from Chicago to Mobile. Land was granted to the states on the condition that the road be completed within ten (10) years. If it was not completed, (a) all unsold lands would revert to the federal government, and (b) the states would pay the preemption price of $2.50 per acre for all lands already sold by the states. The act also doubled the minimum sales price for retained federal lands along the right of way. Congress was again speculating that the railroad project would cause the land to more than double in value. Approximately three and one half million (3,500,000) acres of land were included in the grant. Free passage was guaranteed for federal employees, goods, and troops.Google Scholar
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    See, also, Stover, John F., History of the Illinois Central Railroad. Edited by General Editor Thomas B. Brewer, Railroads of America. New York: Macmillan Publishing Co., Inc., 1975, pages 15 to 57.Google Scholar
  190. 190.
    Prior to commencing work, the figure of 7% was negotiated to fill in the blank in Rantoul’s offer.Google Scholar
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    Stover, John F., History of the Illinois Central Railroad. Edited by General Editor Thomas B. Brewer, Railroads of America. New York: Macmillan Publishing Co., Inc., 1975, at page 30.Google Scholar
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    Bruce, R. “Reforming the Railroads.” Infrastructure Finance, 27–30. (1996); Goodrich, C. Government Promotion of American Canals and Railroads, 1800–1890, Columbia University Press, New York, New York. (1960); Macavoy, P. W. The Economic Effects of Regulation: The Trunk-Line Railroad Cartels and the Interstate Commerce Commission Before 1900, The M.I.T. Press, Cambridge, Massachusetts (1965); MacGill, Caroline E., et al, History of Transportation in the United States, 1917, Balthasar Henry Meyer, Series Editor, Published by Carnegie Institution of Washington, Washington, D.C.; Mercer, L. M. Railroads and Land Grant Policy: A Study in Government Intervention, Academic Press, New York. (1982); Stover, J. F. History of the Illinois Central Railroad, Macmillan Publishing Co., Inc., New York. (1975).Google Scholar
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    Stover, John F., History of the Illinois Central Railroad. Edited by General Editor Thomas B. Brewer, Railroads of America. New York: Macmillan Publishing Co., Inc., 1975, at page 56.Google Scholar
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    David McCullough, The Great Bridge, 1972, A Touchstone Book, Simon & Schuster, New York. Daniel L. Schodek, Landmarks in American Civil Engineering, 1987, MIT Press, The Massachusetts Institute of Technology, Cambridge, MA. As described below, the undisclosed ownership of William “Boss” Tweed and a number of his associates, when discovered upon the “fall” of Tweed in 1872, caused the legislature to require the cities of Brooklyn and New York, in May, 1875, to buy out all private shareholders in the New York Bridge Company, creating a publicly owned company to complete the bridge. At the time of the take-over, however, the Brooklyn tower had been completed and the New York tower was nearly completed. The risk that the bridge could not be constructed was over at that point. Hence, the classification of the project as Quadrant II.Google Scholar
  195. 195.
    After a lengthy period of discussion and maneuvering, the New York Legislature voted a charter to the New York Bridge Company on April 16, 1867 to design, construct, maintain, and operate the bridge shown in Roebling’s sketches. The charter provided that the Company was to complete the bridge in approximately three and one half years, that is, by January 1, 1870. New York Laws, April 16, 1867, Chapter 399.Google Scholar
  196. 196.
    /3/1869, Act to Establish a Bridge From Brooklyn to New York City, 15 St 336. Congress, in typical fashion, required the Company, prior to starting construction, to submit to the Secretary of War a plan of the bridge, with a detailed map of the river for one mile above and below the proposed site, so that the Secretary could verify that the bridge, once erected, would not “obstruct, impair, or adversely effect the navigation of the river.”Google Scholar
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    The $5,000,000 capitalization was chosen based upon a “revised estimate” presented to the legislature about which Roebling was not consulted, and did not agree. McCullough, David. The Great Bridge. 1 vols. New York: Simon and Schuster, 1972, at pages 119 et seq.Google Scholar
  198. 198.
    McCullough, David. The Great Bridge. 1 vols. New York: Simon and Schuster, 1972, at 131. Although there was substantial dispute at the time, it appears that 1680 of the 5000 shares of voting stock plus $55,000 in cash was paid by someone to Boss Tweed in return for arranging for New York City to contribute its cash subscription to non-voting stock. McCullough concludes that the “someone” who made this payment to Boss Tweed was the general contractor for the project. This same contractor held another 1600 shares in the Bridge Company. Combined, Tweed and the general contractor held almost two-thirds of the voting stock.Google Scholar
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    McCullough, David. The Great Bridge. 1 vols. New York: Simon and Schuster, 1972, at pages 90 to 95.Google Scholar
  200. 200.
