Every week the media covers collaborative ventures between city, county or state government and private industry. Public Private Partnerships (P3s) are quickly becoming the norm – and for good reason. Government has no money to build roads, repair bridges, manage new projects, construct and repair facilities, or purchase new technology. Public officials are short on funding everywhere and there are few options to find capital outside the private sector.
At an Enlightened Speakers Series event in Austin, two experts in public private partnerships presented their outlook. Mary Scott Nabers, a former Texas railroad commissioner, now runs Strategic Partnerships, a government affairs, business development, and procurement consulting firm. She has written a book, “Collaboration Nation: How Public-Private Partnerships are Revolutionizing the Business of Government.” Jim Broaddus formerly handled major project planning and budgeting for the Chief of Naval Operations in the Pentagon, then served as the director of the office of facilities planning and construction for the University of Texas System. He now runs Broaddus & Associates, one of the leading providers of facilities program management, consulting and planning services in the United States.
“We are living in historic times,” said Mary Scott Nabers. Because of the state of the economy, private companies are being called upon to handle such tasks as operating toll roads, creating websites, managing technology services, and building health care and public safety facilities.
“Public-private partnerships, whether you like them or not, are the only option we see on the horizon now, so we must do everything we can to make them successful,” Nabers said.
Broaddus told of his experience of first being involved in a P3. His company was asked to provide oversight for the Texas A & M Health Science Center in Round Rock. Coincidentally, his company was also working on a similar building in Bryan-College Station.
“When I started looking at the contrasts between the two, I thought the one in Round Rock went a lot faster,” he said. “It was built more cost effectively. I said to myself, ‘All this talk about bringing private sector innovation and process into the equation, there must be something to it.’”
He cited some other major projects, such as student housing, multi-family housing and a parking garage on land adjacent to San Antonio College. “Ultimately they will build an academic complex, and it’s all been built with private money through the San Antonio College District,” he said.
At Texas A & M again, a public-private partnership was created to transform a 3,500 acre tract of land for a bio-defense facility. Broaddus said that project will involve both public and private uses.
Texas Senate Bill 1048 Opens the Door to Opportunities
P3s gained impetus during the last legislative session with the passing of Senate Bill 1048 – the Public Private Facilities Infrastructure bill. That bill provided improved opportunities for the use of Public-Private Partnerships at the state, county, city and school district levels. “It’s a very good bill,” said Broaddus. “It gives structure and encouragement to an area that was previously ill-defined.” Broaddus noted that the law is focused not on the big transportation mega-projects, but smaller projects such as education and infrastructure.
One of the interesting parts of S.B. 1048 is that it allows for unsolicited projects, as well as solicited projects, said Broaddus. So a private partner would do well to develop a strategy for pursuing P3s. Then, make contact with the entity that has a need.
Nabers calls it a “go to market strategy.” Figure out what you have to offer, and then learn what public entity needs it. “Draw up a tactical plan for both sides,” she said. “It’s a strategy just like you do your business strategy, or your marketing.”
P3 Projects Are Diverse
P3s cover a wide variety of projects. Some infrastructure and facilities projects currently in the works include:
But infrastructure doesn’t tell the whole story. Often, P3s consist of “softer” projects:
In addition, P3s are found in every state. Companies from outside Texas are bidding on Texas-based projects, and Nabers urged Texas companies to find projects elsewhere.
An important component of successful P3s is a thorough financial analysis, Nabers added. “P3s live or die on one thing – either they can make the financial case or they can’t,” she noted.
Nabers suggested the executive summary of any proposal is key. “What you always want to do on your proposals is put your value proposition and your one overlying message in the executive summary,” she said. Members of the evaluating committee might each concentrate on different aspects of the proposal, but they will all see the executive summary.
Broaddus emphasized that any public-private partnership must consider value for money, or the costs of a facility for the total life cycle of that facility. “We look at the construction cost, the immediate capital costs of the project, but seldom do we go past that,” he said. “What you look at with value for money is the entire capital cost, the operations cost, the utility cost, and the periodic refurbishment cost – all of that must be considered.”
Typically, he said, that’s something the public sector doesn’t do very well.
“If you take away anything from my piece of this, it’s that public owners need to be educated in this and if they listen, possibilities will bloom and blossom,” Broaddus said.
Of course, politics will always be involved in a P3. Knowing this, the best thing a private entity can have is a political champion for the project, said Nabers. “Look at what John Sharp (Chancellor of the Texas A&M System) is doing at A&M,” she said. “He’s championing all of the outsourcing and privatization in P3s and he’s doing it for financial reasons. He’s bringing the parties together by giving benefit to both sides.”
But politics brings challenges. Nabers said there are five things that can kill a P3.
How to Kill a P3
First, poor communication. Nabers said public officials will need to be more open about the procurement process. “They need to be saying, ‘We’re not going to tell you how to do it, but understand what the end result needs to be and come talk to us,’” she said. “Poor communication will kill a deal every time.”
Second, a contract that is too general. “We urge our public sector friends to use someone like Jim Broaddus to get involved who understands how to bring these two cultures together and make it work,” Nabers said.
Third, not enough stakeholder buy-in. “In the public sector, there are so many stakeholders,” she noted. “There are never one or two making a decision – there are a great deal of stakeholders and everyone of them has to have buy in.”
Fourth, lack of total oversight by the public sector entity all the way through the process. “They can’t just walk away,” Nabers said.
Fifth, too little professional respect or trust between the parties. “It’s just like a marriage,” she said. “It can go on the rocks real quick if there’s not good communication and respect. It’s the same with a P3.”
A Successful P3
On the flip side, she said there are five things in every successful P3: trust, professional respect, a commitment to total success, stakeholder buy-in from the beginning and political acceptance and political support.
“The politicians will kill it if it starts to go bad,” Nabers said. “If you get them involved early, they will stay involved and help make it a success.”
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