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MAY 2019 • Vol. 33, No. 4
ASPHALT
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Published by AC Business Media
Jessica Lombardo, Editor jLombardo@ACBusinessMedia.com 920.542.1247
Should the Industry Consider More P3s? P3's aren't made for every project, but states are finding if they want something done, they need to start looking to the private sector for help
S
ince Trump has yet to keep his promise of an infrastructure plan, asset owners are tasked with balancing an aging infrastructure with the need to meet contemporary demand, all with little federal money coming in. While legislators in 37 states have introduced 185 bills aimed at boosting transportation investment in the first two months of 2019 and the public is starting to recognize the need for infrastructure investment, we are still a long way from meeting the needs of updating our aging roads, bridges and buildings. In fact, the American Society of Civil Engineers (ASCE) estimates we need to spend over $4.5 trillion by 2025 to improve the state of the country’s roads, bridges, airports and more. So where is all this money going to come from? Many industry experts think P3s. SHOULD YOUR PROJECT CONSIDER A P3? In lieu of a full infrastructure package, the White House suggests using private investments to fund most of its proposed spending package which means contractors should start familiarizing themselves with what it will mean to work on these projects. For contractors, P3s open up a whole new realm of business. If contractors enter a P3 alone as concessionaires or developers, they get even bigger roles in the design, construction and operation of the public assets. Contractors also get long term revenue from operating and maintaining the asset. The other attractive aspect for contractors is the opportunity to share some risk with the public entity which
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opens up opportunities to diversify. Of course there are cautions for contractors and others on the private side of the equation. Among them is enthusiasm causing higher than realistic revenue estimates. If the estimated revenue doesn’t materialize, the contractor ends up waiting longer to recoup investment money. Which is why P3's can seem unattractive to both contractors and DOTs alike. "When things go wrong on a P3 project, even if the DOT has nothing to do with what's happening, they are going to get the blame," Joe McGuiness, commissioner at Indiana DOT says. "If contractors are walking out on a P3 because they're not getting paid and projects are stalled, the public is always going to blame the DOT and not the private entity because they aren't aware of the full situation." Still, these type of projects aren't likely to go anywhere. In fact, Ohio just completed a $634.3 million, 16-mile long, four lane highway project in just over three years with the help of a P3 structure. "We are seeing P3 projects delivered on time or early even," Sam Beydoun, bureau chief at the Illinois DOT says. "There are incentives to come in ahead of schedule. It gives the developer more revenue and makes the public entity look good as well. The public sector is starting to understand these projects can be done and are being done successfully." What's your experience with P3's? Let me know at jlombardo@acbusinessmedia.com
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