Public-Private Partnerships and DBIA
Issue 1 of 2015
by Jim Whitaker
According to several industry sources, the pent-up demand for infrastructure in the U.S. is measured in hundreds of billions of dollars. Roads, bridges, schools, courthouses, jails, utility systems, the list goes on and on. Public-private partnership (P3) enabling legislation is beginning to take hold in many state houses and municipal governments where the capital project need far exceeds the budget’s ability to buy. On the federal level, the aging interstate highway system is an integral part of the nation’s economy and desperately needs repair and recurring maintenance. What is being done to solve this gigantic problem? Not enough.
With the increased use of P3s across the country to solve the nation’s need to rebuild, replace or expand its infrastructure, DBIA has an opportunity to position itself as a leading voice on design-build as it relates to P3s. As more and more entities across the country turn to this delivery and financing model, sometimes called finance, design, build, operate and maintain (F-DBOM), private sector finance leads the way. When an asset can be monetized, then the deal begins to make sense.
Design-build project delivery is inherent and embedded in the P3 model. Furthermore, design-build is fundamentally important to the P3 model’s success in that, according to industry data, design-build delivers cost and schedule certainty, innovation from an integrated designer and contractor, risk transference of the often complex design and construction process and better customer satisfaction.
So, whereas DBIA often has education and training opportunities tailored to those unfamiliar with Design-Build Done Right, these same education tools could provide great value to those teams on projects for the first time being delivered as a P3. The psychology is the same! Design-build best practices are very teachable. Every successful project has competent leadership, aligned interests of the parties, mutual trust and fair dealing, risks and responsibilities assigned to the parties best apt to accomplish the task and a collaborative, creative, sometimes explosive environment where the whole result is greater than the sum of the parts.
While every P3 project will have its own nuances pertaining to the specific transaction, most P3 project deliveries include: finance, design, construction, operations and maintenance and property disposal either by lease, sale or buyback. Generally speaking, P3 projects are larger in scale to accommodate financing and underwriting requirements along with the ability to produce a revenue stream over a long period of time, e.g. toll road, water use fees, availability payments for a courthouse, etc. Across the world, every other developed country is far ahead of the United States in the adoption of P3s as a project delivery mechanism.
P3s are not a project delivery panacea, however. There are challenges with P3 project delivery, especially the fractious politics within individual states and municipalities, vested stakeholders that are adverse to change, lack of consistency in adopting enabling legislation and a general misunderstanding of how a relatively sophisticated P3 transaction works. And we know public education is required for every project. Those that disregard the first word of P3 — public — do so at their own peril.
So, together, let’s solve the problem. Let’s renew, rebuild and build new infrastructure in the United States. Let’s create jobs. Let’s get back to that boot-strapping entrepreneurial genius that makes this country great. DBIA is uniquely positioned to be an integral component of that success.
Jim Whitaker, AIA, DBIA, NCARB, is a member of DBIA’s 2015 National Board of Directors, is Principal and Senior Vice President, Director of Government and Design-Build Services, HKS, Inc., and served as DBIA 2014 National Board chair.