Foreign firms' growing interest in U.S. design-build projects and public-private partnerships (P3s) may turn big contractors into "the pretty girl at the dance" but, in some cases, also might leave out smaller firms, industry experts recently cautioned in response to questions from officials of those very firms.
P3s are "picking up at a fast pace, with 33 states having P3 legislation," said James Merrill, managing director with Star America Capital Advisors. Merrill was a panelist on the subject at the annual meeting, held last month in San Diego, of the Construction Financial Management Association.
"We see U.S. contractors getting into the business," Merrill said at the audience-driven Q&A session. He warned, "A P3 doesn't turn a [bad] project into something viable." As an example of a risky P3, Merrill gave a hypothetical case of a toll-road project in which the expected revenues are based only on traffic volume.
Merrill noted that foreign firms typically eye alternative delivery projects of $500 million+ in the U.S. "They want the big, flashy projects," he said. But there are examples in Canada of smaller—$30-million design-build projects, for example—that, "if set up right, the [midsize] contractors are not cut off," added Jeff Parkhurst, principal with Epic, an insurance and bonding broker.
William Corn—project manager with Shimmick Construction, which is on a design-build team with Spanish firms on the $1-billion Gerald Desmond Bridge in Long Beach, Calif.—noted the synergy, saying, "[Spanish contractors'] technology is just as advanced, but business is done differently here. We take the lead on that part."
The potential of a big design-build project causing more specialization on smaller projects and cutting out the midsize contractors is a concern, Merrill said. When asked what resources those contractors had, he said, "You can call me."