Engineering Inc. - September/October 2007 - (Page 20) Y ou can lose money if you don’t crunch the numbers and manage a project effectively. Bartlett W. Patton kleinfelder Critical Steps to achieve PPP Success according to the National Council for PublicPrivate Partnerships, there are six critical components of any successful public-private partnership: “It comes down to a question of raising taxes or creating toll roads supported by private investment,” explains Little. Although the concept is nothing new—megaprojects from the Suez Canal to Australia’s Sydney Harbour Tunnel have used the PPP model for years—traffic woes and resistance to new taxes have kept many U.S. project planners from buying into the approach. Overcrowded roads and congestion cost the U.S. $12 billion annually, according to the Texas Transportation Institute’s 2005 Mobility Study. The number of urban areas with more than 20 hours in annual delay per peak traveler has risen from five in 1982 to 51 in 2003, the study says. In the early 1990s, Orange County, Calif., became one of the first government entities to embrace the PPP concept. For t here’s a great deal of profit and potential risk [in public-private partnerships]. Bill jordan PBs&j nearly 20 years, citizens, elected officials and private firms wrangled over a proposed 15-mile road from Newport Beach to San Juan Capistrano. In September 1993, officials broke ground on the San Joaquin Hills Toll Road. Six years later, the $1.1 billion toll road opened, allowing motorists to shave up to 45 minutes off their average trip through the area’s vast tangle of freeways, highways and side streets. Commuters willingly paid $4 a day to avoid traffic on neighboring roadways. Despite a recent increase to $5 per trip during peak hours, the road reportedly carries more than 85,000 motorists each day, up from 50,000 in 1997. “The project has been key in allowing the region to manage its growth,” states David Lowe, acting chief engineer for the Transportation Corridor Agencies, the group that oversees the road. “With the scarcity of state funding, the toll road concept allowed us to bring infrastructure dollars into Orange County to help us build these improvements.” The San Joaquin Hills Toll Road also helped pave the way for other projects, such as the Dulles Greenway, a privately owned 14-mile toll road that connects Washington Dulles International Airport in Virginia to neighboring Leesburg. Built for $350 million, the road features 124 lane miles and carries on average 57,445 vehicles per day. Additionally, transportation officials in Chicago made headlines in 2004 by leasing the Chicago Skyway to private investors for 99 years. Reportedly worth $1.83 billion, the city used much of the money to pay off its Skyway debt, address outstanding budget concerns and create a reserve fund. In 2006, Indiana leased its 157-mile toll road to a group of foreign investors for 75 years. The price: $3.85 billion. The U.S. Department of Transportation reports that PPPs can save 6 percent to 40 percent on the cost of construction and significantly limit the potential for cost overruns. Proponents of the concept say having one entity responsible for design, construction and operation drives efficiencies not possible with more traditional Political Leadership. a commitment must exist from “the top.” Public-Sector Involvement. It’s essential for the public sector to remain actively involved in the project. A Well Thought-Out Plan. all participants must know what to expect of the partnership beforehand. Moreover, a clearly defined method of dispute resolution must exist. A Dedicated Income Stream. although a private partner may provide the initial funding for capital improvements, there must be a means of repayment over the length of the partnership. Communications with Stakeholders. The exchange of information must extend beyond public officials and the private-sector partner to everyone affected by a partnership. Selecting the Right Partner. The lowest bid is not always the best choice for selecting a partner. It’s wise to look for a “best value” partner that can be trusted to maintain a long-term relationship. design-bid-build methods. PPPs can reduce the time it takes to build a project through innovative financing and project management. In some cases, transportation officials say, improved management processes trim the time to completion by months or even years. But formidable roadblocks remain, including laws, antiquated procurement practices and a general lack of understanding about how PPPs work. As Ray Messer, president and chairman of Houston-based Walter P. Moore and Associates, explains: “There also are questions about who is keeping an eye on public interests, who is going to maintain these projects and how the fee structures and profits will work. The question becomes, do PPPs provide extra money and improve the process? Or is it that public entities don’t have the political will to do what’s necessary to get the money required?” Not Without Controversy One of the most pressing concerns with PPPs is whether private-sector interests conflict with public-sector intentions. A private 20 ENGINEERING INC. sEptEmbER / oCtobER 2007
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