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6 TH ANNUAL CONFERENCE

6 TH ANNUAL CONFERENCE. Performance Based Maintenance Approach P3 Projects. Overview of P3. Typically 30 to 50 year terms Significant Risk Transfer to the Private Sector Can be either Availability based or Demand based (toll roads etc.)

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6 TH ANNUAL CONFERENCE

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  1. 6THANNUAL CONFERENCE

  2. Performance Based Maintenance Approach P3 Projects AMOTIA Conference – October 2014

  3. Overview of P3 • Typically 30 to 50 year terms • Significant Risk Transfer to the Private Sector • Can be either Availability based or Demand based (toll roads etc.) • Guaranteed pricing for term (typically with indexation on the OM&R) • Guaranteed performance standards with penalties attached for non conformance • Prescribed hand-back conditions at end of term • Typically require equity investments from private financing sources • Financial security (L/C’s, Bonds etc.) is expected from subcontractors to backstop the risk transfer they’ve accepted AMOTIA Conference – October 2014

  4. Common Non P3-Related Risk Exposure – The issue to be solved AMOTIA Conference – October 2014

  5. Significant Risk Transfer – P3 Model P3 Procurement Example AMOTIA Conference – October 2014

  6. Value Proposition – P3; The Right “balance” is Key • Long term “Whole of Life” costs instead of just first cost construction • Good decisions during design process consider Value for Money and best investment approach • Results in lower whole-of-life cost (the “box” is smaller) • Provides outcomes that are guaranteed • Financial returns / abatement ensures alignment between private partner and owner Initial Construction Cost Maintenance Program Operations Rehab program AMOTIA Conference – October 2014

  7. Maintenance/Rehab approaches in the P3 model: • Innovation is encouraged by the P3 model. For example: • Pavement design can be looked at more holistically; a long term deal will include first costs, ongoing O&M costs, traffic projections and hand-back requirements in a performance based arrangement. It may pay to upgrade the initial design in order to reduce long term O&M and Rehab costs. • New products can be evaluated for longevity and applicable Construction, O&M and Rehab costing on a full contract term basis. Some examples of this are: LED lighting, Pavement markings, newly introduced polymers for the asphalt mix, etc. • Bridge designs and construction can be looked at from a “whole life” perspective vs only the construction costing. Examples of this may be bridge deck treatments, structural steel vs precast concrete etc. • To achieve the above, detailed lifecycle comparison models are developed for the entire term with final decisions being made based on lowest MAP or NPV analysis. AMOTIA Conference – October 2014

  8. Challenges • Pricing of oil based products for asphalt, equipment etc. • Technology changes – for example: • will oil based asphalt be available in 40 years and what will the cost be? If not, what will the new product be and what will that cost? • Lighting changes – we’ve seen many changes with LED lighting starting to become more prevalent. What will the next generation bring? • And what about the concept of the driving surface acting as solar collector to generate power or heat? Out there perhaps, but…. • Snow and Ice program costing – how do we handle those years when the volume of snow and ice is significantly more than expected? • Increased Traffic – we all know that Traffic projections are partly science, partly an art form. How do we manage that risk? • We know the above challenges face all of us in the room. The question is how do we work together to continue to manage that risk? • Finding maintenance contractors who can understand and manage long term contracts. The good news is we’re starting to see that ability be developed in the industry. AMOTIA Conference – October 2014

  9. Summary • P3 promotes innovation in design, construction, maintenance and rehab strategies • P3 results in transfer of risk from States, Counties, and Cities to the Private sector. AMOTIA Conference – October 2014

  10. Questions? AMOTIA Conference – October 2014

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