Choosing the right partner is essential to reaping the benefits of a public-private partnership. This innovative delivery model, while gaining momentum in the vertical space in the US, has already delivered on its promise in countries like the UK, Australia and Canada.
In the heart of Public-private collaboration (P3) is the collaboration between a public entity and private sector companies, especially when building large and complex infrastructure projects. P3s have a lot to offer.
Jon Kindrachuk, Senior Project Manager at PCL Construction, is currently working on the Clackamas County Courthouse P3 project. “We anticipate that public entities are looking closely at the results of existing P3s before determining the most advantageous procurement method for their next project,” says Kindrachuk. For PCL and Kindrachuk, this presents an exciting opportunity to champion a model that promises mutual rewards and supports PCL’s vision.
Why consider a P3?
Rather than fragmenting a project in the manner of traditional procurement, the public sector integrates all parts of a project into a single contract with a P3. This holistic approach brings together a diverse team including the capital developer, designer, design builder, lenders, maintenance and operations providers into a powerful consortium.
To truly appreciate the essence of P3s, it’s helpful to understand how they diverge from traditional design-bid-build (DBB) contracts. The advantages of P3s are highlighted in three main ways in DBB contracts:
1) Financing and risk allocation
- DBB: The public sector (usually a government entity) typically provides the financing for the project and retains most of the risk, such as cost overruns, construction delays, ongoing life-cycle costs, and maintenance issues.
- Q3: Private entities provide equity and debt financing, and the transfer of risk from the public to the private sector is greater throughout the life of the concession. This means that the private sector takes responsibility for risks such as design errors, construction costs and schedules, life cycle, energy use and performance from the perspective of facility availability. lation completed. Risk distribution contributes to better cost and schedule management with financial incentives for the private entity to avoid delays and overruns.
2) Involvement in the project life cycle:
- DBB: Each phase of the project is contracted to different parties (design, construction and maintenance). Once the project is built, the public entity usually assumes responsibility for operation and maintenance.
- P3: a single private entity, a unified consortium of the parties normally involved in each phase of the project, is contractually and fiscally responsible for multiple stages of the project, from design to construction and even through operation and project maintenance. Participation can last several decades and often results in better project quality and sustainability, as the private entity is incentivized to minimize long-term operation and maintenance costs.
3) Innovation and efficiency:
- DBB: It follows a specific process where the design phase precedes the tendering of construction companies, who then build exactly what is designed. This sequence can limit the opportunities for innovation and cost efficiency that construction companies only address after the design is complete.
- Q3: It promotes a more integrated approach where design and construction are carried out by a single consortium. This can encourage greater innovation and efficiency, as the entities responsible for building and operating the facility can offer design adjustments based on their practical experience. The private sector is also motivated to deliver services more efficiently.
Choose the right partner
For clients considering a P3, Lee Clayton, senior vice president of global strategic initiatives, emphasizes the importance of partnering with a consortium with experience executing P3 projects tailored to the project’s market sector. The strength of each consortium member is paramount to a successful outcome.
With a legacy as the leading developer partner of $21 billion in P3 in North America and Australia, PCL specializes in vertical construction. From airports and courts to hospitals, PCL’s expertise spans multiple domains. Currently in the United States, teams are working on two unique P3 projects: the Clackamas County Courthouse in Oregon City and the Consolidated Rent-A-Car Facility at Los Angeles International Airport.
Clackamas County Circuit Courthouse
The 230 million dollars Clackamas County Courthouse is a six-story, 257,000-square-foot building with 16 rooms scheduled for completion in 2025. The project will seek LEED Gold certification.
The P3 contract model enabled Clackamas County to better achieve its goal of building an iconic and legacy project focused on value. The extra effort invested up front in verifying the technical, programming and operational requirements resulted in a better value product. The risk transfer allowed by the P3 contract model helped ensure that costs remained within the project agreement.
Clackamas Progress Partners includes Fengate Asset Management; PCL Investments Inc.; PCL Construction Services, Inc.; Honeywell; and the DLR group. The 30-year project agreement was structured as a design-build-part-finance-operate-maintain (DBFOM) P3.
The Clackamas County Circuit Court project was recognized as the Social Infrastructure Deal of the Year at the 2022 IJGlobal Awards Ceremony. The project marks the first time in Oregon history that a courthouse has been delivered through a P3 and the first successful closing of an availability payment P3 in Oregon. This type of P3 allows infrastructure that does not have an associated revenue stream (such as tolls) to be built with private financing.
Despite severe uncertainty in the construction and financial markets during the post-Covid era of rising interest rates and rising construction costs, it was one of the fastest P3 acquisitions ever in the States united The procurement process took only 11 months from the issuance of the Request for Qualifications (RFQ) to the selection of the winning bidder and an additional three months from selection to commercial and financial close.
“Clackamas County’s relentless commitment to closing the deal, even in the face of post-Covid challenges, is truly inspiring. Their vision and dedication highlight the transformative potential of this procurement method. By adopting the model P3, demonstrate their forward-thinking approach and dedication to innovative solutions. We applaud their leadership in making the P3 contract model the procurement method of choice, shaping a better future for infrastructure development,” says Deron Brown , president and COO of PCL Construction’s North American operations.
Consolidated car rental facility
Described by Clayton as a “perfect team sport,” a P3 is a true collaborative effort that works toward a common goal in which everyone wins. The pop-up delivery method offers many advantages; contributing to the success of customers and partners is one of PCL’s most rewarding partnerships. The Consolidated Rent-A-Car (ConRAC) The facility is a 28-year, $2 billion P3 DBFOM deal with LX ConRAC Partners (LAXCP) and combines more than a dozen independent car rental locations in the Los Angeles International Airport area in a single installation. With the completion of the facility, LAX will see a significant reduction in vehicle traffic and passengers waiting to board rental car shuttles on the airport curb with the elimination of 3,200 daily shuttle trips, as well as an improvement in land use and the reduction of carbon emissions.
The ConRAC has more than 18,000 spaces for rental vehicles, an 8,400 megawatt solar photovoltaic panel system and Quick Turn Around (QTA) facilities that allow car washing, fueling and light maintenance. At 6.3 million square feet, ConRAC is estimated to be the largest cast-in-situ concrete project of its kind and is the second largest concrete structure in the United States, behind only the Pentagon. In 2022, QTA’s facility received an Award of Excellence from the American Concrete Institute’s Southern California Chapter for Infrastructure, and the project recently achieved Leadership in Energy and Environmental Gold accreditation Design (LEED).
LAXCP includes Fengate Capital Management Ltd.; PCL Investments USA, LLC; PCL Construction Services, Inc.; PGAL, Inc.; AC Martin Partners; Johnson Controls, Inc.; and MVI Field Services, LLC.
Requiring more than two and a half million man hours, ConRAC will be completed in 2024 on time and on budget.
An experienced design and construction partner can be the key to unlocking the benefits of a public-private partnership. This alternative delivery method with the right equipment provides a high value benefit to municipalities and public agencies looking to fund capital improvement and community development projects.
