Evolutionary adaptation appears to increase during periods of change and adversity. And so our construction industry appears to be providing greater examination of public-private partnerships, or P3s.
They're not truly new, but they aren't traditional, either.
P3s have become a hot topic at many seminars and conferences. I will be attending several conferences in the coming months highlighting this known, but perhaps previously limited model, including the DBIA (Design Build Institute of America) conference October 19-21 in Orlando.
DBIA’s Liberty Region will also host an entire conference devoted to Public Private Partnerships on November 1-3 in Atlantic City NJ.
Cash-strapped agencies at the local, state and federal level are embracing this formerly suspect delivery system for infrastructure such as highways, water and waste-water treatment, and even office buildings.
It’s not really that new a concept. My grandmother used to tell me about how she and her father modified a building with special raised floors for the U.S. Postal Service, which then leased the renovated area for fewer years than initially planned, resulting in a net loss for the private partner of this venture.
So, much of the concern of the parties is and should be about drafting the agreement to meet the reasonable expectations of each side.
As an engineer as well as an attorney, my primary focus is often on how these partners may best interact in an effective manner. Use of project management tools to duplicate (or subcontract to) the work of an accounting department is not the best means to provide the most cost effective design and delivery of the project.
You must carefully establish the goals for all three partners.
The public entity must be very clear what is desired, including an ultimate budget limit for not only construction but for yearly operations and decommissioning. The public entity should seriously consider hiring an architect or engineer to develop the performance specification.
The design professional entity must understand the ultimate budget is just that, the goal is to fully meet the performance specification with its own prescription specification, and that the cost of gold plated door knobs comes out of its pocket.
The constructor entity must understand that this is a partnership, including two very weak kneed, risk adverse partners. If the A/E partner is treated as an “at risk” subcontractor or if the public partner is treated as an “at risk” owner, the partnership will not thrive.
A three-way contract or agreement is difficult to devise. It is not enough to say A shall do X and B shall do Y and C shall do Z. It is important to understand A shall do X for B and only then B can and shall do Y for C. Side agreements between A and C are not acceptable and should not be permitted.
Subcontractors are not of A nor B nor C but are of the partnership. The obligations of the parties – at the named individual level – are required, as well as to whom such deliverables are due and may impact. We are building a CPM logic network – whether we meant to or not – and may as well use it to manage our project. The logic network of specified activities – and not budgeting and tracking of resources – will indicate where conflicts may occur and the need for management supervision.
Public-private partnering, like many other buzzwords of the past,has arrived. Other buzzwords of the past come to mind, such as fast-tracking. Have any forgotten the buildings that were half erected before it was discovered the foundations were under-designed?
Many project teams will understand the additional coordination required for P3. Others may focus upon how their involvement in this partnership is but one element of their individual parent’s enterprises. Yet others may focus upon minimizing individual entity costs or maximizing individual entity productivity. Perhaps such will thrive, but do expect some incredible stories of such partnerships going down in flames.
While we are on the topic of conventions, the early bird pricing deadline for our Construction CPM Conference is October 15th. See www.ConstructionCPM.com for more details.