Key Criteria for Project Success
The AIAI Water P3 Toolkit is a resource to inform those responsible for procurement about the benefits of the P3 process in support of P3 water project procurements. To ensure success, we have pulled together key criteria that we have found leads to a successful project.
A leader, a champion of the cause is needed to stand up for the project and the model. Assess the candidate champion’s appropriateness. The champion can be:
- Senior Staff leadership
A P3 project needs a champion, on the political side as well as internal to the sponsor agency to ensure that the procurement has the support and direction needed to progress. Select an internal owner P3 champion. At the outset of the procurement, it is imperative to arrange processes and chains of command for project support throughout the process which includes a path to access Champions & Decision-makers.
Ideally, the Project Champion should be able to not only know all of the details pertaining the project, but also able to speak publicly and withstand what can be intense political adversity.
Be Outcome Focused.
Many times, local governments, water districts, or state offices begin the procurement process for a P3 before they have a clearly articulated idea of the true goals of the proposed project. Beyond begging a procurement for more capacity, or maintenance backlogs, the public owner of the project needs to determine the outcomes (the services to be delivered to the rate payers and end users – such as better water quality or more reliable service) and understand the project’s risk allocation.
Setting objectives is the critical first step for any partnership and is critical for promoting innovative, efficient solutions. Prior to engaging with the public or the private sector, the sponsor agency should examine its specific needs and desired outcomes for a project. These activities should be consistent with current proponent practices to provide the optimum development strategy of the private sector and on a practical level, to ensure that the outcomes are reasonably achievable. Overarching precepts:
- Provides an immediate and long-term solution.
- Connects effectively with the community of water users and water fee payers.
- Provides transparent review of all viable options.
- Accelerates delivery of performing assets with clearly understood risk.
- Mitigating risks to guarantee performance delivery for the contracted asset life and end of term conditions.
Public Outreach, Public Outreach, and More Public Outreach.
Manage and communicate with impacted communities. Many different community stakeholders can be impacted by any infrastructure project and those communities should be informed of those impacts as early as possible. When a project is being delivered as a P3, those communities will have even more questions and more information will need to be shared to address the any potential points of confusion that may exist around the P3 delivery model. The three most common points of confusion:
- A P3 is NOT privatization; ownership and control stay with public sector
- A P3 is NOT more expensive just because the private sector adds profit to the same costs as a public sector approach. This is due to the benefits of regular and fully funded maintenance.
- A P3 is NOT union-busting to lower labor costs. Innovative technologies and approaches bring much more efficiency than squeezing hourly labor costs.
The flow of information about a P3 project during conception, planning, procurement, and even operation phase should be controlled by the public sector owner. It is the owner who has the best and most direct communications link to the public at large. It is the elected and appointed officials from the owners’ side who are most accountable to the project users. The public owners should have a robust go-to-market communications plan to introduce the project to the users and stakeholders, and a plan to keep those informed throughout during the project’s planning and execution phases.
Establish performance-based criteria for the project.
Partnerships are only as good as the underpinning contract signed by both parties and that contract must contain mutually agreed and achievable performance-based criteria for project success. Disagreement, or lack of definition between the two parties as to what success looks-like, from the response time for customer service requests to gallons throughput treated, can lead to public outcries, default and untold costs. It is much better to have difficult conversations around performance before the contract is signed than after. When determining the performance-based criteria for a project the authority should examine the current standards and identify where changes need to be made to ensure the project will meet the need of the program and serve the best interests of the tax or rate payers. Higher performance standards or outcomes required of the P3 Contractor may increase costs to the owner over other service options. If these higher standards (and costs) are attributed only to the P3 project option, public opposition to the project will jeopardize success. The public owner should determine that higher standards are the desired outcome of the project before selected the procurement method. The stated goal of any water project should be higher standards and quality regardless of the procurement model. Dialogue during the procurement process of a P3 is highly encouraged to be sure that industry and the owner have a full understanding of outcomes that may not be achievable or are achievable at a high cost.
Similar to any complex commercial transaction, the sponsor should consider how the project may go awry, either during evaluation process and particularly after the P3 agreements are executed, as failing to deal with problems on a timely basis can be critical error. Remember that providing clean, dependable water to your community will still be your ultimate goal and duty.
Identify and communicate risks and responsibilities for all parties
Beyond goals and performance expectations, there needs to be an accounting of project risks – such as a risk register which identifies and assigns responsibility of risks and approaches to mitigate those risks between the partners, a true understanding of the costs associated with each risk. The risk register should be a robust document of all possible (known) risks that could impact the procurement, design, construction, financing, maintenance, and operation and transfer of a project. Many of those risks will have a remote possibility of occurring, and some will have no true mitigation, but the remaining risks – those that could or will be happening – then must be addressed and assigned to a partner.
Track progress, identify concerns, report and communicate.
A good P3 is based on regular communication – communication of good and bad news between the partners (public and private) on a regular, on-going, and informal schedule. This communication should touch all aspects of the partners from required reports, to informal updates, and general concerns. Communicating between parties should not need to involve external legal counsel.
It is critical that the entire team of all internal and external advisors and resources meet on a frequent basis and communicate and collaborate as they work through all the issues associated with structuring and delivering the project. They all need to know how the other issues are being addressed and resolved and how they impact each other.
Specified agreement on project oversight and delivery.
P3s will require dedicated ongoing sponsor agency resources to ensure project performance, goals and optimal asset lives are achieved. Identification of a person or team that will ensure the above is affected efficiently, timely, and with accountability.