LAS VEGAS, Nov. 7 — Panelists at a Design-Build Conference & Expo 2019 presentation on public-private partnerships didn’t pull any punches about the risks involved with the delivery method that some industry heavyweights have become skeptical of.
“Sometimes when a [public-private partnership] project isn’t totally synched up and there’s not total harmony between the players, that can result in issues,” said Joe Wingerter, vice president of project development at Kiewit, adding that some of the expectations around P3s’ ability to deliver a better product more quickly have not yet been proven.
“I think so far the jury is out on whether the data supports that there’s a higher quality product in a P3 than in a traditional design-build project,” he said.
Negative reports about some P3 projects have “caused some hate and discontent along the way,” Wingerter said, due to cases where risks were carried by contractors in an unbalanced manner. Nevertheless, he said, in the right circumstances and with the right partners, P3s can have extraordinary results compared to other methods.
“Contractors have to have their eyes wide open about the risks and be aware of having a good fit with the team they’re working with,” he said. “When you get that all synched up and everybody’s aligned and the client’s open to innovative ideas focused on a performance-based outcome, then P3s can really be a tremendous professional experience and from a delivery standpoint can exceed the expectations of the asset over a long period of time.”
Kiewit has worked on many successful P3s in recent years, such as the $1.2 billion expansion of Interstate 70 in Colorado.
Even though several large contractors recently announced they are getting out of the P3 business, a steady group of firms will continue to keep them in their project arsenal, Wingerter told the audience at the conference run by the Design-Build Institute of America (DBIA). The association recently produced a position paper on the delivery method, saying it "supports P3s as a potentially effective and efficient method to help address our nation’s infrastructure financing and delivery challenges."
“They’re not for everyone and the challenges have caused certain firms to say that they’ll focus on other projects,” he said, "but that just comes down to a business decision.”
“Anything that goes wrong, it’s always blamed on the contractor.”
Darryl D. VanMeter
Georgia Department of Transportation
Johnson Controls' director of P3 business development, Caludio Andreetta, said that many of the most contentious P3 projects have been in the transportation sector, but in the vertical construction market in which he works most, P3s are successful. For any P3, he said, "there are higher risks but there are higher rewards."
Darryl D. VanMeter, assistant P3 division director at the Georgia Department of Transportation, attributed some of the botched infrastructure P3s to owners, who sometimes try to pass the buck when problems happen.
“Anything that goes wrong, it’s always blamed on the contractor,” he said.
Pros and cons
The panelists looked at the ways that P3s differ from traditional design-build projects as well as how they are similar. For starters, P3s have a much longer lifespan than traditional design-build projects, Andreetta pointed out.
“Generally, these are 35- to 40-year contracts that include the idea of ongoing operations,” he said, breaking down 40-year facility costs for a typical P3 this way:
- Planning, design and construction costs: 40%
- Operations and maintenance costs: 35%
- Energy costs: 15%
- Lifecycle costs: 10%
“This means that 60% of costs will be incurred after the construction of the building,” he said.
VanMeter, who has worked on many P3s for the Georgia DOT, noted that in his experience, the long-term nature of P3 projects puts more of an emphasis on quality and longevity.
“The design builder in a P3 has a contracted interest in the quality of the outcome for the building,” he said. “The natural tendency is that you’re going to get better quality built in than if you were just doing a design-build project.”
In addition, P3s have a much longer procurement process than traditional design-build, VanMeter said, at about 18 months on average compared to four to six months for design build.
All panelists agreed that P3s are more intense than typical design-build projects in terms of the need for collaboration, the level of risk and the amount of stakeholders involved. Even so, they said design-build practitioners are well suited for the challenges of P3s.
“One thing that’s very common on the two models is that you have an integrated team,” he said. “It’s drilled into you already if you work in design-build.”
For instance, Wingerter told the audience that as a design-builder in a P3 arrangement, he has to think like a subcontractor, not a GC, because he doesn’t report directly to the client.
It’s crucial for every P3 to have someone on the team who really knows and believes in the project delivery method, said Ruth McMorrow, executive vice president at Parsons Enterprises.
“Is there somebody there on the project who is a champion?” she asked. “You need that because there’s some people who are going to be averse to this type of project delivery method because it’s new and different.”