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Infrastructure giant Ferrovial is no stranger to public-private partnerships.
Last September, Silvia Ruiz, the company’s global head of investor relations, told Construction Dive The P3s would become the “foundation” of the next phase of infrastructure development in the US
Alberto González, the head of business development at Cintra, the infrastructure development arm of Ferrovial, had more to share about how the contractor approaches when, where and why to position for a P3.
Here, Gonzalez talks to Construction Dive about his view of the US road and highway construction market, what boxes he checks for a P3 project, and how to keep a project stable in an uncertain time.
Editor’s Note: This interview has been edited for brevity and clarity.
Construction Immersion: What are you seeing for road and highway construction in the US right now?
ALBERTO GONZALEZ: The gap between needs and available funds continues to widen. It is difficult to deal with for various reasons: organization, population growth, inflation, especially in construction.
The pressures are greater than the relievers, and in an environment of increased fiscal responsibility, the availability of public funds has not been exhausted, but it is definitely not able to meet all needs.
I would expect to continue to see greater private sector involvement in development, at least of critical infrastructure.
We always say that P3s are not available or suitable for every project, but it is certainly a tool that needs to be in the toolbox when trying to increase the reach of public funds and trying to deal with the increasing demands on infrastructure, especially in transport and highways.
How do you determine if a P3 is appropriate for an infrastructure project?
P3s are more appropriate in projects where there is a certain level of complexity, where the private sector can bring ingenuity and more advanced technical solutions.
Alberto Gonzalez
Authorization granted by Cintra
The other thing is, in critical infrastructure, the ability to accelerate delivery. The way it works, we need to have all funds available on day one. Then it’s a question of how much can be run to complete the project, whereas in traditional delivery, projects are subject to the annual budget process. And how much money can the public sector allocate to a specific need or a specific region?
We continue to see traditional delivery projects being delayed, so I think projects that require greater accountability or have tighter deadlines are also the best candidates for P3.
In terms of, especially on highways, where there is a component of technical complexity and price management to make the product work at its best, I think that’s a good space for the private sector as well.
What is an example?
We typically look for urban areas where additional capacity is needed within the existing footprint. A city may continue to grow, but there are limited opportunities to build alternative corridors.
Most of our projects are express lanes or managed lanes or choice lanes, which is basically building tolling capacity within an existing corridor. The private sector brings a lot of value to this type of project. Obviously, we are looking at urban areas that are growing, we have long-term contracts and we have to recover our investment over a long period of time.
We prefer environments where we have economic prosperity and corridors that are a critical piece of the economic backbone of those cities or states, to make sure the traffic will be there for the next 30-50 years.
And then, if that is possible, political stability. We don’t want to be subject to the changing whims of politics, and maybe someone trying to make a discretionary decision when we’re only in the early stages of our project. Having a stable political environment is very important.
How does Cintra protect itself from these major outages?
The most important thing is to target critical pieces of infrastructure.
When it is an asset needed for the economic development of the region, this mitigates this potential risk significantly, because there is less willingness to mess with a critical piece of infrastructure.
Those projects that may not be as important can be more volatile.