    McCullough, David. The Great Bridge. 1 vols. New York: Simon and Schuster, 1972. Separate contracts were competitively awarded by the Company to Webb & Bell, a New York marine company, to build the Brooklyn and New York caissons in October, 1869 and October, 1870, respectively. Work proceeded with difficulty on the caisson foundations because of the depths of the excavation below the level of the East River. Caisson’s disease was as yet an unsolved mystery, and several workers died.Google Scholar
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    Demonstrating a uniquely poor sense of judgment about when conflicts of interest might adversely affect progress on the bridge, the Board of Trustees voted, on September 7, 1876, the following resolution, at the instance of Board Member Abram Hewitt, a future Mayor of the City, but then a U.S. Congressman running for reelection in 1876.“RESOLVED,that bids from any firm or company in which any officer or engineer of the Bridge has an interest will not be received or considered; nor will the successful bidder be allowed to sublet any part of the contract to any such person or company.”Hewitt was a protégé of then New York Governor Tilden, who was running for President in the 1876 election. Hewitt was also a wire supplier himself and a potential bidder. McCullough, David. The Great Bridge. 1 vols. New York: Simon and Schuster, 1972, at page 374.Google Scholar
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    In his private papers, Roebling noted that Hewitt held a mortgage on Haigh’s wireworks and had made an arrangement not to foreclose so long as Haigh turned over 10% of what Haigh made from the bridge contract. McCullough, David. The Great Bridge, at page 396. During Roebling’s supervision of the spinning of the wire supplied by Haigh, Roebling discovered and proved in July 1878 that Haigh had attempted to bribe the wire inspectors, had substituted inferior steel for the crucible steel he had bid, and had arranged for rejected wire to be shipped to the construction site with inspection tags from a small quantity of good wire that was repeatedly offered for inspection. McCullough, David. The Great Bridge, at pages 443 to 447, 451, 470. Roebling’s comment was short and pithy: “An engineer who has not been educated as a spy or detective is no match for a rascal.” He estimated that Haigh had made over $300,000 by cheating his suppliers and the owner. Roebling’s solution was to require Haigh to supply additional “good wire” for the cables, at his own expense. Later that same year, the contract to Haigh was quietly terminated by the Board, and John A. Roebling’s Sons award the balance of the contract for wire.Google Scholar
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    Hood, Clifton. 722 Miles: The Building of the Subways and How They Transformed New York. New York: Simon & Schuster, 1993, at page 26. Hewitt was still in the iron business, in addition to his job as Mayor. The Subway project is another early example of a Design-Build-Operate franchise in Quadrant I.Google Scholar
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    New York franchises for transportation facilities were governed by the Husted Act of 1875. Hood, supra, at page 50–51. Under the Act, the mayor of New York City could appoint a five man Rapid Transit Commission which would have to power to lay out routes; specify the type of power to be used, and assign the franchise to a private operator who would build, equip, and operate the facility. In effect, the Husted Act prohibited municipal governments from owning its own rail systems; quite a different perspective than the prevailing view today. Google Scholar
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    Hewitt was thinking strategically. He claimed that construction of the rapid transit system would “confirm [New York’s] imperial destiny as the greatest city in the world,” and that the system would be “as important as the Erie Canal had been when it was completed in 1825.” Hood, supra, at page 26.Google Scholar
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    With its surging population in lower Manhattan, and with large open areas on the Upper West Side, in Harlem, and in Washington Heights, Hewitt believed the City needed cheap, fast, transportation between these open areas and lower Manhattan in order to protect the City’s economic future. Hewitt believed that building a subway would greatly expand the city’s tax base through new home and industrial construction. This, in turn, would provide tax revenues to fund improvements to wharves, docks, shipping channels, and city streets to maintain the City’s supremacy over rival seaports.Google Scholar
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    Many metro regions face the same questions Hewitt faced in the late 1800’s, although the conclusions are undoubtedly different than those drawn by the City of New York in the 1890’s. For example, what are the characteristics of Boston and the surrounding region that create (or could create) competitive advantage for business and residents. Once identified, can infrastructure development assist in preserving or extending these advantages? If so, how can the government use a “dual track” procurement strategy to arrange, either itself or in cooperation with industry, to deliver infrastructure that is aligned with a broader economic strategy?Google Scholar
  208. 208.
