The Market
The growth of design-build as a procurement approach for Owners is well documented and continues to increase in the Transportation market segment. While not always the “right” solution replacing the traditional bid-build approach, at the current rate of growth, design-build is forecasted to equal or surpass other procurement approaches in the next four to six years. As a response to Owner and project requirements, the market transitioned from mainly contractor-led teaming formats to more integrated designer-contractor teams as well as designer-led teams.
Currently, while the highway/bridge market continues to dominate the design-build transportation market in numbers of projects and business volume, design-build delivery is also being used in other transportation arenas such as ports, aviation, transit, and security. The advent of our aging infrastructure in concert with the continued strain on our public funding has caused an increase in Owners’ need to reach out for a greater level of private sector involvement including finance.
This financial strain has necessitated an increased level of Public-Private Partnership (P3) procurements as well as increased legislative activity at federal, state, municipal and county levels to enable evaluation and procurement of the private sector’s unsolicited proposals and tap into the creative abilities of the private sector. Teaming now has reached new dimensions where the design-build team now is dealing with new financial, operations, maintenance, and warranty partners with whom the private sector has, prior to now, not had to formally engage.
The Challenge
Many new challenges are posed to Owners to try to leverage their funding levels and they are now faced with trying to determine the proper balance of risk-transfer in these P3s and enhanced design-build procurements. Issues of dealing with various cultures, tax issues, and the security of our critical infrastructure are challenging Owners like never before.
The challenge to the Private Sector will be to take on more of an Owner’s mentality. Our private companies need to seek out the resolutions that will take on longer term solutions and in effect become mini-agencies of the Public. This will cause us to be re-evaluating a truer definition of quality, life cycle, safety and performance. Concurrently, Owners will also need to enlist not only the political support they need to see these projects successfully delivered, they will also need to create an equitable stakeholder environment allowing communications to develop among all affected entities enabling execution in a timely manner.
The Opportunity
Owners’ abilities to also tackle an equitable definition of “long-term benefit” are also creating a heightened contractual dialogue in their project development. This is giving rise to significant risk-reward discussion for elements such as environmental, permitting, right-of-way, and differing site conditions that have traditionally been risks held by Owners. The Owners who best embrace an equitable transfer of these risks will be those who will continue to attract competent, qualified private sector teams empowered to create positive solutions.
Similarly, bad news travels quickly and can taint or impede positive progress in using new tools to provide delivery of complex projects. In recent months, several large, US-based firms have incurred significant losses on large transportation projects leaving market doubt about working in certain areas of the Country or for specific Owners. Those Owners displaying the vision to seek win-win solutions will ultimately be those attracting the best Teams with the best solutions for the long term benefit of both the public and private sectors in the Transportation industry and others.
INFO: CH2M HILL (www.ch2m.com)