34
/ BUILDING DIALOGUE / DECEMBER 2015
P3s Can be Viable for Social Infrastructure
T
here has been a lot of discussion about
public-private partnerships (P3s) recently
in Colorado and for good reason. Colorado
leaders have positioned the state to be a leader in
this delivery model and is on its way to proving
that that this approach can be a viable choice for
vertical buildings (social infrastructure) in addi-
tion to transportation projects. P3s have been prov-
en to be highly successful in Canada, Australia and
Europe, and it is a matter of time before we see this
project approach become more prevalent in the U.S.
The most notable Colorado P3 project is the con-
struction of additional lanes along U.S. 36. In order
to allow for this project to move forward, the state
passed legislation that cleared the way for funding
to be applied, a barrier many other states can’t over-
come. The statute passed only allows this to be used
for transportation projects but, if proven successful,
legislation may be agreeable to expand the use of P3s
to other kinds of infrastructure projects. Additionally,
Colorado has moved on from the days of requiring
hard-bid delivery and is accustomed to design-build
and construction-manager-at-risk delivery models.
Finally, Colorado is a home rule state, so legislation is
not necessarily required for projects to move forward
if the debt is properly structured.
P3s often are incorrectly categorized, which is ev-
idenced by some recently released requests for pro-
posals. If a project has a public entity working to solve
a challenge and that entity involves a private entity,
say a developer, then it is a public-private partnership
right? According to the Performance Based Building
Coalition, it is more than that.
Think of it as design-build
on steroids. The structure has
an owner carrying an agree-
ment with a concessionaire;
this entity is at the center of the
project and pulls together the
design-build, financing and op-
erations/maintenance team. P3
projects typically encompass the
following characteristics:
• Currently greater than $100 mil-
lion in size
• The asset is owned by the public
entity for the entire project (the con-
cessionaire is a service provider)
• Based on a need (not want)
• Public entity partially funds the
project
• Income generating (parking garages,
toll roads and dormitories)
• Agreements that last for an average of
25 to 30 years before the asset is returned
to the public entity.
In order to expand this delivery mod-
el, there must be a local champion. Enter
Mike Cheroutes. Mike is the new direc-
tor of the Colorado Center for Infrastruc-
ture Investment (CC2i) and is leading the outreach
and education for this delivery method. When I
met with him, I asked what P3 stands for; he said,
“Persistence, Patience, and Prayer.” He is right as it
will take time for P3s to be a viable alternative, es-
pecially for smaller-scale projects, simply due to the
fact that, in a booming economy, financing is not the
challenge to getting projects completed assuming
voters will approve the project. Private-sector financ-
ing simply can’t match the public sector’s tax-exempt
status. According to Mike, “There has to be more of a
reason than costs to make a P3 the preferred delivery
method.” Think innovation, higher quality and speed
to market.
At this moment in time, we are only seeing a hand-
ful of P3 projects, which is understandable as only 10
states have passed legislation allowing them. The
projects are often very large scale, which led me to
ask Mike, where do you think the vertical opportu-
nities will present themselves? “DIA owns a lot of
land, has the proper structure to do P3 projects and
has recently finalized development hurdles with Ad-
ams County. I also anticipate the college campuses to
be part of the P3 market.” Will true P3s become the
standard delivery method? Time will tell as there are
many advantages to P3 projects that were not covered
in this article. But we anticipate that this model will
be proven to be another tool in the chest; it may end
up being a nail set and not the screwdriver we use
regularly.
\\
Paul Wember
President,
Wember
TRENDS
in P3s
‘DIA owns a lot of land,
has the proper structure
to do P3 projects and
has recently finalized
development hurdles
with Adams County.
I also anticipate the
college campuses to be
part of the P3 market.’
– Mike Cheroutes, Colorado Center for
Infrastructure Investment
