Chapter Summary
This Chapter presents a variety of tools, old and new, that systematically distinguishes among project delivery and finance methods. “Systematic” is the key. In today’s environment, there are too many “alternative” schemes to deliver public infrastructure, too many “acronyms” for these schemes (DBB, DB, PP, FT, CM-At-Risk, DBO, DBOM, Turnkey, Super-Turnkey, DBFO, BOT, BOO), and too little logic to distinguish among them. Tight public resources and taxpayer recognition that alternatives should be considered have produced a destructive environment in which self-interested groups argue for “their” form of experimentation, and in which “one-of-a-kind” procurements have become routine. Hidden in the background are a substantial decrease in the level of competition and a substantial increase in the costs incurred for the transaction (not the project, the transaction). Also hidden is the fact that in most “alternative” procurements, neither the owner, contractor, nor user is assured that better service, lower costs, or lower prices will follow.
The first tool presented in the chapter is a quadrant framework, which allows project delivery and finance methods to be systematically compared. Infrastructure projects have common phases that can be used to distinguish “segmented” from “combined” strategies for delivering projects along the horizontal axis in the quadrants. These phases are (a) design, (b) construction, (c) in-service operation and maintenance, and (d) replacement. The degree of integration of these phases is a reliable way to distinguish alternative delivery strategies. Design-Bid-Build, for example, is a fully “segmented” process, in which planning is provided prior to the procurement by the owner, design is separately obtained through a procurement for design services, construction is separately obtained through a second procurement, and operations and maintenance is typically self-performed by the owner. Design-Build-Operate is a fully “combined” process, in which the design, construction, and operation are integrated into a single procurement.
The source of project cash is used to distinguish “direct” from “indirect” strategies along the vertical axis in the quadrants. When the owner of the project applies its own cash resources (from its own pocket) to finance an infrastructure project, the project finance method is “direct.” When an owner structures the project so that the developer/contractor provides its cash resources to pay for the project, the project finance method is “indirect.” Projects may be financed through combinations of direct and indirect means. The public portion of such financing is commonly called a subsidy or a shadow toll. Ironically, public cash resources are typically obtained through taxes or user fees. Private cash resources are typically obtained based on the expected future receipt of user fees or consumer receipts. In the final analysis, most infrastructure projects are financed by consumers, users, taxpayers, or combinations thereof. The taxpayer’s “interests” are typically best served through stable, high quality service at competitive rates not by purely ideological arguments that revolve around control.
America has applied alternative delivery methods since 1789. Project delivery method has been a continuous variable throughout this period, and “segmented” strategies as well as “combined” strategies have been successfully employed, with numerous variations in between. Similarly, project finance method has been a continuous variable, and “direct” and “indirect” strategies have been used by Congress to allocate public resources and attract private financial resources to the development of infrastructure facilities. There is no standard project delivery method in American history and no standard finance method, although five key procurement strategies have emerged: Pure Operations and Maintenance, Design-Bid-Build, Design-Build, Design-Build-Operate, and Design-Build-Finance-Operate. The first three procurement strategies — Design Build Operate and Design Build Finance Operate — are “segmented” strategies, in which only one or two phases of the project’s life-cycle is procured. These are also “direct” strategies in which the owner provides the cash resources to complete this phase of the project. The latter two procurement strategies are “combined” strategies in which all phases in the project’s life cycle are procured at once. Design-Build-Operate is a “direct” strategy in which the owner either provides funding from its own cash resources, or commits user fees that it collects or controls to finance the project. Design-Build-Finance-Operate is an “indirect” strategy in which the producers of the project provide cash resources based on the expectation of future revenues collected from the project (typically user fees or development related revenues).
Sources and uses of cash for infrastructure brings us to the second tool described in Chapter 2: discounted cash flow (and net present value). Every infrastructure project requires money to plan, design, construct, operate, and replace an infrastructure facility. The money typically comes to governments from taxpayers and users and to private owners through operating revenues and debt. How this money is invested, and whether it is effectively spent, present more complex qualitative and quantitative questions.
