Hundreds of billions of dollars of PBI-type arrangements have been utilized around the world to procure, operate and maintain high quality public infrastructure for citizens. As an example of the types of projects potentially available to California if PBI is fully enabled in our state, set out below are descriptions of eighteen (18) such projects.
Courthouses
Water Treatment Facilities
Public Schools
Public Hospital Facilities
Tunnels and Roads
Rail Systems
Land Protection, Housing and Recreation
Energy Efficient Improvements
Courthouses
Durham Courthouse, Ontario, Canada
In March 2007, the province of Ontario entered into a project agreement with a private partner to consolidate Superior Court and Ontario Court justice services currently delivered from eight locations into one modern facility. In addition, the building's design will conform to LEED "Silver" certification standards, with an emphasis on energy management and conservation.
Under the terms of the agreement, the private partner will: design and build the courthouse; finance the construction and capital costs of the facility; obtain a third-party independent certification that the facility is built to specifications; provide the facility management, lifecycle maintenance and other facilities management services for the new centre; and ensure that the buildings meet the conditions specified in the project agreement (DBFOM). In addition, key risks are transferred to the private partner.
The total construction cost of C$377M is financed 100% by the private partner. Once the courthouse is open, the Province will make annual payments for 30 years, based on performance requirements defined in the project agreement. If standards set out in the agreement are not met, there will be financial deductions.
An independent assessment determined that this partnership will save the taxpayers C$49M, or an estimated cost savings of 11.47% when compared to the traditional delivery model.
Water Treatment Facilities
Britannia Mine Water Treatment Plant, British Columbia, Canada
In 2005 the British Columbia Ministry of Agriculture and Lands contracted with a private company to build and operate a water treatment plant that will treat up to five million cubic meters of contaminated water per year flowing from the Britannia Mine site before draining into Howe Sound.
This project is a design-build-finance-operate (DBFO) partnership under which the private company financed and designed the plant, assumed all risk associated with the water treatment technology, and is being paid each year under a 20 year operation agreement based upon the volume of water purified and ability to meet environmental regulations. Payments did not start until after the plant was in operation.
The total construction cost was C$15.5M (100% from the private partner), the lifetime project cost to operate the plant is C$27.2M, and taxpayers are expected to save C$12.5M over the lifetime of the asset when compared to the traditional delivery method.
The plant opened in June 2006 on time and on budget. At the end of the agreement, the province can choose to renew the contract with the private operator, assume operational responsibility for the contract, or put the contract out for tender using a traditional or alternative delivery model.
Great Falls Wastewater Treatment Plant, Montana, USA
In 1977, the city of Great Falls, Montana, entered into a partnership with a private company to manage its new wastewater treatment. This partnership is for operation and maintenance of the plant plus 31 lift stations. The contract structure also allows the private company to design, build and operate small capital improvements at the plant.
According to the Great Falls city manager, over the past 30 years the private partner provided superior operations, delivered significant costs savings and assisted in several plant upgrades. The contract was renewed in 2004 for another 10 years.
Public Schools
Glasgow Schools, Glasgow, Scotland
According the United Nations Economic and Social Council , the Glasgow School project illustrates high quality physical working environments and world class IT obtainable from PBI-type arrangements, thereby raising educational standards, improving student attendance, preparing students for the information age and raising teacher morale.
In 2000, the Glasgow City Council joined with private partners to construct, finance, operate and maintain (DBFOM) new and existing schools in Glasgow, Scotland. In addition to construction, the private partner provided a broad range of support services for a 30-year period, including janitorial, cleaning, building and grounds maintenance, security, waste disposal and disaster management, as well as a 24 hour, 365 day a year support help desk.
As of May 2002 there were 89 such school projects, representing £2.6B of capital value, some of them with facilities such as a swimming pool, a gymnasium, fitness suite and a floodlit artificial grass field. The project also provided an email address for each pupil. In June 2002 a £1.2B second phase was launched and another £750M was added in March 2003.
New South Wales (NSW) Schools 1 Project, NSW, Australia
In 2001, the NSW Department of Education and Training paired with private partners to design, build, finance, operate and maintain (DBFOM) six new primary schools, two secondary schools and one special needs school within a 25-month period. The project cost was $A131.4M, 100% financed by the private partner in exchange for 30 year performance-based fees for providing the school facilities and associated services, with deductions if the contractor does not satisfy specified standards and penalties for contractual breaches.
The projects was considered by an Auditor General's Report to be delivered two years in advance and at 5-7% discount when compared to the traditional government procurement process.
Public Hospital Facilities
Abbotsford Regional Hospital and Cancer Centre, British Columbia, Canada
Under a design-build-finance-operate (DBFO) partnership, a new 300 bed, 645,800 sq. ft. public hospital and cancer treatment center will be built to replace the existing functionally outdated MSA Hospital. The new hospital and cancer center will have twice as many professional and health service staff as the current facility, and will offer the local community much needed and improved access to a greater range of services in an environment that is designed to be supportive of both patients and staff.
