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Alternative Project Delivery Presented By: Aaron Toppston Aon Infrastructure Solutions. public-private partnerships ARE different from traditional infrastructure procurement. Design-Bid-Build Procurement. Public Private Partnership (DBFOM). Architect. Government.
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Alternative Project DeliveryPresented By:Aaron ToppstonAon Infrastructure Solutions
public-private partnerships ARE different from traditional infrastructure procurement Design-Bid-Build Procurement Public Private Partnership (DBFOM) Architect Government Financing, design, construction & operation of asset Building design Design request Debt Equity APD contract & routine payments Government Concessionaire Debt Contractor may contribute equity and act as concessionaire Construction contract & lump sum payment Construction and warranty DB Contractor O&M Contractor Contractor
public-private partnerships (p3) Come in Many Forms • Design Build Finance (DBF or ‘gap finance’) • Private sector engaged to design, build, and finance the construction of a project and the Authority takes over operations at substantial completion • Typically the Authority pays the private sector over a period of time after substantial completion (e.g. 3-5 years) through availability payments or a lump sum • Design Build Finance Maintain (DBFM) • Private sector engaged to design, build and finance the construction of a project and maintain the project for 30+ years after substantial completion • Typically the Authority pays the Concessionaire (equity) over the entire operating period (e.g. quarterly availability payments) OR the Concessionaire receives direct user fees from the project (e.g. tolls) • The contractor is paid during the course of construction by the Concessionaire • Design Build Finance Operate Maintain (DBFOM) • Similar to DBFM, but the private sector will operate & maintain the project
Both social and civil infrastructure can be procured as a public-private partnership • Civil projects (e.g. roads, bridges, mass transit) or social projects (e.g. courthouses, police & fire, government offices, student housing) can each be procured through P3 • To date, the major P3 projects in the Midwest have all been civil projects: • Ohio River Bridges East End, procured by the Indiana Finance Authority and won by a Consortium of Walsh/Vinci/Bilfinger & closed last December • Portsmouth Bypass, procured by the Ohio Department of Transportation (ongoing) • I-69 Phase 5, procured by the Indiana Finance Authority (ongoing) • Illiana Expressway (under evaluation)
Governments typically evaluate the use of Public Private Partnerships based on “value for money” Value for Money Example1 • P3s create value for money through the transfer of risk and innovations in delivery • For example, design & construction risk, maintenance quality, scheduling, etc. are transferred to the private sector • For example, Ohio River Bridges East End closed 23% below the Authority’s project estimate2 $115 $100 Ancillary Cost Retained Risk Financing Cost Base Cost Source: 1) Infrastructure Ontario (2007), “Assessing Value for Money; A Guide to Infrastructure Ontario’s Methodology” 2) http://www.forconstructionpros.com/news/10951041/construction-starts-on-east-end-crossing-of-ohio-river-bridges-project
Construction (and maintenance) work is typically contracted “UP” in p3 Government Paid by Government / Users Concessionaire Paid by Concessionaire DB Contractor O&M Contractor Paid by DBJV or O&M Sub 1 Sub 2 Sub 3
In a successful p3, Risks are transferred to the party best able to manage Capital Markets Concessionaire Public EntityAsset Owner Concession Agreement Design Build Joint Venture Insurance Markets
