P3s are now a familiar method of large project delivery around the world, panellists speaking at a recent infrastructure conference pointed out — so much so that its flaws are now apparent, and owners are now more open to alternatives.
Three Canadian experts in project delivery were joined by Australian Stephen Litterick of Acciona, who as alliance general manager for his firm has worked on numerous projects delivered by alliance contracting that went well but also others that went sour.
The session, billed as The P3 Evolution: Innovative Project Delivery Strategies, was held on Nov. 17, day one of the annual conference of Canadian Council for Public-Private Partnerships.
Moderator Melissa Di Marco, vice-president with project consulting firm Accuracy, pointed out that in last 30 years, the P3 delivery model has been the primary choice for Canadian infrastructure projects.
“Although the P3 model’s merits are undeniable, it has not been free of drawbacks, concerns and criticisms,” she said. “Considering the evolving market, the state of our economy and the pipeline of projects in Canada, it is vital to examine a multitude of alternatives that can enable owners and stakeholders to get their projects procured and built quickly, safely and successfully.”
Panellist Corey McNair, vice-president of alternative delivery for WSP Canada, said there is a healthy P3 pipeline across Canada but owners should always keep their minds open for better ways to deliver projects.
“Having another delivery model in the tool kit is certainly promising for some of these complex, integrated, stakeholder projects,” McNair commented.
Focus on alliance
Besides alliance contracting, other large-project delivery models generating buzz in recent years have been progressive design-build, construction management and integrated project delivery (IPD), Di Marco said. But most of the panel discussion focused on alliance.
Alliance is working well in the UK, Australia and New Zealand, panellists heard, and it is being used to deliver a major project at Toronto’s Union Station.
The panellists differentiated alliance from traditional P3s by its focus on requiring contractors and the owner to work in a relationship throughout the project. Alliances are non-adversarial and include a range of project delivery strategies where the parties strive to achieve mutually beneficial outcomes.
Also, in an alliance, there is no strong-arming by owners intent on having contractors assume as much risk as can be negotiated.
Litterick has worked almost exclusively on alliance projects over the past six years.
“P3s tend to be selected for complex megaprojects where private finance might be required and very long-term solutions are needed for maintenance of a project,” he said. “The alliance tends to be selected for short-construction handover projects where there is no ongoing maintenance or operation involved and generally where you need to work as a team with the operator so we can hand over the project at the end.”
Litterick stressed caution for owners in other jurisdictions who might cherry-pick an alternative solution like alliance without careful consideration of the special circumstances where it works — small packages, and owner involvement in operations upon the handover.
Got it right in Australia
And owners should also realize it takes time and multiple projects to develop best practices.
“We are very mature with alliance, we have been doing it a long time in Australia,” said Litterick. “We have nearly got it right but it has taken a long time.”
Panellist Paul Boucher, vice-president of development for Kiewit Canada, is currently working on a bridge project in Kingston, Ont. that is being delivered through IPD.
IPD and alliance benefit from owners that are engaged with the contractors and who bring in levers to solve problems. They do not stand there, he said, with arms crossed and say, “that is your problem, you solve it.”
Projects can go awry when an owner unfairly allocates risks to the contractor team, Boucher noted.
“If you are going to impose risks on a contractor that are underpriced, unmanaged and uncapped, the reality between the partners is going to degenerate into an adversarial one,” he said.
In the end, the executive with the most experience with alliance suggested others with less exposure should not “throw the baby out with the bath water” if they are merely encountering elements of a model such as P3 that are not working. If interested in trying alliance, start with a small project and see how it goes, Litterick said.
But “if the P3 model works from a commercial, a financial and operations sense, stick with it,” he added.
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