My posting of the Douglas/Sykes article, wherein I remarked on the three year negotiation period for the P3 at the Rialto water and wastewater system, sparked the following email exchange.
“You raise a good point re the 3-year negotiation period on the Rialto deal. The promise of P3s is that projects can get built quicker, cheaper and better. Once P3s become more common, the negotiation period should shorten. And if the folks at Rialto had gone a traditional, public-funding route – assuming it had the financial capacity to raise funds for the project – it may have been quicker from the time it was initially conceived until completion, but it would have cost the city more – a properly structured P3 deal should result in overall reduction in lifecycle costs by 15 to 30%. Clearly, there needs to be further development of P3s in CA and elsewhere in the US – the industry refers to this as “Americanizing” P3s – but P3s are needed here to address our aging infrastructure and the new infrastructure needed by the public.”
“Have you run across some studies on the savings over life-cycle costs that seem solid. They did a pretty well documented report on the Long Beach Courthouse, but reading through that report the "science" of it is pretty thin. When public entities outsource things like water and wastewater systems, some of the "savings," I assume, will be attributable to lower labor costs--non-union, no pensions--which raises larger issues. Same thing for privatizing jails, as the Reason Foundation suggests; and there you have the additional issues of do we want private corporations having control over such things as parole and health care in prisons?
I think it's important to get the metrics on this right, because if there truly is a 30% life cycle savings, public construction should make a wholesale shift towards PPP right now. No? But before we make such a wholesale change, we should be paying attention to the metrics and make sure they are right. I think a lot of the "savings" talk comes not from professors at Universities, but from companies who want to do these projects and their consultants.
We are concerned about contractors hiding pools of profit in hard bid or GMP projects. I think we can't begin to imagine the hidden pools of profit that can sneak into a 30 year P3 concession, and the ultimate cost differential for taxpayers.”
Today, at the annual meeting of the Western Region of the DBIA, I listened to Sandra Beck, an architect with the building program department at the University of California. They have significant experience with Design-Build at this point. One of the points she addressed was “the myth” that design-build is per se faster, better, and less expensive. She said “You get what you pay for” and that she views savings that can be achieved as a nuance.
The situation may be different for 30 year concessions. If awarding concessions for the design, construction, operation, and maintenance truly can achieve the large savings that some promise, we should confirm this ASAP and get on with making the change. However, my guess is that “Americanizing” of P3 will develop slowly.
Who will gather and keep the metrics?