How to use this white paper:
This white paper can be considered independently or as part of HNTB's public-private partnership white paper series, written to reflect the milestones in the life cycle of a P3. These papers are not intended to be exhaustive works but rather to trigger ideas and questions of how the topic might be applied to your agency's program. To learn more about P3s, contact Scott Smith, director strategic initiatives, at ssmith@hntb.com, or Tim Heilmeier, program director Georgia Department of Transportation Public-Private Program, at theilmeier@hntb.com.

Shifting from cruise control to a new business model

For decades transportation agencies have been able to function largely on cruise control, financing and delivering projects under the same policies, the same funding and financing sources, and the same design-bid-build method. As they enter the world of public-private partnerships, though, agencies are discovering they can no longer operate on autopilot. A vastly different way of doing business, P3s require the public agency have a cradle-to-grave understanding of every project aspect:

• Policy development
• Commercial positions
• Legal and financial components
• Risk identification and mitigation
• Design and construction, governed by performance specifications
• Operations, maintenance and life-cycle considerations

Many agencies aren't accustomed to goal-setting, risk-based decision-making or working with the private sector. It's a whole new ballgame. Thus, the first and most critical step to developing a successful P3 program is for the agency to transform the way it thinks about project delivery. It must drop the business-as-usual mindset and adopt a success management approach. The sooner an agency can adopt a success management model, the more it can influence outcomes.

Why is the agency pursuing P3s?
Perhaps the first question an agency should tackle is: Why are we pursuing P3s? Is it because the agency is committed to delivering optimal value for money? Is it because P3s are new and the agency wants to appear to be on the cutting-edge? Are outside forces, such as political pressures, the cause? Is there a conscious internal desire to monetize existing assets and use the funds for something else, as Indiana did with the Indiana Toll Road? Is it a deliberate attempt to transfer specific risks to the private sector? Or is it as simple as a need to keep debt from being recourse to the owner?

The answer could be a combination of factors, internal and external, and it is key to beginning a success management program on the right foot.

What will a successful P3 program look like?
After the agency determines the impetus for its P3 program, the next exercise is to envision the outcome. How does the public agency define success as it relates to the P3 program? More importantly, does that definition dovetail with other stakeholders' definitions?

The answers to these questions form the foundation of a strategic, well-executed P3 program.

Success can be defined in many ways and has different meanings, depending upon whom you ask. To a state department of transportation, for example, success could be leveraging a procurement, financing and/or delivery tool for a critical project that improves mobility and increases the organization's credibility. For a project manager, success may mean delivering a project on-time, on-budget and to the client’s satisfaction. To an elected official, success could be creating jobs, improving economic conditions and generating a high approval rating.

How can a transportation agency be assured that its P3 program ultimately will meet these diverse goals? Success management puts in motion a plan that identifies what success means to all stakeholders, manages uncertainty and delivers results.

A powerful starting point
Having a success management workshop early in the programmatic process is a powerful kickoff. Workshops provide a forum for stakeholders to identify strengths, opportunities, weaknesses and threats to the program.

To get all issues on the table and addressed early, agencies should strive for diversity in participants, inviting not only key members of the owner agency's team, but also external influencers, such as:

• Political leaders
• Federal partners
• Affected local jurisdictions
• Key business interests
• Experts on P3 program development, who can answer questions and help facilitate
• Other transportation agencies that have entered the market successfully and are willing to share their lessons learned

Sample workshop agenda items include:

• Developing and prioritizing program goals. Success management starts by collecting participants' visions of success and developing them into list of strategic program goals that clearly communicate the desired outcome. With these common goals in mind, stakeholders will recognize success when they achieve it. Acting as compass points, these overarching program objectives will drive every programmatic decision the public agency makes moving forward. They should be broad, 30,000-foot statements that will be as applicable in five years as they are now.

• Identifying and mitigating risks. After defining success, the group should address the risks. Risk management is another core component of success management. It begins by identifying all potential issues (both opportunities and risks), on a qualitative level, that may affect successful program completion. Programmatic risks might include:

- Lack of legal authority to enter into P3 agreements
- Public rejection of asset privatization
- Conflicts with the organization’s strategic objectives
- Lack of political support and education
- Managed expectations regarding projects, program volume and timing

Once identified, the risks and opportunities should be prioritized in terms of likelihood and impact. From there, the group can make recommendations for mitigation and allocation. This type of troubleshooting likely will be uncharted territory for agencies. It would be helpful for them to understand, vis-à-vis an advisory team, the risk allocation in precedent P3 deals and how that allocation has deviated from allocations made in design-bid-build delivery. Each agency also will need to undertake its own self-discovery effort to understand what risk allocation makes sense and brings value. Sometimes this speaks as much to the owner agency's philosophies as it does to the dollars and cents of risk assignment.

