In a refreshingly frank and vigorous discussion, the group delved into some of the key challenges, opportunities, and real potential solutions to increase the pipeline of bankable projects in North America. Below is a synopsis of the outcomes.
- Politics at all levels continue be a major constraint on pace and scope of deals. While not a new theme, there was consensus that there has been insufficient proactive interaction with key “local” stakeholders that typically determine the fate of these projects. Notably, opponents of P3s mobilize quickly to shape the debate about a project, thereby putting project proponents immediately on the defensive.
- Inadequate revenue streams are a far more serious challenge than financing. A “free lunch” mentality is pervasive and opponents continue to assert that any presence of private sector equity makes projects needlessly more expensive than tax-exempt financing, without acknowledging the counter arguments (i.e. the ability to take a lifecycle cost perspective, the benefits of competition surfacing more optimistic revenue forecasts, etc.). The inability to use tax-exempt financing on pure brownfield transactions was also cited as a challenge.
- Processes are lengthy, expensive, and not standardized. Bidding consortia require considerable investment to get to the gate and processes can sometimes outlast administrations. This results in lost momentum, and can act as a disincentive to private investors as the bid costs are sunk in the face of uncertain outcomes.
- Shape politics more astutely and professionally market the projects. Identifying and building a community of P3-friendly stakeholders in key states and cities is the first step. This group would include mayors, governors, chiefs of staff, and local chambers of commerce that work well together and have an appetite to deliver critical infrastructure. The next step is to professionally market the project and delivery mechanism to citizens and politicians. The objective is to help stakeholders understand how successful P3s work and positive impact on citizens lives. One idea was to create a central repository of P3 delivery performance, including rates of return, and share case studies broadly.
- Work with government to develop programs and policies that actively encourage the use of P3 models. These programs would enable faster approvals for P3 deals, and provide incentives, where possible.
- Push for a pricing model for transportation assets. Such a model could resemble a regulated utility model with stable revenue streams, and help transition existing revenue streams to tangible project-level user fees.
- Standardize P3 processes and templates to introduce more certainty and predictability. Standards and P3 templates could go a long way to simplifying the bid criteria, process and timelines.
Opportunities for collaboration
- Codify the case for P3s in the US. Drawing from US examples, documenting the P3 mechanism and benefits in plain English for use by policymakers could go a long way to unlocking P3s in the US.
- Develop high-potential pilots in favorable geographies. Identify pilots and build the case of what the impact would be by shifting delivery models. Pick regions where stakeholders work well together and are open to different delivery models for critical infrastructure.