    The act provided for government investment in the proposed subway and gave control of rapid transit planning to the New York Chamber of Commerce through a Rapid Transit Commission (the “RTC”). A November, 1894 referendum by New York City voters approved of the Act of 1894 by a margin, 132,647 to 42,916. Hood, supra, at page 66.Google Scholar
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    Land speculators who had purchased land along previously planned routes for the system complained bitterly, and the RTC failed to obtain the consent of fifty percent of value of assessed land along the new route, which was one means of obtaining local approval of the route, as required in the 1894 act. Hood, supra, at pages 66 through 70. The RTC then failed to obtain approval for the new route by a second means provided in the 1894 act. Although it succeeded in obtaining the approval of a Citizen Review Panel, Justice Charles H. Van Brunt, of the New York Appellate Division, refused to confirm the plan by coming to his own conclusion that the system would cost more than $50,000,000. The RTC went back to the drawing boards, scaled down the system still further and repeated the Citizen Review Panel process and approval by the Court.Google Scholar
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    The RTC’s decision to introduce “competition” for Belmont’s IRT one year after it awarded a 50 year franchise through competitive proposals was a strategic error. Introducing “competition” against its own franchisee was a procurement strategy entirely at odds with the original franchise strategy. Creating a public utility commission to regulate fares, as was done in New York City in 1907, destroyed any opportunity to implement a franchise procurement strategy in Quadrant II. Switching procurement strategies in mid-stream has been a recurring problem throughout the 20th century. Not only do major changes in procurement strategy result in cost and time inefficiencies, But they send a very clear signal to the private sector - that government is confused or uncertain about what it wants and how it should get it.Google Scholar
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    An Army engineer’s survey of the rapids in 1836, conducted by then Lt. Robert E. Lee, reported the vast amount of water power available from the rapids to the War Department. The river had carved a narrow channel, with unusually high walls, through hard blue limestone, an ideal base for a dam. Glaciers had blocked the original course of the Mississippi further to the west, creating the cut known as the Des Moines Rapids.Google Scholar
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    In 1856, over the President’s veto, $200,000 was specifically appropriated to improve the Des Moines Rapids, under the superintendence of the Secretary of War. 8/16/1856, Act to Improve the Des Moines Rapids in the Mississippi R., 11 St 51. In 1871, $341,000 was appropriated to expand the locks and canal at the rapids. 1/18/1871, Act Appropriating $341,000 for Des Moines Rapids, 16 St 399. In the Rivers and Harbor Improvement Act of 1874, $400,000 of the $5,000,000 appropriation was earmarked for the Des Moines Rapids improvements. 6/23/1874, Act to Improve Rivers and Harbors, 18 St 237.Google Scholar
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    In 1878, the Edison Electric Light Company was formed, opening its Pearl Street power plant in New York City. Carruth, Gorton, ed. The Encyclopedia of American Facts and Dates. 9th Edition ed. New York, New York: HarperCollins Publishers, 1993, at page 325. Edison quickly began to commercialize his invention by franchising a number of plants across the nation for the installation and use of his innovative K-type dynamo, which could power machinery, paper mills, streetcars, and lighting systems.Google Scholar
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    Much of the information describing the Appleton project was obtained through the generous help of Ann Larson, Curator of the historic house museum at Friends of Hearthstone, Inc., in Appleton, Wisconsin. Ms. Larson’s assistance led to several important sources, summarized above. See, also, Schodek, Daniel L. Landmarks in American Civil Engineering. 1 vols.: MIT Press, 1988, at pages 318 to 323. This project was organized by H.J. Rogers, president of both the Appleton Paper and Pulp Company and the Appleton Gas Light Company. Rogers obtained an exclusive right to light Appleton with the Edison electric lamp, arrange financial backing, and founded the Appleton Edison Electric Light Company. The Edison Company K-type dynamo was installed in an existing paper mill, turned by the mill’s existing water turbine. The dynamo powered a number of factories and homes in the city, and in 1886, powered the nation’s first electric streetcar.Google Scholar
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    /8/1901, Franchise for Wing Dam at Keokuk on Mississippi, 31 St 764. The act required that the project not interfere with navigation over the Des Moines Rapids, that plans be submitted to the Secretary of War for prior review and approval, and that construction commence within three years (amended to four by subsequent act, See 33 St. 56) and be complete within six (amended to seven by subsequent act, See 33 St. 56). The wing dam approach proved to be too expensive for the amount of power generated. The economics did not yet work.Google Scholar
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    Thirty-percent (30%) of the power to be generated by the dam was sold, in advance of construction, to supply the St. Louis area with electricity.Google Scholar
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    Boston was an indirect beneficiary of the Keokuk project. Stone & Webster Engineering Corporation went on to become one of the premier engineering firms in the world. Stone & Webster has been applying and extending its knowledge and expertise in power generation ever since.Google Scholar
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    The Mississippi River Power Company sold the entire plant to the Union Electric Company in the 1920’s. Union Electric still operates the plant, which continues to provide power throughout the region.Google Scholar
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    For example, in 1869, Cornelius Vanderbilt financed the construction and operation of Grand Central [Station] Depot in New York. The roof covering the train-shed, an immense vault of glass and iron, created the largest interior space in the country. McCullough, The Great Bridge, supra, at page 83.Google Scholar
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Copyright information

© Springer Science+Business Media New York 2000

Authors and Affiliations

  • John B. Miller
    • 1
  1. 1.Massachusetts Institute of TechnologyCambridgeUSA

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