The limitations of using net present value as a decision rule in making capital investment decisions are reviewed, but the importance of correctly modeling cash flows on public and private projects is confirmed. Consumers, taxpayers and users have a common interest in seeing Client resources spent productively — on planning, design, construction, operation, or repair — rather than on transaction costs associated with experimental, noncompetitive procurements.
Cash flow is an important tool that is widely ignored in the allocation of resources to infrastructure spending. Proper cash flow analyses of facilities (and collections of facilities) allow public and private sector owners governments to show taxpayers, consumers, users, and potential private sector producers how, why, and where receipts and user fees are spent on infrastructure services. Regrettably, for most public owners, the actual cost, by activity, of a public infrastructure facility is not known — to governments, legislatures, taxpayers, users, or to potential producers (such as designers, constructors, and equipment suppliers). Elaborate financial records show expenses — such as salary, equipment, supplies, and overhead — associated with entire collections of facilities. For most public owners, the actual cost of running and maintaining an individual facility — a school, a pumping station, a police station, a bridge, or a terminal — is purely guesswork. The harsh reality is that without a good understanding of current actual costs, by activity, it is not possible to correctly assess the incremental effect — positive, negative, or neutral — of any new project on the overall cost of a facility. It is this type of analysis that is needed to efficiently manage collections of facilities.
Examples of proper cash flow modeling of incremental revenues and incremental costs of projects are presented that allow infrastructure owners to make capital investment decisions with a clear picture of the effects on overall quality and cost. The concept of “opportunity cost of capital” is introduced along with the importance of constantly evolving technology, and our inability to accurately predict future events (“uncertainty”).
Most owners only “model” cash flow during initial delivery, i.e. design and construction. This is an easy task because actual cash flows are typically fixed by contract. These cash flow models ignore the cost of operations and routine maintenance (typically 90+% of total life cycle costs). Moreover, as each facility ages, annual operations and maintenance costs change due to increased requirements for repair and replacement of components, systems, and assemblies. Condition assessment (i.e., what repairs will be required when to keep the asset functioning properly) and activity based costs (i.e., what are the cost of operations and maintenance — historically, currently, and in the future) will continue to emerge as the key concepts in managing a portfolio of infrastructure assets.
Cash flows differ for each project delivery method; i.e. the amount and timing of cash required to produce the project are different for DesignBid-Build, Design-Build, Design-Build-Operate, and Design-Build-FinanceOperate. These differences create a significant opportunity for owners and producers of infrastructure that has largely been overlooked — the third tool described in the chapter. This opportunity — the simultaneous use of multiple project delivery and finance methods to improve portfolios of infrastructure assets — is described in more detail in Chapters 4, 5, 6, and 7.
These three tools — the Quadrant Framework, discounted cash flow analyses, and different cash flows for each delivery method — are the building blocks of a more comprehensive, competitive approach to infrastructure planning, delivery, and replacement. The emerging problem for owners of collections of infrastructure facilities is how to operate the portfolio. The key elements of this problem are to understand current activity costs, current condition, and the project delivery methods available to solve the problem.
The chapter also offers a “two-key” test for the proper application of project delivery and finance methods to a collection of infrastructure projects. Both “keys” are required in the analysis. The first “key” is the owner’s to apply, and is based upon a good understanding of the Owner’s expected cash flows (revenues and expenses) for each project, and for each project delivery method considered for use on the project. Only those project delivery methods that produce a positive net present value to potential producers can be selected by the Owner. The second key is applied by private sector producers, and is based upon an independent confirmation by private sector bidders of the existence of positive net cash flows for the project delivery method chosen by the Owner. The “two key” test reduces to this: an owner has an obligation before soliciting bids or proposals, to confirm that its choice of project delivery and project finance structure will produce a viable business opportunity to private sector producers. Private sector competition to confirm the government’s assessment is then a very useful check on the viability of each project.
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Notes
The software model is a decision support system called CHOICES © 1997, 1998 MIT.
