Outsourced P3 Project

What is outsourcing?

Outsourcing is simply using contractors to do things traditionally done by in-house staff.

In the P3 space, virtually the entire project is outsourced, by definition. In a traditional, publicly owned and operated roadway, the Owner (DOT/Ministry, etc.) provides operations and maintenance for the roadway with in-house staff, trucks, equipment and materials. Similarly, a facility such as a hospital, manufacturing facility, port or other large fixed asset will have maintenance staff and operational support.

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North Star Infrastructure Team to build and maintain Northwest Territories Tłı̨chǫ All Season Road

WYTHEVILLE, Va. (February 27, 2019)PILLAR Operations and Maintenance Advisors worked with its client, North Star Infrastructure, on a project to design, build, finance, operate and maintain the Northwest Territories Tłı̨chǫ All Season Road in Canada. Working closely with North Star staff as the technical advisor, Pillar contributed to the success of the winning bid by developing operations and maintenance (O&M) budgets for the 25-year concession.

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Why is pavement management important?

The nation’s road system represents an asset valued at more than $2.4 trillion. Nearly 90% of passenger-miles traveled and 60% of the nations’ total freight is transported via the nation’s highway system. There is no doubt, it is an asset worthy of substantial investment for the sake of our economy and the safety of our citizens.

Two constant elements unrelentingly diminish pavement’s value and cost the nation billions of dollars every year: traffic loads and environmental conditions.

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A Public-Private Partnership (P3) is a contract vehicle where a private developer – working with a public entity – designs, builds, finances and operates the infrastructure. This Pillar Talk will focus on the rehabilitation, or handback portion, of a P3.

P3 transportation projects have two varieties: availability payment or revenue risk.

In an availability payment model, the public entity pays a fixed amount on a monthly or annual basis, usually after making some larger “milestone” payments during or at completion of construction. The funding could come from general transportation funds, a bond issue or indirectly from tolls generated from the new roadway but retained by the public entity or any combination of these. An availability payment P3 is generally of shorter duration, generally 25 years.

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Last month I attended the 12th TRB Asset Management Conference (my third) and the 2018 AASHTO Committee On Maintenance Annual Meeting (my fifth).

While both conferences were about Asset Management, the focus of each was on two different planes. The TRB Conference focused more on strategic issues (i.e. risk, resiliency, sustainability) and the AASHTO Conference focused more on tactical issues (i.e. equipment, materials, technology, regulations). Asset Management has gone through a significant evolution from a tactical focus on operations and roadside maintenance to a powerful strategic management tool that enables agencies to better plan, manage and execute to maximize results and be more cost efficient.