• Determining internal governance. Who will oversee the program internally, and who will be the program’s decision-makers moving forward?

• Retaining advisers. Do you need to retain outside counsel? Many transportation agencies find an in-house adviser or outside program manager invaluable as they wade through these unchartered waters. In either case, the function of this central figure is to help identify the pros and cons of each decision, as well as its ripple effect.

• Crafting a legislative agenda or a well-articulated legislative bill. Penning a legislative strategy early will allow the agency to proactively propose and support a bill that is empowering and implementable.

• Assembling the team. Who will serve on the internal P3 program development team? What characteristics, skills and experiences should they possess? How will their performance be evaluated?

• Evaluating educational needs. Does the internal P3 team have the knowledge and the resources it needs to build a strong P3 program? If not, how will the agency prepare these newly appointed team members? Is an education program needed?

• Identifying projects. What will P3s help the agency accomplish and what can’t they do? How will candidate projects be identified, evaluated and prioritized? How will the agency provide resources, such as human capital, program/project development dollars and project subsidies, in concert with its normal program needs? Setting expectations now will help avoid misunderstandings down the road.

Benefits of success management
Success management, applied early in the process, can:

• Identify program goals and provide overall direction
• Align program goals with key stakeholders
• Establish and communicate expectations internally and externally
• Enhance the public agency’s image
• Generate support from elected officials and other stakeholders
• Create efficient internal business practices
• Connect staff experts to the community/industry
• Identify programmatic risks and strategies to mitigate them
• Thoughtfully assign risk to parties best equipped to manage them
• Build confidence in the program among the private sector and the bond market

An ongoing management practice
Success management isn't a one-time event. There will be programmatic milestones when it would be advantageous for the public agency to employ the workshop technique, again. The first workshop will be programmatic in nature, but subsequent sessions could focus on identifying candidate projects or the risks of a specific project, where quantitative tools, such as Monte Carlo assessments can be applied. Another strategic place on the timeline would be upon selection of a private sector partner. A collaborative success management workshop to kick off the partnership could be invaluable in getting the relationship off to a productive start. Some of the same initial questions would apply but at a more granular level: What does a successful partnership look like to each party? What are the risks to the partnership?

No transportation agency begins a P3 program thinking it will not succeed. On the contrary, every P3 initiative begins with a degree of optimism and the belief the program will succeed. But launching a P3 program with a business-as-usual mentality will only bring the agency frustration and failure. By adopting the success management mindset early, the agency will be in front of issues rather than being surprised and sabotaged by them.

Additional resources
For more information about public-private partnerships, consult the following:

David Downs, HNTB Corporation
Vice President and National Program Management Consultant
(303) 839-8300; ddowns@hntb.com

Scott Smith, HNTB Corporation
Director Strategic Initiatives
(816) 527-2425; ssmith@hntb.com

Tim Heilmeier, HNTB Corporation
Program Director Georgia Department of Transportation Public-Private Partnership Program
(404) 946-5710; theilmeier@hntb.com

For a map of P3 activity in the United States, visit:
http://www.hntb.com/sites/default/files/P3_2011.pdf

Design-Build Institute of America
http://dbia.org/

The Federal Highway Administration’s website on public-private partnerships
http://www.fhwa.dot.gov/ipd/p3/index.htm

InfraAmericas
http://www.infra-americas.com

The National Council for Public-Private Partnerships
http://ncppp.org

Institute for Public-Private Partnerships
http://www.ip3.org/about-ip3.html

For other HNTB-issued papers and viewpoints on P3s, visit HNTB.com.

HNTB Corporation is an employee-owned infrastructure firm serving public and private owners and contractors. With nearly a century of service, HNTB understands the life cycle of infrastructure and solves clients' most complex technical, financial and operational challenges. Professionals nationwide deliver a full range of infrastructure-related services, including award-winning planning, design, program delivery and construction management. For more information, visit www.hntb.com.

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