Miller, J. B., “Aligning Infrastructure Development Strategy to Meet Current Public Needs,” Doctoral Thesis, Massachusetts Institute of Technology, Cambridge, (1995); Miller, J. B., “Toward a New American Infrastructure Development Policy for the 21st Century.” Infrastructure, Vol. 1, No.3, 1 (1996).; Miller, J. B., “Engineering Systems Integration for Civil Infrastructure Projects.” Journal of Management in Engineering, ASCE, 13 (No. 5 Sep/Oct) (1997).
Throughout the text, our viewpoint is that of the Owner, for reasons of simplicity and practicality. Procurement strategies focus upon the Public Owner/Private Section interface.
Design-Build-Finance-Operate franchises conclude with the transfer of the facility back to the government at a nominal charge, and in the condition of operation required by the terms of the franchise. In many parts of the world, such arrangements are called Build-Operate-Transfer franchises (or “BOT”). In this book, long-term franchises are described either as Design-Build-Finance-Operate or Design-BuildOperate. There are important distinctions between the two. The most significant is that DBFO includes no direct government cash funding for initial design, for construction, or for operations. DBO contemplates partial or complete funding by the government.
The trick, of course, is for the government to structure projects in ways that are consistent with the delivery and finance method chosen. Chapters 4 and 6 focus on these issues.
The quadrants are numbered in clockwise fashion, beginning with the first quadrant used by Congress in 1787. See Chapter 3.
Gordon, C. M., “Choosing Appropriate Construction Contracting Method.” Construction Engineering and Management, 120, No. 1(MAR. 1994), 196 — 210 (1994).
In this sense, American infrastructure has largely been “privatized” for two hundred years.
Certainly, such decisions may be properly labeled as “privatization”.
Miller, J. B., “Aligning Infrastructure Development Strategy to Meet Current Public Needs,” Doctoral Thesis, Massachusetts Institute of Technology, Cambridge, (1995)
The Interstate Highway Act of 1956, 70 St 374, 6/29/1956, authorized up to 90% of the cost of urban, primary, and farm-market roads to be paid by the federal government. As a condition of receiving 90% federal reimbursement, federal procurement rules had to be accepted by the states. Federal engineers ensured that the entire system was constructed. As originally enacted, neither city nor state officials had authority to eliminate portions of the system, or to change road alignments without federal approval. Funding, design and construction were segmented from each other. Construction cost rose from $4 million to $20 million per mile from 1959 to 1979. Lewis, D. L., “The Interstate Highway System: Issues and Options,” The Congress of the United States, Congressional Budget Office ( 1982 ). The IHS program is categorized as “directly funded,” since current federal appropriations were the source of the moneys granted to the states. The project delivery strategy employed is categorized as “segmented”, because the statutory and regulatory requirements of both grant programs tied state and local governments to federal acquisition standards that require separate procurement of the finance, design, construction, and operations elements.
USDOT. (1996). “Transportation Statistics Annual Report 1996.”, US Dept. of Transportation, Bureau of Transportation Statistics. USDOT. (1993). “The Status of the Nation’s Highways, Bridges, and Transit: Conditions and Performance.”, Report of the Secretary of Transportation to the United States.
Friedlaender, A. F. (1965). The Interstate Highway System, A Study in Public Investment, North-Holland Publishing Company, Amsterdam.
USDOT. (1990). “Highway Statistics 1990.” Publication No. FHWA-PL-91003, US Dept. of Transportation, Federal Highway Administration.
The Federal Water Pollution Control Act of 1972, 86 St 816, 10/18/1972.
EPA, H. (1996). “GICS Data Base, Region I.”, U.S. Environmental Protection Agency, Washington, D.C.
United States EPA(1975). “FWPCA Rules.” 40 CFR Parts 30, 33, and 35, 40 Federal Register 20232.
Stiefel, H. J. (1994). “The Effectiveness of Municipal Wastewater Treatment.” Civil Engineering Practice, Fall/Winter 1994, 49 to 72.
EPA, U. (1972). “FWPCA Conventional Treatment Rules.”, 40 CFR 35.970, Appendix E, §§4–6.
