Public-Private Partnerships (P3): Lessons Learned

Public-Private Partnerships (P3s) can be a valuable tool for advancing Utility Performance Management by helping utilities address infrastructure needs, manage risk, and access innovative financing and delivery models. Paul Barthel, an experienced project manager currently working on the Fargo Metro Flood Diversion Program, joined us for “Public Private Partnerships: Lessons Learned” on July 23. Barthel helped our members consider the mindset that it takes to approach and deliver projects differently, recognizing that P3 principles, ideas, and lessons shared can ultimately help and bolster other work utilities might do.  Regardless of whether you are considering P3’s or not, there were three pieces of sage advice that can help anyone manage projects of any size and type.

1. Focus first on what you want to accomplish versus how you want to build it.

2. The closer you are to a decision, the better a decision you will make.

3. Assign risk to the party most able to manage that risk.

Learning from Experience

Paul shared his experiences with Public Private Partnerships with the Fargo-Moorhead Metropolitan Area Flood Risk Management Project. The Fargo-Moorhead Metropolitan Area faced record flooding year after year, compounded by an exceptionally flat terrain that only exacerbated the problem. The team opted into a Public Private Partnership with the goal of a 100-year flood protection minimum and 500-year fightable protection in the cities of Fargo and Moorhead  utilizing a 25 mile levee and a 30-mile diversion ditch. Basically, with the Metroflood Diversion Authority as their client, the team took the diversion channel that had been divided up originally into 22 different reaches or pieces. This approach involved 22 different contracts which had a high risk of delay due to funding issues, contract overlap and lack of available contractors.The team developed a concept to utilize a public private partnership which allowed them to build the entire channel under a single contract, successfully find alternative funding and also ensure the project was properly operated and maintained. The P3 developer they chose—River Valley Alliance, an international conglomerate, is focused on designing, building, operating, maintaining, and financing the project, and they will be paid back over a 30-year term.

Key Project Takeaways

Barthel says an important question came into play when shifting to a P3: moving away from how you need something built and instead think critically about what you need the infrastructure to do. He says exploring and ultimately choosing the P3 shifted the mindset of some of the decision makers into looking more at the long-term benefits and requirements. Additionally, Barthel shares that their P3 allowed the developer to manage the greatest risks of cost escalation and schedule delay. The P3 also helped by creating a more balanced funding structure and reducing reliance on federal funding alone, so the local sponsors gained greater flexibility over project timing and decision-making while keeping leadership and accountability at the local level. “The closer you are to a decision, the better decision you will make,” Barthel says, “It’s important to keep it local!”

Public Private Partnership Benefits

Ultimately, Paul shared with us a few of the key benefits for those considering a Public Private Partnership include:

• Multi-generational payback for larger projects

• Options for multiple, long term alternative financing

• Design and delivery innovation

• Cost certainty through shared and alternative financing

• Performance guarantees and long-term warranties

• Possibility of securing Federal appropriations

• A shortened schedule- In Barthel’s project experience, deciding on a P3 took 10 years off of the schedule!

Additionally, Barthel described the capital maintenance, routine maintenance, land, vegetation, incident, and inventory management involved in a P3, which he considers to be another huge benefit.

For those considering Public Private Partnerships, Barthel offered the following advice:

1. Start early: Barthel encouraged a more holistic mindset for how to get projects done.

2. Develop long-term project champions: who is going to help you work through this? Where can you find experienced consultants, and how can you work to keep things local? Barthel shared that P3 is sometimes being treated as a buzz word, and finding confidants with real experience in the process is key.

3. Be flexible: Barthel pointed out that P3s are not a cookbook, and each has to be crafted to the project they are working on. Additionally, like all projects, they will not go as planned and will require flexibility.

As utilities consider P3s, Barthel encouraged members to engage resource agencies early, think bigger picture about financial models, and identify your ultimate/big picture goals. Barthel offered to connect with anyone interested in learning more, and you are always welcome to reach out to our Moonshot facilitation team. Please email preserve@moonshotmissions.org for any questions or a consultation!