Public-Private Partnerships (PPP) is a joint effort that entails schools, hospitals and other infrastructure being built and managed to the mutual benefit of investors, stakeholders, private companies and end users. In Europe, especially in the UK and in France, PPP has proven valuable to procure and handle big, complex assets, including highways and bridges. This calls for a state-of-the-art asset management and the software of AgileAssets is fully compatible with this demand.
The value bound in infrastructure assets is immense and huge investments are needed to achieve the best possible results. It can be argued that the public entities neither have the necessary funds, nor the workforce or specialization to perform all aspects of the infrastructure operations themselves. Also, there is a constant need to manage assets in the least disruptive and most efficient manner. PPP is a means to reach that end; collecting financial, practical and strategic issues into one systematic approach, asset managers are better suited to the many challenges that comes with long-term PPP contracts.
These points are central parts of an infrastructure PPP, where the private partner undertakes design, planning, financing, building and maintenance of a given asset over a period of time, typically 25-30 years. The private partner assumes most of the risks while having the freedom to make decisions for the asset, as long as the performance standards set by the public agency with oversight responsibility are complied with.
To cope with the challenge of managing very large infrastructure, tenders are often answered by large consortia, which consist of sizable construction companies, advisors and investors (banks). Depending on the tendered assignment, the PPP can span from a toll-paid solution (typically bridges, tunnels, private highways), where the private company actually owns the infrastructure, to a tax-financed construction (Design, Build, Operate), where the private company is paid to manage, but does not own, the infrastructure in question.
CONDITIONS OF AN INFRASTRUCTURE PPP CONTRACT
Basically, a PPP contract entails that the infrastructure assets should be handed back in a condition, following a set of criteria, agreed upon by the partners. These criteria again can vary from a simple set of performance conditions which can be measured fairly easily in terms of expected life expectancy of assets in relation to different kinds of structures, paired with collected data on parameters such as bearing capacity, cracks, wear and tear.
On top of this comes a set of criteria for the contract period, which relates to the level of service (LoS) of the infrastructure. This relates to the quality the (typical public) users of the infrastructure might expect when using the road, bridge, tunnel, rail, etc. A big part of this service relates to the mobility and safety of the users, i.e., travel time, congestion, some of which is measurable (traffic speeds, statistics) and some of which is more subjective, and may be more in the realm of preventing bad publicity/ retaining happy clients to the specific asset. Environmental aspects such as noise and air pollution from the assets might be an issue to consider, also. This goes for materials used for building, methods for maintenance and preventive actions (noise barriers, etc.).
Additionally, there is a very large financial aspect to the PPP contracts. The more complex a project (for instance a sizeable, highly used highway), the more money used for managing the assets and the more money bound in the project, both in the assets themselves and in the contribution to the society, keeping wheels turning, so to speak. There is a direct correlation between the effectiveness of our infrastructure and the benefit of movement of goods and people. So each unnecessary lane closure is very costly and will be subject to a penalty (from the road owner, in this case). Equally, all assets, which require interruption of traffic for maintenance, should be monitored and managed wisely.
Finally there is the cross-asset management aspect, not only in terms of building and maintaining the assets, but also to support the financial side of the house by accumulating all relevant data on assets, sub-assets, conditions, service levels and budgets to produce an overview of all elements of the project and to plan and act with due diligence.
This exercise requires not only precise measurement data but also highly advanced and reliable software systems that can handle complex data and support strategic and practical decisions during the full lifetime of a PPP project.
By considering a single integrated asset management system that contains advanced analytical capability for decision support, the PPP consortium can realize a near instantaneous return on investments (ROI) due to efficiency gains as well as substantial reduction of maintenance budgets due to advanced optimization methodology. Furthermore, advanced decision support tools can be deployed to evaluate and frame the risks associated to PPP contracts and the asset lifecycle. Thus, the right asset management software solutions can prove invaluable to the PPP consortium in the long run.
A paper on Public Private Partnerships in Europe will be presented by Mr. Mikkel Bruun and Dr. Pascal Laumet, AgileAssets, Europe, at the ICPPP conference in Austin, Texas, May 26-29 2015.