Federal (Quadrant IV) procurement rules accompanied federal/state funding. EPA’s May, 1975 regulations established a segmented, direct process for funding, designing, and constructing these facilities. 40 Federal Register 20232, May 8, 1975, at 40 CFR Parts 30, 33, and 35. The regulations prescribed the text of grant agreements, the contract clauses in municipal contracts with both engineers and construction contractors. Federal cost principles for direct contracts with the federal government were passed down to the municipalities. Federal regulations also set forth requirements for sewer use charges to be collected by grantees from users, the purpose of which was to produce sufficient revenues to cover maintenance and operations expenses during the useful life of each facility. As implemented, the Construction Grants Program was the equivalent of the Quadrant IV federal procurement system, except that it was operated by local grantees pursuant to governing federal regulations.
Stiefel, H. J. (1994). “The Effectiveness of Municipal Wastewater Treatment.” Civil Engineering Practice, Fall/Winter 1994, 49 to 72.
Friedlaender, A. F. (1965). The Interstate Highway System, A Study in Public Investment, North-Holland Publishing Company, Amsterdam
Jondrow, J., and Levy, R. A. (1984). “The Displacement of Local Spending for Pollution Control by Federal Construction Grants.” American Economic Review, Vol. 74, No. 1–2
Michael Porter’s concept of “value chain” is referenced periodically throughout this text as a useful description of how private sector firms structure their activities to improve performance with down-stream suppliers and up-stream customers, while constantly responding to their competitors. Porter’s three works on competitive advantage, competitive strategy, and national competitive advantage, and the competitive advantage of the inner city are very useful in understanding why and how firms are driven to respond as they do to opportunities in commercial markets. A major tenet of these works is that infrastructure procurement strategies can be productively altered to take advantage of these drivers in order to attract new methods, technologies, improved performance, and investment to public infrastructure portfolios. Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press, A Division of Macmillan, Inc., New York; Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, A Division of Macmillan, Inc., New York, New York; Porter, M. E. (1990). The Competitive Advantage of Nations, The Free Press, New York; Porter, M. E. (1995). “The Competitive Advantage of the Inner City
Reinhardt. (1996b). “Minnesota Fumbles on Toll Projects.” Public Works Financing, 10–11; Reinhardt. (1996c). “Muni Veto Kills MinnDOT Toll Partnership.” Public Works Financing, 4–5; Reinhardt, W. G. (1995b). “Minnesota DOT Gets Five Private Offers.” Public Works Financing, 4–5; Schriener, J. (1995). “Minnesota to Try Toll Roads.” Engineering News Record, 21.
Reinhardt, W. G. (1997). “Highway 407 Tolls to Begin.” Public Works Financing, 30.
Reinhardt, W. G. (1998a). “CHIC/Hughes Win Cross Israel Tollway.” Public Works Financing, 10–11.
Daniel L. Schodek, Landmarks in American Civil Engineering, 1987, MIT Press, The Massachusetts Institute of Technology, Cambridge, MA.
St 27, 5/17/1796, Act to Authorize Ebenezer Zane to Locate Certain Lands in the North West Territory.
Macgill, Caroline E., History of Transportation in the United States, 1917, Balthasar Henry Meyer, Series Editor, Published by Carnegie Institution of Washington, Washington, D.C., at pages 161 to 194.
MacGill, Caroline E., History of Transportation in the United States, 1917, Balthasar Henry Meyer, Series Editor, Published by Carnegie Institution of Washington, Washington, D.C.
/29/1806, Act to Regulate Laying Out the National (Cumberland) Road, 2 St 357.
Miller, J. B. (1995a). “Aligning Infrastructure Development Strategy to Meet Current Public Needs,” Doctoral Thesis, Massachusetts Institute of Technology, Cambridge.
/11/1848, 9 St 283; 1/20/1853, 10 St 152; 5/9/1856, 11 St 7.
Daniel L. Schodek, Landmarks in American Civil Engineering, 1987, MIT Press, The Massachusetts Institute of Technology, Cambridge, MA.
