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Saturday, May 21, 2022

Public-Private Ventures May Build Up Infrastructure

To better understand the severity of America’s aging infrastructure, take a look at the issues California faced in February alone.

In Northern California, the Orville Dam crisis forced the evacuation of more than 180,000 residents amid fears that the emergency spillway could collapse. Then, in San Jose, a massive flood not only forced 14,000 people to evacuate the city, a damaged levee led to the temporary closure of the 101 freeway. Separately, Pfeiffer Canyon Bridge along Highway 1 is cracked and sunk, causing Pfeiffer Big Sur State Park to be cut off from the rest of the state.

Meanwhile, in Southern California, a 30-foot sinkhole swallowed two cars in Studio City, and a separate roadway collapse in San Bernardino County sent a fire truck crashing off the edge of the 15 freeway.

Improvements to roads, bridges, water systems, airports, and other infrastructure are much needed across the United States. While securing adequate funding to complete the necessary improvements might seem like a pipe dream, other nations have successfully adopted alternative financing methods that could also provide viable solutions in America.

Federal, state, and local governments throughout the United States could leverage private investments to finance, build, and operate numerous publicly owned assets within their respective jurisdictions. In fact, public-private partnerships – or P3s – have been a successful financing arrangement for numerous infrastructure projects around the world.

P3s are gaining traction in the United States. For instance, a $2.3 billion joint effort between Kentucky and Indiana was just completed in December. The project, which utilized a P3 arrangement to finance construction of one of its new bridges, was completed ahead of the original schedule and under budget.

Generally, cost and schedule certainty are among the primary benefits of implementing P3s as a procurement method for complex infrastructure projects. Another important benefit of such partnerships is the long-term view, as the private owner-builder of the asset – a bridge, for example – is incentivized to maintain the physical asset over the life of the contract, which is typically 30 years. Otherwise, if the asset crumbles or is defective, the owner doesn’t recoup its investment. This also shields the asset from the volatility of annual public works budgets being cut, which leads to deferred maintenance.

In Los Angeles, P3s are being used to truly transform Los Angeles International Airport. An automated people mover system, which will connect the airport’s central terminal area with a new consolidated rental car facility, is the centerpiece of a $14 billion modernization program. After evaluating several different delivery methods, airport officials determined P3s are best suited to deliver both the people mover and rental car facility.

Moving forward

Meanwhile, the Los Angeles County Metropolitan Transportation Authority has taken its approach to solving the region’s congestion woes a step further. The agency has established an Office of Extraordinary Innovation for the sole purpose of finding ways to improve mobility for people in the Southern California region. A major component of this effort involves executing P3s to accelerate the delivery of L.A.’s much needed transportation projects.

P3s are structured primarily for revenue-generating projects – such as toll roads, bridges, and public facilities such as consolidated rental car facilities at some of our nation’s airports. These are more complex projects and require an all-in solution.

As bridges buckle and roadways continue to congest, the magnitude of opportunity and challenge facing America’s large, established cities is ever apparent. But replacing and expanding infrastructure in growing cities is more challenging, more disruptive, and more expensive than ever before.

While we can continue to work harder, smarter, and to employ technology to identify ways to create efficiencies, this will not be enough. The infrastructure industry needs to increase the pace with which it embraces innovation. Similarly, federal, state, and local governments will need to be open-minded about using alternative methods of doing business.

The public needs to be educated as to the real condition of our nation’s infrastructure and the benefits and costs of bringing these assets to a condition where they serve their purpose in this modern age. This latter point really isn’t an option as the impacts to finances, productivity, quality of life, public health, and safety continue to climb.

Charles L. Harrington is chairman and chief executive of Parsons, a technology-driven engineering services firm.

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