Ongoing Construction of the Regina Bypass near Highway 33

ViewPoint

An Owner’s Engineer Perspective to project delivery via Public-Private Partnerships

Across Canada, we are facing the challenge of infrastructure deficit and aging infrastructure. Infrastructure expansion is required to accommodate growth and allow for economic development.  The legacy of infrastructure funding has not adequately maintained reasonable levels of service across Canada. As a result, national, provincial, and local governments face increasing demands for their infrastructure dollars. All levels of government are exploring innovative solutions for infrastructure development, as an alternative to the Design-Bid-Build model traditionally used by many communities.  There is increasing interest in alternative delivery mechanisms and securing funding through non-traditional means to meet the challenges of replacing aging infrastructure and developing new infrastructure to support growth and economic development. 

Public-Private Partnerships (P3) have emerged as an alternative for infrastructure delivery. PPP Canada defines Public-Private Partnerships as “a long-term performance-based approach to procuring public infrastructure where the private sector assumes a major share of the risks in terms of financing and construction and ensuring effective performance of the infrastructure, from design and planning, to long-term maintenance” (PPP Canada Website, www.p3canada.ca).  

A wide range of P3 procurement models are available; however, most often, P3 projects are undertaken using a Design-Build-Finance-Operate-Maintain (DBFOM) model.  While the design and construction component of a P3 project may take a few years, operations, maintenance, and rehabilitation (OMR) may involve upwards of 30 years.  

In addition, there are many different players involved.  A typical DBFOM project involves a Project Consortium (Project Co) comprised of a Design-Build Joint Venture, an Operations and Maintenance arm, a Rehabilitation group, and a Lender.  An “Owner’s Engineer” (OE) provides the role of trusted advisor to the Owner, while an Independent Design Checker and Lender’s Technical Advisor are additional potential roles.  

Understanding the Owner’s needs and being able to work collaboratively with all of the groups involved is key to the success of a P3 project.  Partnering sessions, project collaboration websites, technical working groups, design review meetings, and even shared office space can create project synergies.

A major benefit of delivering projects via Public-Private Partnerships is the transfer of risk, i.e. the Owner reduces its risk of escalating costs because the work is at a fixed price, noting that a contractor will estimate and price in a value for taking ownership of the risks.  However, it is important to understand that you get what you ask for - no more, and, without appropriate oversight, maybe less!   

The project agreement is always subject to interpretation and must clearly state what is required.  Variations (changes) after award may cost substantially more than if they were included in the initial bid documents.  That’s one of the reasons why early involvement of the Owner’s Engineer is critical to assist in the development of comprehensive project requirements to reap the full benefits of risk transfer.  

Certainly, the Owner’s Engineer involvement provides numerous benefits to a P3 project.  One of the greatest benefits is the addition of resources to the Owner’s team to allow for consideration of various areas of project delivery, such as value engineering, contract options, and increased scrutiny on cost estimating.  

Early involvement, even at the planning phase, allows for a greater influence at a lower cost than at later stages of scope development.  Another important role of the Owner’s Engineer is to provide quality management through design and field auditing. The Project Consortium’s quality management / auditing is not the same as the Owner’s Engineer auditing, as the Owner’s Engineer acts on behalf of the Owner to verify compliance with the project agreement requirements and the Owner’s standards:  The Owner’s Engineer’s audit focuses on high risk, high vulnerability checks for the long-term durability of the project.

Even with risk transfer, there are some residual risks that the Owner will retain.  For example:
•    Public Communications: If something goes wrong, regardless of who may be at fault, the Owner may get bad publicity.  The perception of local jobs going to non-locally-based contractors is an often-voiced concern.
•    Contractual Issues, such as Compensation and Delays: These need to be defined in the project agreement.
•    High Risk Items: May be too costly for Project Co to bid and may be better kept by the Owner or at least cost-shared.

A clear understanding the Owner’s goals and risk tolerance – or intolerance – as appropriate, can aid the Owner’s Engineer in developing a project agreement that will meet the required expectations.  

As an Owner’s Engineer, my experience with P3 projects is that they can be delivered faster, better, and more cost-effective, if the Owner’s Engineer is engaged early in the project. By maintaining a strategic focus and establishing clear expectations, project goals, including those related to safety, schedule, quality, and environment, can be met and exceeded. 

About the author:

Martin Rowland, P.Eng., C.Eng., MICE is Manager, Transportation, in our Toronto area office.  He has over 28 years of experience in the design and implementation of highway, infrastructure, and airport projects.  Martin has been heavily involved in alternative delivery projects for Owners’ and Proponents’ teams, including P3 and Early Contractor Involvement contract documentation preparation and implementation. He has led major projects in Canada including the Regina Bypass Owner’s Engineer for the Saskatchewan Ministry of Highways and Infrastructure; Airport Trail Tunnel under the new Parallel Runway for the Calgary Airport Authority; and Northeast Stoney Trail Owner’s Engineer for Alberta Transportation, in Calgary, Alberta.