Clifton Hood, 722 Miles: The Building of the Subways and How They Transformed New York, 1993, Simon and Schuster, New York.
The RTC selected the flat price bid of John B. McDonald for $35,000,000, rejecting a higher priced proposal tied to a percentage of annual operating profits. August Belmont formed two companies, one to construct the system, and a second to operate it. McDonald was hired as a subcontractor to construct the works for his quoted price of $35,000,000. Clifton Hood, 722 Miles: The Building of the Subways and How They Transformed New York, 1993, Simon and Schuster, New York.
The arrangement with Belmont in 1899 is strikingly similar to the procurement by the Port Authority of New York and New Jersey of the new International Arrivals Building at JFK (See Chapter 4.).
/8/1901, 31 St 764.
/2/1905, 33 St 712.
After several similar power contracts were made, Stone and Webster Engineering Corporation of Boston became a shareholder and was engaged to supervise the overall effort. Edwin S. Webster became President of The Mississippi River Power Company.
Barr, G.W. (1913). Electric Power from the Mississippi: A description of the water power development at Keokuk, Iowa., Mississippi River Power Company, Stone and Webster Management Association, Keokuk, IA; Dille, E. K. “75th Anniversary Keokuk Dam and Power Plant.”, Keokuk, Iowa; Sweet, M. (1988). “The Real Power of Keokuk.” The Hawk Eye, Burlington, Iowa.
The Armed Services Procurement Act of 1947 (“ASPA”), 62 St 21, 2/19/1948; The Federal Property and Administrative Services Act of 1949 (“FPASA”), 63 St 377, 6/30/1949.
The Brooks Architect-Engineers Act, 86 St 1278, 10/27/1972, codified at 40 U.S.C. §§542 to 544.
G. L. Christian v. United States, 312 F.2d 418 (Ct. Cl. 1963 ).
Other grant programs in support of airport and transit improvements follow similar patterns.
NCPWI. (1988). “Fragile Foundations: A Report on America’s Public Works: Final Report to the President and the Congress.”, National Council on Public Works Improvement, Washington.
Federal Register 20232, May 8, 1975, at 40 CFR Parts 30, 33, and 35.
NAPCOO. (1994). “Hong Kong Airport Core Programme: The Vision Takes Shape.”, New Airports Projects Co-ordination Office.
Bernard Lam Moon Tim, J. P. (1994). “Personal Interview
Byrne, M. J. (1994). “Personal Interview,” Government Secretariat Works Branch.
Climas, J. (1994). “Personal Interview,” Government Secretariat Works Branch.
Lloyd, R. H. (1994). “Personal Interview,” Highways Department.
U.S. Code Annotated §1221. The definition of “capital assets” as “property held by the taxpayer” was embodied in the Internal Revenue Code of 1954. August 16, 1954, c. 736, 68A Stat 321. Another section of the 1954 Act, codified at 26 U.S.C.A. §263, makes capital expenditures by taxpayer non-deductible against taxpayer income.
Interstate Highway No. 70, a modern day limited access highway through the states of West Virginia, Ohio, Indiana, and Illinois provides a good example. The route was first followed in the 1700’s as an Indian trace across the Appalachian Mountains into the Ohio River valley. Since then, the transportation service along the route has been the subject of constant repair and replacements for over 200 years. Portions of the route were repeatedly reconstructed as Zane’s Road, as the National Road, as U.S. 40, and ultimately as I-70. Government has been arranging for transportation along the route for 200 years. The vehicles used on the route, the technology used to produce and protect the road surface, and the materials and structures used to cross rivers and streams along the way have changed significantly. But, government’s commitment to maintain the transportation service along the route has never wavered. The I-70 example is typical of government’s commitment to transportation, water supply, water treatment, wastewater treatment, and power. The American experience can be described as cycle-upon-cycle of capital re-constructions and improvements to existing facilities and services, generally driven by improved or new technology. This relationship - between advances in technology and changes in public infrastructure demands - is a recurring theme throughout this book. Policy analyses of public infrastructure often ignore the irrefutable lesson of American history that there will always be a better, more effective, higher quality, cheaper or more satisfying way to provide today’s services tomorrow. The unwillingness to include advances in engineering, construction, and technology in infrastructure policy analysis is a fundamental error. Numerous examples from American history are explored in greater depth in Chapter 3.
