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April 2013

Alternative Transit Project Delivery Offers Attractive Options

Alternative project delivery, including public-private partnerships (PPPs); design-build; and design-build-operate-maintain, are viewed as attractive options for transit agencies, as they transfer risk and accelerate the project process.

However, while these forms of project delivery continue to take hold in Europe, Asia and Africa, there have been a limited amount of projects in the U.S. that have utilized these innovative solutions.

METRO Magazine spoke to representatives from several companies to discuss why forms of alternative project delivery have been slow to take off in the U.S., as well as the possible benefits and what transit agencies should look for before selecting a partner.     

How does alternative project delivery benefit a public transportation agency?

Mel Placilla (Director, professional services, transportation group, HDR): What we advise is that they have to have some drivers to want to do alternative delivery; one is time. You can go much faster [with alternative project delivery] because you lose multiple months, in some cases, between development of final plans and bidding and then getting construction started with traditional forms of delivery.
Additionally, for us and most organizations that deal with alternative delivery, the mantra is allocate the risk to the entity best able to manage the risk.

Samara Barend (VP/P3 development director, AECOM Capital): In a PPP, for example, you have an integrated form of project delivery, where there’s one single point of accountability, unlike a traditional delivery where the designer and contractor each report to the state or city agency they are working for. In a PPP, there is a full integration of design, construction, long-term operations and financing. That integration allows much more  risk transfer from the public sector to the private sector. And because you’re able to transfer that risk, you can generate considerably more cost savings, because much of the risk you’re transferring are risks that the private sector has much more ability to control than the public sector — overall project delivery, scheduling, budget.

Basically, in a PPP, the private sector is taking the risk that project will be delivered on time and on budget, otherwise they do not get paid.

Lorenzo Reffreger (head of sales, systems, North America, Bombardier Transportation): What a public transportation agency is acquiring, other than the services, is cost certainty, because there are different elements involved that allow the agency to know what the costs are. And, when the contractor is able to act as sort of one-stop shop, the integration of all those elements makes it easier for the agency to have cost certainty.

There’s also an amount of schedule certainty, because these are turnkey procurements where the agency is basically saying ‘give me everything and this is the date by which I need to open.’

Overall, alternative project delivery enables the public agency to focus on what they do, rather than maintaining equipment.

Stephanie Brun-Brunet (VP, turnkey & infrastructure systems, Alstom): [Alstom] approaches all of these [alternative project delivery] structures as turnkey projects, and while there are differences, they all offer agencies and cities the same fundamental benefit — the ability to move new transportation projects forward in a resource-constrained environment.

Giving private sector partners a stake in the project's success also reduces the level of public sector risk associated with things like managing project interfaces, integrating systems and technologies, minimizing delay and ensuring the system meets established performance requirements. Private sector involvement also helps ensure on-time delivery and that the project comes in on or under budget — Deloitte recently found that alternative project structures can be 20% less expensive than design-build projects.


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