Taking Off with P3s

March 27, 2018

Our nation’s airports provide vital links to regional, national and global market places, and require investment in existing or new airport infrastructure to remain competitive. Yet airports around the country share a common dilemma – lack of reliable funding sources for critical infrastructure development.

Today, public private partnerships are gaining increased momentum, and may provide an effective solution to deliver essential airport infrastructure programs. At a time when the aviation industry is seeking finance solutions for major airport programs, the Trump administration has encouraged the use of P3s as a possible mechanism to fund infrastructure development in the U.S.

HNTB is seeing U.S. airports or their governing authorities turn to P3s as an alternative way to fund, finance and provide long-term operation of $100 billion in airport infrastructure. Large aviation P3 projects in the U.S. include LaGuardia Airport’s Central Terminal project, Delta’s LGA Terminals C & D P3 project, Denver International Airport’s Great Hall project and Los Angeles International Airport’s Automated People Mover P3 project. JetBlue Airlines is in the process of soliciting a P3 team for the expansion of JFK Terminal 5.

Not limited to large, complex terminal buildings, P3s can deliver a piece or part of the airport facility, as evidenced by JFK International Airport’s IAT T4 and AirTrain Light Rail System, Denver International Airport’s Great Hall and LAX’s Automated People Mover P3 project. The LAX people mover program will be delivered via a design build- finance-operate-maintain contract and features a people-mover rail system that will shuttle passengers to and from the airport, LA Metro transit, long-term parking and a consolidated rental car facility.

To help airport authorities navigate potential P3 projects, HNTB offers the following P3 delivery best practices from its extensive experience across the country.

Initial Steps

  • Appoint and support a project champion
  • Determine a delivery approach early in the project’s life cycle
  • Incorporate a broad group of stakeholders and map out the project’s goals, funding needs and construction parameters
  • Bring in experts to educate stakeholders about the advantages and disadvantages of P3s
  • Properly evaluate life-cycle costs
  • Understand local tax and licensing laws that can impact financials and approach to work
  • Compare the financial impact of a P3 project against the traditional public delivery alternative to help determine whether a specific project is appropriate for P3
  • Understand there will be institutional resistance to change

Procurement

  • Don’t rush into procurement
  • Insist on a transparent procurement process
  • Seek industry feedback before and after the start of the P3 procurement to engage the private sector early, creating a more competitive environment and achieving lower bids
  • Use a combined funding and finance plan (e.g., private-sector finance, local investment and federal funding)
  • Provide sufficient, functional design information during procurement

Scheduling

  • Establish a reasonable procurement schedule to accommodate Alternative Technical Concepts, one-on-one meetings with proposers and sufficient time for proposers to develop their technical and financial proposals
  • Allow time for regulatory approvals, right-of-way acquisition and major utility relocations
  • Consider lead times for major equipment and materials, especially when equipment is manufactured outside of the country

Getting more value from the P3 Developer

  • Develop specific, achievable, affordable performance specifications vs. method-based specifications
  • Understand P3 investors and lenders have different needs and concerns than procurements without private financing at risk
  • Establish and maintain open communication with the private-sector developer
  • Balance risk allocation with the private developer
  • Employ independent oversight and audits
  • Improve the customer/user experience with construction sequencing

It’s important to remember that P3s are not a funding mechanism. They are a delivery method with some opportunities as a financing mechanism and, therefore, are not applicable to every airport improvement project. While the entire universe of infrastructure needs cannot be resolved with P3s, using an approach that combines private financing supported by robust revenue streams can maximize infrastructure improvements when appropriate. P3s are certainly taking off as a growing option in aviation’s infrastructure’s delivery tool box.

Tom Rossbach is the national aviation architecture leader for HNTB Corporation. He provides strategic direction for projects within the national aviation market and has nearly 35 years of terminal planning, design, and airport P3 development experience. He can be reached at [email protected].