Gordon, C. M. (1994). “Choosing Appropriate Construction Contracting Method.” Construction Engineering and Management, 120, No. 1(MAR. 1994), 196 — 210; Miller, J. B., and Evje, R. H. (1998). “CHOICES: The Practical Application of Delivery Methods to Project Portfolios.” Construction Management and Economics (In Press).
See Chapter 3 for an in-depth discussion of the incremental segmentation of the design from the construction function in American infrastructure statutes between 1916 and 1972.
For example, the Foreign Service Buildings Act of 1926 gave the Secretary of State the option to separately retain qualified architectural and engineering services by negotiated contract, or to continue the practice of hiring design-builders. The State Department commonly uses Design Build processes in the delivery of diplomatic buildings overseas. 5/7/1926, Foreign Service Buildings Act, 1926, 44 St 403.
The Federal Acquisition Reform Act of 1996, P.L. 104–106, Laws of 104th Congress, Second Session, Section 4001 et seq., February 10, 1996. The two-phase Design-Build procedure is set forth at Section 4105 of the law, and has been codified at 10 U.S.C. §2305(a) and 41 U.S.C. §303M. The statutory requirements are implemented in the Federal Acquisition Regulation at 48 CFR Chapter 1, Subpart 36.3 §§36.300 to 36. 303–2.
See, for example, the Design Build Institute of America’s website: http://www.dbia.org/
See Chapter 3 for a detailed description of the historical uses of the various delivery methods in the United States.
Power. General Electric’s development of electricity throughout the South began toward the end of the 19t1í century in its own right, and was continued, between the early 1900’s and the passage of the Holding Company Act of 1949, by Electric Bond and Share Company (“EBASCO”). Many of the electric utilities of the South, including Louisiana Power and Light, Mississippi Power and Light, Arkansas Power and Light, are spin-offs of General Electric’s DBFO development of electric power. EBASCO has continued to operate independently, as a subsidiary of ENSERCH, and most recently, of Raytheon Engineers and Constructors. The conversion of these companies into regulated utilities after World War II, designed to control rates of return in monopoly situations, has converted at risk capital development by the utilities to guaranteed (but regulated) capital development risks. Changes in the federal regulatory scheme for power generation, and substantial development of electric generation capacity by Independent Power Producers throughout the 1980’s and 1990’s has now led to a substantial statutory change toward de-regulation of the power industry. The result will be a return to BOT methodologies throughout the power industry, driven by fierce competition to attract user customers with the lowest kilowatt hour delivered price. Telecommunications. In telecommunications, the regulated infrastructure monopoly was first seriously challenged by the court-ordered break up of ATandT in the early 1980’s. The dispute was fueled, in large part, by the desire of potential competitors to apply technological advances to long distance services. To attract customers with lower and lower telecommunications charges, competitors in the telecommunications market consistently used the DBFO project delivery method to procure and install key elements of high technology communications systems. Financing for capital projects is at the developer’s risk, securitized by burgeoning use of telecommunications services (phone, email, internet) and by the strength of the company’s balance sheets.
Brealey, R. A., and Stewart C. Myers. (1996). Principles of Corporate Finance, The McGraw-Hill Companies, Inc., New York.
Contractors submitting proposals to furnish and install this equipment will not analyze this project in the same way, nor should the City want them to do so. As we shall see, the difference is an important one, because it permits the City to test its estimates about overall cost and cash flow through competitive bidding. Contractors’ prices will vary depending on a number of factors, including, for example, material cost, equipment cost, skill in installation, and each bidder’s opportunity cost of capital.
Brealey, R. A., and Stewart C. Myers. (1996). Principles of Corporate Finance, The McGraw-Hill Companies, Inc., New York.
