There's been a lot of early union opposition,
labor union opposition to P3s because of the term privatization but
actually that couldn't be further from the truth.
P3s generate union jobs by these assets being advanced through the P3 model,
profits quicker and more efficiently than under the traditional approach.
So the union issue of, well this is going to cost us jobs, it actually doesn't.
It generates tons of construction jobs, a lot of sub-contracting so
again it's not multinational companies coming in and taking up all the jobs.
A large portion of the P3 design, build scope and
the support scope under the O&M are sourced locally and regionally.
As a matter of fact, we're required to do so by our public client,
we're happy for that.
We want to make sure that the community completely benefits from the asset
that's being created.
Interestingly also, one of the largest investors in
P3 projects around the world are actually union pension funds.
So in a way it's using your retirement dollars if you're a union member
to generate projects that are hiring the next generation of union workers.
And in some cases, when there is a brown field component to the P3 along with
a green field, the brown field component includes employees of the state or
the authority that can go now to work for
the private partner when the entire project is packaged as a P3 and
there has been a number of examples where that's happened very, very successfully.
The media is a little unfamiliar with P3s as well, so
there takes a little bit of education, you know, you hear the term Lexus Lanes and
why are they charging tolls at that rate, at market rates.
The media often times thinks of the private investors as foreign
investors who are only here to squeeze profit out of the assets and
the whole idea of doing a public-private partnership isn't
quite on the full radar screen of our media friends and colleagues.
So, a lot of education and effort is required there because again these
are complex endevours, they involve perhaps companies that are unfamiliar,
at least at the top level, a lot of times it's all local companies below.
But it's not, it's a very, it can be a little bit controversial,
a little bit political and
it's an easy headline if you're the media to talk about a P3 in a particular way.
So I think one of the myths is that we have a difficult time
breaking through on the benefits of a P3 or what
a P3 is all about because it is such a new and somewhat complex construct there.
And you have other issues related to the fact that you have,
you would call Wall Street investing in these projects.
So you have debt and equity coming in from the investor community or
the equity community and that always raises suspicions and
perhaps that's deserved in some cases.
But ultimately, I think what you will find in all the P3s that have been done
successfully in the US that that has not been an issue.
That this is considered a major investment in a community where a long
term approach is being taken, where we are absolutely reliant on
the excellent performance of the asset in order to generate our return and
we're not there to take advantage of anyone.
We're not there as a private investor or a developer or
contractor to do anything other than deliver a high quality long term life
cycle approach to an asset that can benefit the full community.
So the idea is that there have been a lot of detractors of the P3 model and
that's acknowledged but I think overall, what I'm trying to argue through
today's presentation is that these myths are largely that.
They're not really based on best practices or
full fact and full view of the overall value proposition of the P3s.
So, the pros outweigh the cons.
The pros are that, the cons are that you have slightly higher financing
cost to the risk transfer, tougher more complex procurement process.
All of a P3 procurement basically happens up front, so
that when financial close is reached, construction and design and
engineering begin and the operations and maintenance is already under process.
And so, once the contacts are all signed and
everything is locked, you move immediately into the delivery phase.
There's no, well we'll get your bid and we'll get the bids of four others,
we'll rip them open and we'll get the low price and then we'll negotiate for
a year and a half.
Before you can proceed, we got to go through a design process and so on.
In a P3, it's fully baked if you will.
The solution is baked, it's selected, it's financed, it's ready to go.
And once the financial close is agreed, work begins.
Sometimes there's even an early works agreement that project can get underway
from a design and construction standpoint even before financial close.
So there are some negatives if you will but I think that they outweigh,
the positives outweigh the negatives.
So you have lower life cycle costs, you have an earlier project realization,
you have on time, on budget guarantee.
Typically, the executions are done,
the project is done in a way that is more efficient and faster than traditionally.
You have a guaranteed service level in every incentive for
the private partner to perform and you can spread the costs over time,
and that's another valuable aspect of the P3s.
