“Great Debate” panel, left to right: ARTBA Chairman Bob Alger, chairman of the board of The Lane Construction Corporation; panel moderator Sia Kusha of Plenary Group; Joe Wingerter, vice president project development at Kiewit; and Jim Ray, former senior adviser at the U.S. Department of Transportation.
By Mark Holan, editorial director, & John Schneidawind, vice president of public affairs, ARTBA
Shifting risk burden was a major discussion topic at ARTBA’s 31st Annual Public-Private Partnerships (P3s) in Transportation Conference. The “Great Debate” feature, a favorite plenary session of the three-day conference that always elicits provocative views from the participants, asked: “Are P3s Even Worth It?”
Discussion points included whether too much risk has shifted to builders from designers; to the private sector from the public; and whether there’s too much “cut and paste” contract language from one project to the next.
“We are at a crossroads” with P3s, said ARTBA Chairman Bob Alger, chairman of the board of The Lane Construction Corporation. He said that multi-billion dollar mega-projects “are out of control” when it comes to the risk placed on contractors.
Alger said designers went from unlimited liability five years ago to no liability in the latest projects. State DOTs and other public agencies that are new to P3s are enforcing 100 percent compliance with project specifications, rather than allowing some flexibility in the interest of completing the job in a timely and satisfactory fashion.
Joe Wingerter, vice president project development at Kiewit and incoming ARTBA P3 Division president, said “P3s have moved down the list” of preferred business opportunities from some contractors. “We talk about ‘public’ and ‘private,’ but ‘partnership’ is left out of the mix,” he said.
Like Alger, however, Wingerter said his firm will remain in the P3 market.
Jim Ray, a former senior advisor at the U.S. Department of Transportation (USDOT) and now an industry consultant, said market forces are dictating risk.
“The P3 market has evolved,” he said. “It is healthier than it was a decade ago. We are so much further along, geographically, and across asset classes.”
But policies and procedures at USDOT have not evolved as quickly as needed, and the same is true for the private sector consultancy industry.
“They are trying to replicate the last deal with cut and paste language, which is unacceptable. We owe it to owners and citizens to be more creative and agile. We are cutting and pasting what we did last time in order to move quickly and eke out a profit.”
In comments from the audience, Andy Fraiser of Ashurst, a leading legal advisor to parties on P3 projects, challenged some of these views, arguing that contractors have miscalculated risk, especially in their supply chain management. Fraiser participated in another plenary session: “(Don’t) Kill All the Lawyers… Untangling Risk Issues in P3 Projects,” which explored the issue with an all-star assemblage of legal minds, including Chuck Wall of Seyfarth Shaw; Fraiser; Simon Santiago of Nossaman; and Joe Seliga of Mayer Brown.
In a panel on the U.S. market opportunities in the P3 industry Canadian Council of Public Private Partnerships President and CEO Mark Romoff outlined why he believes our northern neighbor is a leader in P3 implementation worldwide.
“We’ve been fortunate that we’ve had strong, committed governments,” Romoff said. “They’re ‘all in.'” More specifically, Canada has:
- “Infrastructure agencies” throughout the provinces with government personnel who have “real expertise and approaches.”
- A strong legal framework for implementing P3 projects. “Contracts are enforceable,” Romoff said.
- Cooperative relationships between labor unions, government and industry. “Governments are more respectful of collective bargaining agreements,” he said.
Despite these strong points, Romoff concedes the Canadian P3 market has its own challenges. Among them is that the Canadian government itself “is downloading too much risk … putting too much money into these projects,” which can crowd out private investors.
As in America, Canada is also experiencing workforce recruitment and retention challenges.
But the P3 market is competitive in Canada, he said, exemplified by the attitude: “If you want to do a P3, get on with it,” Romoff said.