The British Columbia Ministry of Health and its public sector health care partners joined with a private partner to design, build, finance and maintain the state-of-the-art regional hospital and cancer center. Once the hospital and cancer center is open, the private partner will provide non-clinical facility management services for 30 years. All clinical services will be provided by the public sector.
Total project capital costs are C$355M, 100% privately financed. The lifetime project cost over 30 years will be C$424M, producing an expected benefit to taxpayers of C$39M when compared to the traditional method. The private operator will not receive payments until the facility is complete; at that time the Province will begin performance-based payments that take into account facility availability and service quality.
Construction is on time and on budget; the facility is expected to open for patients by the end of summer 2008.
Newcastle Mater Hospital Redevelopment, New South Wales, Australia
Awarded in 2005, the Newcastle Mater Hospital Redevelopment project includes a new 196-bed hospital and a new 96-bed acute mental health facility, refurbishment of the old Mater Hospital, transfer of local mental health services onto the site, construction of new road works, traffic signals and local road upgrades and maintenance of buildings, car parks and grounds on the Newcastle Mater Hospital site.
The private sector involvement includes design, construction, financing, maintenance and provision of selected services. The Hospital construction costs of $A180M were 100% financed by the private sector and are being delivered under a fixed price and fixed time contract, with construction cost risk and completion time risk transferred to the private sector. In exchange the private partner will receive fixed operating costs for 28 years, including facility maintenance and non-clinical services through management of public sector health employees (who remain public sector employees) under a Labor Services Agreement.
Tunnels and Roads
Port of Miami Tunnel, Florida, USA
The Florida State Department of Transportation (FDOT) is now entering into the final stage of negotiation with a consortium to design-build-finance-operate-maintain (DBFOM) a tunnel to improve access to Miami's port and reduce congestion in Miami's neighborhoods. The private partner will fund 100% of the $1.2 billion capital cost and, provided the facilities meet performance standards, be paid back over 30 years with availability payments from the city, county and state.
Citizens of Miami will benefit from reduced traffic congestion and increased safety and the project will benefit from much earlier delivery of the tunnel, private sector expertise in designing and constructing tunnels, allocation of risk away from the public sector, and upfront capital displacing the need for a public bond.
Sea-to-Sky Highway, British Columbia, Canada
Awarded in 2005, this 60 mile-long highway improvement project between Vancouver and Whistler includes highway widening and straightening, passing lanes, and other measures to improve safety, reduce hazards, shorten travel times and increase capacity.
The partnership was created between the British Columbia Ministry of Transportation and a private partner to design, build, finance operate (DBFO) the improvements in exchange for payments based upon the highway's availability to users both during the construction and for 25 years after the project is completed. No toll is imposed, the risk of cost overruns is borne by the private partner, and substantial financial penalties will accrue if the schedule is not maintained pursuant to contractual standards.
The total construction cost of C$600M is 2/3 privately financed, 1/3 publicly financed and the lifetime project costs (i.e., the net present value of the capital cost plus the cost to maintain and operate the project) will be C$789.8M. The partnership agreement is expected to produce $131 million in benefits over the life of the agreement when compared to the traditional method.
This project is currently ahead of schedule and over budget. (As noted above, the private sector bears the burden of cost overruns.)
North-South Bypass Tunnel, Queensland, Australia
In 2006 the City of Brisbane entered into a partnership with a private consortium to design, build, finance, operate (DBFO) the North-South Bypass Tunnel, a $A3.3B toll road. The project will be 100% financed by the private consortium in return for a 45-year toll concession, freeing Brisbane to use its monies for other public initiatives, including public transport. Tolling will be fully open road at highway speed, using transponders and cameras with no cash collection. The private sector takes the risk of delivering the project on time and on budget. Construction began in September 2006, with the tunnel due to open in 2010. As of July 2007, construction is reported by Brisbane's Lord Mayor Campbell Newman to be ahead of schedule.
M-30 Madrid Road and Tunnel project, Madrid, Spain
Started in 2004 and completed in 2007, the Madrid M-30 motorway was refurbished and rerouted and tunnels were added in order to ease urban gridlock and move traffic more efficiently through Madrid. Total project cost was estimated at EUR 3.9 billion. The City of Madrid provided 80% of the capital and the remaining 20% was privately provided. The 35 year concession includes payments to the private partner, subject to the meeting of performance standards, to operate and maintain the new segments and maintain (but not operate) the existing segments.
Capital Beltway, Washington DC, USA
In December 2007, the State of Virginia Department of Transportation and private partners reached financial close on the largest public-private toll-road project to date in the USA. The US$1.5B Capital Beltway / I-495 project, a 64-mile freeway encircling the Washington, D.C. area, will be funded by the State of Virginia (29%), the US DOT (24%), and private partners (47%) and includes construction and conversion of four HOT lanes, toll setting technology combining real time monitoring and historical data to create section-specific tolling, and free HOT lanes for buses, three-person or more carpools and emergency vehicles. The project is considered to be a critical component to the solution of the growing transportation crisis in the Washington, D.C. region, which, according to the Texas Transportation Institute, has the country's third worst congestion.
