Privatizing Public Infrastructure
This article in the Business section of the New York Times reports on how you may begin to see many of those public infrastructure projects turn to private funds for financing.
Private funds’ “strategy is gaining steam in the United States as federal, state and local governments previously wary of private funds struggle under mounting deficits that have curbed their ability to improve crumbling roads, bridges and even airports with taxpayer money.”
Chicago’s Midway Airport and the Flordia Turnpike are two projects that could be partially funded with private monies. From the article:
“This fall, Midway Airport of Chicago could become the first to pass into the hands of private investors. Just outside the nation’s capital, a $1.9 billion public-private partnership will finance new high-occupancy toll lanes around Washington. This week, Florida gave the green light to six groups that included JPMorgan, Lehman Brothers and the Carlyle Group to bid for a 50- to 75 -year lease on Alligator Alley, a toll road known for sightings of sleeping alligators that stretches 78 miles down I-75 in South Florida.”
But how will taxpayers take to this method of financing public projects?
“And then there is the odd romance between Americans and their roads: they do not want anyone other than the government owning them. The specter of investors reaping huge fees by financing assets like the Pennsylvania Turnpike also touches a raw nerve among taxpayers, who already feel they are paying top dollar for the government to maintain roads and bridges. And with good reason: Private investors recoup their money by maximizing revenue — either making the infrastructure better to allow for more cars, for example, or by raising tolls. (Concession agreements dictate everything from toll increases to the amount of time dead animals can remain on the road before being cleared.)”
There’s a need out there and limited money to do it. According to the article, the ASCE…
…”estimates that the United States needs to invest at least $1.6 trillion over the next five years to maintain and expand its infrastructure. Last year, the Federal Highway Administration deemed 72,000 bridges, or more than 12 percent of the country’s total, “structurally deficient.” But the funds to fix them are shrinking: by the end of this year, the Highway Trust Fund will have a several billion dollar deficit.”
“The prospect of steady returns has drawn high-flying investors” , but time will tell whether the investment will be worth the wait on return and whether the politicians can get the public’s support.
Read the full article here.
2007 Annual Survey of Owners Available On-line
The annual joint venture between CMAA and FMI conducts a survey of owners of capital and private projects, and the 2007 Annual Survey of Owners (the Eighth Annual Survey) is now available on-line through the CMAA website.
TheFMI/CMAA Owners Survey, which has become an industry defining and forecasting instrument, “is focused on how owners are accelerating the transformation of the construction process through the use of technologies to enable program management, collaboration, and effective communication strategies.” (page 6)
The report highlights 7 distinct drivers of the construction industry:
- Aging Infrastructure
- Aging Workforce industry-wide
- Struggle to Attrach Generation Y, and retain Generation X’ers and baby boomers
- Accelerated Schedules, globalization, and increased complexity in construction
- the Ability to Learn Alternate Delivery and Financing Systems
- Pressure to Meet Global Competition
- Investment in Purposeful Training
As in every Annual Owners Survey, the 2007 edition delivers a litany of information for the construction industry. Other highlights from the survey are asummaries of CM processes, enabling technologies, and the Use and Practice of Building Information Modeling (BIM). And a quote that sums up the survey best…
From W, Edwards Deming, “It is not necessary to change. Survival is not mandatory.”
Return to our blog to read more acrticles on these and other subjects related to the Construction Management Profession and the construction industry in general.
Construction Management Fact Sheet
The ConstructionManagement Association of America provides this fact sheet to define and explain the specialized profession of Construction Managment (CM).
You can also read this post for a further explaination of the CM profession.
Knoxville’s RiverWalk Like Chattanooga’s River Landing
They say that ‘imitation is the sincerest form of flattery.’ Based on that, the South Knoxville waterfront is going to be quite flattering to Chattanooga’s river front developments.
Josh Flory writes on Saturday’s (August 9, 2008) Knoxvillebiz.com about the similarities between the river front development planned for Knoxville and what has proven to be a success in Chattanooga.
A high-profile development team on Friday unveiled plans for a condo/restaurant project along the south shore, to be between the Gay Street Bridge and the James C. Ford Memorial Bridge, formerly the South Knoxville Bridge. Dubbed RiverWalk Landing, the venture would include approximately 60 condominiums as well as restaurant space, and would be developed by Cardinal Enterprises and Chattanooga-based KPH Development.
You can find out more about the South Knoxville Water Front developments at the city’s website.
Tips On Managing Change Orders
In the latest issue of CM Advisor (not yet available on-line), Lisa C. Sachs writes an informative artcile about managing the Change Order process for your projects.
Sachs spells out the three opportunities you have to “embrace the inevitable and minimize the pain.”
The first and best opportunity is in the pre-construction phase before the budget is fixed.
Perhaps, you or your firm was not involved in the pre-construction phase. Sachs states, “You can include language in the front end documents to at least mitigate the battles that will ensue.”
Finally, if the design and bid phases have passed you by without the proper Change Order management strategy in place, you can always make clarifications prior to the construction beginning.
Here is a brief summary of ways to manage the Change Order process and the phase of the project in which is would be best suited:
Design Phase
- Plan an adequate contingency
- Ensure that there are adequate soft costs
Pre-Bid Phase
- Include upfront language in the contracts balancing risk and costs
Construction Phase
- Request all information in preparation for Change Orders and agree on up-front costs
- Resolve schedule issues as they occur
The article goes into specific details that can reduce the amount of conflict and loss when Change Orders arise. Sachs explains how to implement them as part of an overall Change Order Management strategy, and the article is well worth a full read.
photo credit: Multiple fragments of tissue
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