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Getting on Board with P3: Case Studies
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Из курса от партнера Columbia University
Construction Finance
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Public - Private Partnerships
Karl Reichert introduces public and private partnerships.
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Ibrahim Odeh, Ph.D., MBAInstructor, Department of Civil Engineering and Engineering Mechanics, Columbia University
Director of Research and Founder, Global Leaders in Construction Management
I'm asking, we should get on board with the P3s, and here are some reasons why.
It's a growing method of project delivery in the US.
The synergies that I mentioned earlier,
bring great benefit to the overall turn key delivery of the project.
We, as tax payers, demand quality, accountability,
performance, responsibility when it comes to financing.
Where we want solutions.
And I think a P3 drives all of those aspects in a favorable way.
And therefore we are improving the overall view of government and
how it delivers its services of less perks, more as I mentioned earlier,
more towards citizens service delivery.
Leveraging, limited available resources to generate projects.
And it does move the economy.
Builders, designers, engineers, sub contractors, architects,
you name it, these P3s are generating a massive amount of volume.
Most of the projects are many years in length as I mentioned.
And that really moves the needle and it really gets the economy and
the infrastructure space moving.
Let me talk about a few case studies.
So I talked about how the P3 concept and
why an agency or an authority would go for a P3 as a way to deliver infrastructure.
Now, I want to show you how it's proven, how it is actually delivered?
And I'm going to use seven or eight examples.
And I would like you to pay attention to the diversity of client, the diversity
of sector, the diversity of how the project was financed and delivered.
And what were the drivers that caused the client to
choose the P3 as a way to procure.
So here is case study number one.
I was involved in this project when I worked for Skanska.
It's called the Elizabeth River Tunnels P3, and it's in Norfolk and
Portsmouth, Virginia.
And you can see here,
for ages it was the number one congested roadway, east of the Mississippi.
It was inhibiting growth in that area because traffic was so
bad and you have a naval base there, it's the largest naval area on the East Coast.
And you have weather issues as well there.
Often when a hurricane would come, you couldn't get people clear of the area.
So there were a number of drivers that Virginia was facing to solve
the problem of the congestion and
the aged condition of the existing tunnels, and the need for new capacity.
So you marry that with the inability to generate enough tax revenue or
go into debt to fund the project from start to finish.
And Virginia, I think, did a very wise thing.
They look at all of their projects, complex, large scale projects,
as a P3 first.
And if they qualify as a P3, they are procured as such.
If not, they'll go traditional route.
And Virginia is a leading state in its infrastructure investment and
it's largely because they utilize very regularly the P3 model.
So you can see the project is a network approach to a serious traffic
congestion evacuation route and of course, a strategic naval base area.
So, Virginia took the opportunity to deliver the project as a P3,
[COUGH] and here's how it broke down.
It was a $2.4 billion project with about $1.5 billion design build component.
You also, as the private partner, we took on deferred maintenance
of the existing tunnels and infrastructure there and around.
And as you can see, over $2 billion of long-term O&M costs will shift from
the balance sheet, if you will, of the commonwealth to the private partners
who invested in design build, and now are operating the facilities.
It also created over 700 jobs and 300 million of economic development locally.
And, of course, what's most important is the project actually lived up to
all of its obligations, is delivered on time and on budget.
The project is up and running now.
It's largely completed.
The toll facilities were installed early.
The upgrades to the existing tunnels were done in a very efficient and
effective way.
And traffic is flowing and traffic is improving in the area.
And you can see the total positive effect the project has had on the region.
I also wanted to layout how it was financed.
So what you can see is the brilliance of the Virginia officials who
decided to make this project, a full traffic risk P3 project.
Essentially, you have public funds of roughly $408
million levered into a $2.4 billion project.
Because you can see that there was debt of private activity bonds of 675 million.
There was a federal low interest loan of 422 million.
There was an equity contribution from Skanska and
its partner Macquarie at $272 million total.
There were toll revenues generated for the project,
to support the financing of the project.
And then you have the Commonwealth of Virginia advancing 400 million
to actually achieve in a very short time span,
within 6 years a $ 2.4 billion high priority project.
And so, I think, you see here that the idea of levering limited ability
to finance our fund with a P3, and you get a project that had been lingering for
a decade or two on the drawing board and now it's nearly completely delivered.
Here's another example of a project that I had some personal involvement with.
It's called the I-4 Ultimate project.
It's a managed lanes project in the heart of Orlando where all the resorts
are located and the hotels.
Here you have the Florida Department of Transportation deciding
that this corridor needed to be rebuilt to reflect the community and
the nature of commerce there.
To improve safety, to improve traffic congestion,
to improve environmental standards, to get traffic moving.
But in a way, that was fair and
balanced where you have general purpose lanes that remain free and
managed lanes where you can pay a toll and express your way through.
This would accommodate tourist and commerce but also local traffic.
And it's a very complex project with a lot of overpasses and interchanges.
But ultimately, the idea here was not that well,
we just want to build a new road and we want to toll it.
No, the drivers were more about, how do we boost the economy?
How do we improve life quality?
How do we make throughput and local traffic match up?
How do we show guests from around the world who come to our city,
that we mean business?
That we are here to serve you,
we want your stay to be as positive and enjoyable as it can be.
And it was personified if you will through the I-4 Managed Lanes P3 project.
It's under construction right now and
you can see it's also north of $3 billion in total project value.
And you can see that it again, it is a combination of financing.
In this case, Florida DOT chose to put in significant milestone payments
as part of the financing, so that less was required to be raised by equity and
debt on the market from the private partner.
And this, again, I think is because Florida wanted to have a project that,
it designed more so, it dictated more.
That more reflected its standards and
conditions in the community where the project was build.
And that's the way they choose to structure the P3.
But it's often running and you can see it's quite a project and
it was one competitively against world class teams.
And I think Florida DOT and
its private partnership are off to a really good start there.
Here is what I would call a social public private partnership project,
one of only two done in the US.
You heard me earlier talk about the social sector being hospitals,
schools, and governmental buildings largely.
And mostly and predominantly delivered in the UK and Europe.
Well, here's an example of the first one done in the US.
It's called the Governor George Deukmejian Courthouse.
We call it the Long Beach Courthouse in our sector, if you will.
And I highlight it because Acom was a design and engineer,
an architect for the project, but also because it was the first social P3 and
it solved a huge problem for Long Beach.
The Justice facilities in that jurisdiction were outdated and disparate.
And the judges were unhappy and the sheriffs were unhappy and
the jurors were unhappy.
The community didn't really enjoy going to the old facilities and
this was a consolidation and an upgrade done on time,
on budget as you can see here, using the private sector efficiencies and capital.
Mixing in commercial and retail so
now that when you come to the courthouse, it's full service.
You can dine there, you can do your dry cleaning, you can park.
And it is now more citizen and user-friendly, and
it is a reflection of the community there.
It's an icon now in Long Beach.
And so, again, here's an example where it's not a toll road, it's not a bridge or
a tunnel, it's actually a courthouse.
And we see several more of these coming.
And we're very hopeful that this sector opens up.
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