ASPIRE is a quarterly magazine published by PCI in cooperation with the associations of the National Concrete Bridge Council. The editorial content focuses on the latest technology and key issues in the Concrete Bridge Industry.
Issue link: http://www.aspiremagazinebyengineers.com/i/297024
12 | ASPIRE , Spring 2012 Government owns asset; private sector designs, builds and operates. Cost and operational risks are transferred to private sector. Private Sector Owns-Operates Design-Build Finance-Operate-Maintain Design-Build Operate-Maintain Design-Build Government Owns-Operates Current P3 Model Private Sector Risks Private Sector Involvement Courtesy of The Canadian Council for Public-Private Partnerships P E R S P E C T I V E Project delivery methods have been in a state of flux for many years in the United States. Legislation for public- private partnerships (P3s), and for other alternative delivery systems, varies greatly from state to state. However, the demand for P3s is growing. P3s—A Natural Progression The recent push for more P3s, and for alternative delivery models in general, is due to the nation's dire need to repair and upgrade existing infrastructure, and to do so quickly, with limited public resources. The public sector has also begun to notice potential benefits of P3s, namely, the ability to transfer cost escalation risks, as well as those associated with operations and maintenance, to the private sector. T h e C a n a d i a n C o u n c i l f o r P u b l i c P r i v a t e P a r t n e r s h i p s s t a t e s t h a t , ". . . under the P3 approach, the public sector contracts with a single entity . . . Under the traditional procurement approach, the public sector must contract separately with each discipline. The efficiencies created through the P3 approach can yield significant savings for the public sector, both through a simplified management structure and by mitigating the risk of interface between disciplines." The private sector demand for P3s is also growing. Infrastructure provides diversification benefits for investors and is a solid investment over the long haul—transportation is a service that the public will always use. P3s are not necessarily a new model, but rather the next level of risk transfer to the private sector. Departments of transportation used to construct their own facilities. They soon figured out that private contractors did a better job at managing risk for things like equipment, labor productivity, unions, or even weather. About 25 years ago, a trend to shift design to the private sector began. At that point, the private sector was handling design and construction under separate contracts. A few years later, the notion of combining design and construction emerged as design-build, further reducing the public sector's risk of managing separate designers and constructors. Then, over the last 10 years in places like the United Kingdom, Australia, and Canada, came the P3 contract, under which design, construction, and financing—and in most cases operations and maintenance as well—are handled by the private sector. P3s Provide Risk Transfer Benefits to the Public Sector One of the main benefits of P3s for t h e p u b l i c s e c t o r, i n a d d i t i o n t o reduced construction, operations, and maintenance costs, is the ability to transfer the risks that come with managing multiple contracts to the private sector. P3s also enable owners to transfer the risks associated with long- term, life-cycle performance, operations, and maintenance. Tips for Designers and Contractors According to a recent P3 report by FMI, the industry's largest consulting, investment banking, and research firm, contractors should be very strategic about selecting projects, build expertise through strategic ventures, understand that concessionaires on these projects by Matt Girard and Christie DeLuca, Flatiron Construction Corp. A Contractor's Point of View Public-Private Partnerships: A Guide for Infrastructure Designers and Contractors Degree of private sector risk & involvement. Book_Spr12.indb 12 4/3/12 9:18 AM