...behind P3 was the lack of public funding for needed projects. We have now entered that mode,” says Pierson. “But it hasn’t really arrived in the U.S. yet. There seems to be more acronyms for public-private partnerships than projects.”
The financial crash of 2008 may have aided the P3 concept in the U.S. more than just squeezing public-agency funds. “In the past, equity investors usually wanted to go in and then get out in two or three years with a good return,” says Smith of Black & Veatch. Now, investors are more wary of quick flips; they are looking for long-term returns. “But that means they will need people with experience to go in and manage their investment,” Smith says.
Some owners are reluctant to test the P3 waters. “P3 on the state and local level is not as mature as it is in Canada and the U.K.,” says Heitz. “Too many owners are unsure of its impact.” He says Canada has shown great success with P3 in the building market, particularly with schools. “In Canada, school funding comes directly from the provincial level rather than locally, so a provincial policy favoring P3 doesn’t need local approval,” Heitz says.
For many design firms in the public infrastructure market, P3 opportunities will help, but they are not the whole answer. Siegel of Kleinfelder points out that it would take a huge amount of money to establish P3 funding for just a small percentage of projects for the public water and wastewater utilities and agencies. “The money just isn’t there to support the entire market,” Siegel says.
The strategy of shifting work to branch offices has become less effective. “Satellite offices are always on the brink,” says Wolff of Louis Berger. In good times, firms often would shuffle work off to branch offices with lower utilization rates to share the burden, he says. “But when there is no work to transfer, the branch offices can take a hit,” says Wolff.
Another concern is the unforeseen legal implications of new technology. “We are pretty free with handing out Blackberries in this industry,” says Siegel. “If you give people Blackberrys and expect them to answer your e-mails, it is possible they could be seen as being on call 24/7. That could get you into trouble under the wage-hour law,” he says.
Looking for a Road Map
The transportation market has held up throughout the downturn, but concerns continue. “There is reason for optimism in transportation because the public and the political leadership have awakened to the needs of infrastructure now more than at any time in 50 years,” says Pierson. However, just as the market was poised to take off, the recession hit, causing budgets to tighten, he notes. “The best way to stimulate the economy is to upgrade our infrastructure,” he says.
One major uncertainty is the fate of the transportation reauthorization bill. “There is a slim chance of reauthorization passing this year, but I wouldn’t count on it,” says Yarossi. “I think there is going to be a problem because there is no clear path to passage,” adds Siegel of Kleinfelder. He says Congress understands there is a need for increased funding, but there are too many other priorities standing in its way. “Last time, Congress got into the habit of passing extensions, and that may happen again,” says Siegel.
While many firms are looking to the public sector as a means of surviving the lack of private-sector work, not all is rosy. “Public agencies that rely on user fees to fund projects are in better shape,” says Kleinfelder’s Siegel. But those agencies that rely on general revenue for funds are a different story.
Siegel says tax-revenue shortfalls have caused major problems on the local and state levels, causing local governments to make hard decisions. “When a local government has to choose between cutting a bridge project and laying off public employees, you know the employees and unions will pack the hearings to fight the layoffs. How many people will show up to support the bridge?”
For some firms, the water and wastewater markets have generally held up. However, tax shortfalls and a weak economy have begun to take their toll. “Even the public utilities that rely on user fees for their capital programs are hurting because new connection fees are way down and industrial usage has fallen off,” says Smith of Black & Veatch. He estimates that spending by public utilities may be off by as much as 5% to 20%, depending on the locality.
But some firms see major potential in the water market. There are 100,000 levees in the U.S., and most not only are deteriorating but undersized, says Kamber of Arcadis. “We have a national dam safety program. It is time we...