Rail Systems
Perpinan-Figueras High Speed Rail linking Spain and France
In 2004, the French and Spanish Governments awarded a 50-year concession to a private company for a new 28-mile new high speed rail link (double track for passengers and cargo), including a tunnel through the Pyrenees Mountains, one of the most complex and faulted geological zones of Europe, When opened in 2009, the new line will shorten the time from Paris to Barcelona by 36.5%.
The private team is responsible for designing, building and maintaining the new line for 50 years and will help finance the project by putting up 40% of the capital cost of EUR 952M (in 2003 values) (DBFM). The private team is required to build a rail line that meets environmental standards and assume the risk of cost and time overruns and the geological risk of tunneling through the Pyrenees Mountains.
Canada Line, British Columbia, Canada
Partnering with a private consortium, the Greater Vancouver Transportation Authority is building a 12-mile automated rail line connecting the cities of Vancouver and Richmond and the Vancouver International Airport. Known as the Canada Line, the system is expected to carry 100,000 passengers per day at launch in November 2009.
A private sector team is designing, building and partially funding the line. The consortium will also operate and maintain the line for 35 years in return for a share in the operating revenue. The public sector will own the Canada Line, set fares and monitor system performance. The private company will be paid during the construction period after achieving specified milestones and during the operation period based on performance measures. One-third of the total capital cost of C$1.4B is provided by the private sector and two-thirds is provided by the public sector. Lifetime project, operating and maintenance costs are estimated at C$2.2B and according to the project team, the partnership is saving taxpayers an estimated C$92M over the life of the asset when compared to the traditional delivery method.
The private partner has assumed construction cost and schedule overruns, and also a significant portion of the geotechnical risks associated with tunneling and construction. The private sector will also be responsible for the operations and maintenance risks through a fixed-price, date-certain contract.
According to Partnerships British Columbia, the project is currently three months ahead of schedule and on budget.
Land Protection, Housing and Recreation
Presidio National Park, California, USA
In 1996, Congress established the Presidio Trust to preserve, enhance, and maintain the Presidio in San Francisco as a national park. To generate the funding needed for that purpose, the Trust partnered with private partners to upgrade, convert and restore residential and non-residential buildings which in turn are leased out to private and other users. With the funds generated from leasing those assets, the National Park Service and Presidio Trust is building a network of trails and scenic overlooks, reforesting land, removing hazards, remediating lead-based paint in soil, replanting landfill sites with native plants, restoring natural wetland and riparian habitats, protecting wetlands and more.
Arizona State University South Campus/Barrett Residential Communities, Arizona, USA
In January 2007, Arizona State University (ASU) partnered with a private company to build the South Campus and Barrett residential communities. When completed, the US$240M two-phase student housing development will feature 3,560 beds in 16 residential buildings, all units of which will be fully equipped with kitchens, washers and dryers and high-speed Internet. The project also includes a 23,000-square-foot community center with a fitness center, social lounge, game room, theater and study rooms and pool, and a parking garage. The private partner contributed equity and will own a leasehold interest in the on-campus land and improvements through a long-term ground lease. According to ASU's president, this partnership enables the university to offer more students the opportunity to reside in high- quality modern on-campus housing while concurrently preserving university debt capacity to invest in core academic infrastructure.
Both phases are under construction, phase one is scheduled to open in fall 2008 and phase two is scheduled to open in fall 2009.
U.S. Military Housing, various locations, USA
Since 2002, various branches of the U.S. Military have utilized partnerships to effectively rebuild and invest in over 150,000 single-family housing units in the United States (some of which are in California, at Navy San Diego and Camp Pendleton). The arrangements attracted over $25 billion of private capital and, according to the Secretary of the Army, raised service levels and customer satisfaction and accomplished in five years what under traditional approaches would have take ten to twenty years.
The government formed partnerships with the private sector to design, build, operate, maintain and finance (DBFOM) the program. The partnerships are largely structured on an availability basis (i.e., payments are made to the private partner only if the units are available and meet strict contractual standards) but also include some revenue risk (i.e., the private partner takes some risk that revenue won't reach projected levels).
Energy Efficiency Improvements
San Jose Unified School District Solar Initiative, California, USA
The San Jose Unified School District has entered into a public-private partnership with two private corporations to establish what is believed to be the largest solar power and energy-efficient facilities program in K-12 education in the United States. Under the program, one partner will design, build, operate and maintain (DBOM) a total of five megawatts of solar photovoltaic arrays at the district's schools, and will measure, verify and guarantee the solar energy system's performance. As part of its equipment finance and management business, the other private partner will 100% fund and own the solar equipment and sell the power to the district.
The program requires no district capital investment and is expected to provide district budget stability and predictability through known energy costs, a 25% reduction in the district's demand for utility power, and a reduction of 37,500 tons of carbon dioxide emissions, equivalent to planting 400 acres of trees. The first phase of the project includes 2 megawatts across four high schools is currently under construction.
