• private financing for works normally considered to be in the public domain is
not a new trend. Utilities as far back as the 1700’s have been privately developed.
Shifts to public ownership of infrastructure have gone on throughout both the 1800’s
and 1900’s.
• today there is no consistent structure for public/private development across the
many components of infrastructure or even within any given region.
• the shift from private to public ownership in the past was a result of either
unacceptable commercial risks in the private sector or inadequate response to public needs
by the private sector. Today, public pressures are causing a shift towards private
financing.
• as engineers, we now need to consider commercial, social, legal and financial
issues as well in infrastructure development.
• with today’s burgeoning population growth, an urgent need for
infrastructure arises. Though governments have traditionally spent on defense and
infrastructure, these now have to compete for available funding being distributed into
other programs. As well, taxes collected by one level of government are spent by another
level may tend to negate the rationale for levying and distributing in the first place.
The private sector can more rationally control its funding where the best technical
solution is sought - the move towards a user fee basis is more conducive to meeting the
intended purpose of the levy.
• In the past, prevailing thought in the public sector was that infrastructure
belonged in the public domain because it is the public that needs the facility and
therefore it was best suited to develop. However, better ways to deliver projects are
being sought.
• The debate often was that the private sector did not have the ability to borrow
at the lower government rates and so could not finance as cheaply. The shift to private
financing has come about for two reasons: 1) changes in the public sector itself, and 2)
changes in new market opportunities. In the public sector money is no longer in supply.
However with new market opportunities the world, the customer, the risk taker, and the
delivery system is changing. The user is no longer the tax payer. The user of the facility
accepts that he is the user and hence the user fee.
• The private sector takes on the role of the tax payer, whereas in the past, the
tax payer was left with the facility after the two year warranty period. This shifts
toward benefits driven procurement and single point responsibility.
• As stakeholders, the user looks for the best value for his money, the local
community looks for increased way of life, government looks for early completion and the
investor looks for an early and predicable return on his investment.
• P3 is slowly taking hold, with the public partner as the user, with the public
sector (government) as facilitator and the private sector as the "doer" and
expert. Benefits are lower life cycle and capital costs, certainty for cost, quality and
operations and improved delivery schedule.
• The Confederation Bridge is a proven result: a mega project built on time with a
100 year design life as compared to the usual 30-35 year design life. Types of challenges
on this project were political, judicial, contractual, regional, geographical, new design
codes and scheduling. The capital cost to finance the project by the private sector is
less than the cost would have been by the public sector in part owing to early revenues
generated by operating the facility one year sooner than the public sector could have.
The Government's Perspective
The Government’s Perspective:
• The public sector needs to foster the environment to allow the private sector to
move forward in three-partner financing arrangements (user/government/developer), which is
up to now largely untapped. It is the public sector that has to provide the infrastructure
– the private sector assists in development.
• With an aging population coupled with pressure on government to reduce costs and
provide more with less,
public sector reliance on the private sector is managed through outsourcing and
infrastructure developments.
• The lack of understanding of the mutual perspectives between the public and
private sectors must be overcome for P3 arrangements to be successful. As well, political
will, leadership and effective cross-management teams need to be in place. Strong
definitions of project requirements and proper structuring of RFP’s increase the
potential for success.
• Any successful P3 model should not only clearly define risks, but balance risk
allocation between the two sectors. The public sector must also realize that the private
sector has the right to intellectual property.
• Recent projects where government approved development where private sector
designed, built and operates. The final arrangement fell into an operating-lease category
and hence an ‘off-balance sheet’ project for the government – one of the
main benefits to P3’s i.e. project go-aheads in absence of public funding.
Afternoon Session 2 - Marloboro
Room
Adding VALUE to Client's Shareholders- A Strategy for Putting Engineers and
Scientists "Back in Control"
EXECUTIVE SUMMARY
The old ways of doing business and delivering projects do not
respond to the current needs of the clients. Engineering firms should look at getting more
involved in sharing risk and becoming part of larger teams such as done in alliancing, and
public private partnership (PPP). There are numerous advantages for owners and
participating engineering team members, one of the primary being the sharing of risk.
There are also implications for owners and engineering team members that will require
doing thing in a new, more cooperative way, where each team member is focused purely an on
time, on budget project that has an excellent life cycle.
Reputation Management
and Publicity - Changing the Image of Consulting Engineers
Norm
Huggins - Session Leader Consulting engineers must respond to changing demands for their
services. There are more players with different focuses at the table at the same time as
the engineer, and the engineer is expected to be more than what was traditionally his
role. Clients are more knowledgeable, more demanding and undertaking projects that have a
much more diverse set of criteria than in the past. Thus the engineer is being driven by
influences of economics and politics that have not been a factor in the past. These are
largely reflective of the changing needs of the client to the role of the traditional
engineer.
Norm noted that in the past there have been other ways
to think of Reputation management-publicity, marketing or public relations. Thirty years
ago, the reputation and representation of consultants was through the senior leaders of
the firm networking with the people they had come to know. In this case long term
relationships developed. There was little need for public relations. Twenty years ago the
world started to change and there was much more pressure from a demanding and
knowledgeable public for accountability and social awareness. A more rounded image where
successes were published started to appear. In the nineties clients are more astute, more
challenging and more demanding which has raised the profile even more.
In summary this has pushed the engineering firms into the political arena through a
client who is "technical knowledgeable, politically astute and financially
challenged" of the various public being served.