Think of “discounting” like this: if we want $1 million dollars one year from now, how much money do we have to invest now (in the market or in a bank). We compute this by dividing $1 million dollars by one plus the opportunity cost of capital (100% + 6%) for each year of our investment (in this case one year).
At least one formula is required in any book originating at MIT. This task is now complete.
Remember, the initial investment is a cost, and, therefore, negative.
Brealey, R. A., and Stewart C. Myers. (1996). Principles of Corporate Finance, The McGraw-Hill Companies, Inc., New York
NPV’s Competitors - Payback Period, Internal Rate of Return. Brealey and Meyers make a persuasive showing that Net Present Value’s competitors — Payback Period and Internal Rate of Return - provide poor substitutes as decision rules. The Payback rule is based on the notion that an initial outlay of resources must be recovered within some pre-determined cutoff period. Each potential project is evaluated on the time it takes for the initial outlay to be repaid. The problem, of course, is that positive cash flows that occur later than the cutoff period are ignored in Payback calculations. The Internal Rate of Return (IRR) of an investment is defined as that rate of discount which makes NPV = O. One problem with IRR is that a project will have multiple IRR’s whenever projected cash flow includes more than one change in sign during the period of analysis. In addition, IRR can produce confusing results when managers have to choose among mutually exclusive projects, which is often the case in public infrastructure systems. Brealey, R. A., and Stewart C. Myers. (1996). Principles of Corporate Finance, The McGraw-Hill Companies, Inc., New York.
The new airport in Denver, for example, experienced a significant change in the timing and amount of revenues in 1997, caused by the untimely completion of the airport’s baggage handling system.
Pickrell, D. (1989). “Urban Rail Transit Projects: Forecast Versus Actual Ridership and Costs.” DOT-TSC-UMTA-89–06, Urban Mass Transportation Administration (UMTA), Cambridge, Mass.; Pickrell, D. (1992). “A Desire Named Streetcar: Fiction and Fact in Rail Transit Planning.” Journal of the American Planning Association, 58 (#2), pp. 158–176.
Reinhardt, W. G. (1998). “Express Lanes Profits Delayed.” Public Works Financing, 10–11.
Reinhardt. (1996a). “Dulles Greenway: The Gods Must Be Angry.” Public Works Financing, 4–7; Reinhardt, W. G. (1995a). “Dulles Dancing Starts Early.” Public Works Financing, 7–8; Reinhardt, W. G. (1995b). “Dulles Greenway’s Unhappy Family.” Public Works Financing, 10–11; Reinhardt, W. G. (1996b). “Dulles Greenway Standstill Pact.” Public Works Financing, 14–15.
Brealey and Myers (1996). “Principles of Corporate Finance.” McGraw-Hill, New York.
But, not without opposition from whalers and candlemakers, who saw their markets threatened when the City of Baltimore awarded Rembrandt Peale with a charter (a DBO franchise) to introduce gas lighting to city streets. Granick, Harry. Underneath New York, Fordham University Press, New York, at page 62.
See Chapter 3 for a summary of federal statutes that moved the mails from sailing vessels to steamships. For two sample statutes, see: 2 St 805, 2/27/1813; 11 St 101, 8/16/1865.
Schodek, Daniel L. (1988). Landmarks in Civil Engineering, MIT Press, Vol. 1, at pages 308 to 315. Goodrich, Carter. (1960). Government Promotion of American Canals and Railroads, 1800–1890. New York, Columbia University Press.
Gorton Carruth, The Encyclopedia of American Facts and Dates (Ninth Edition), 1993, HarperCollins Publishers, Inc., New York, at pages 265 and 275. A transcontinental telegraph link between Washington, D.C. and Sacramento, California, was first established on October 24, 1861, when the lines of the Overland and the Pacific telegraph companies were connected at Fort Bridger, Utah. The Pony Express began operations between St. Joseph Missouri and Sacramento in April, 1860.
Described in more detail in Chapter 3.
The designers, constructors, financiers, manufacturers, and operators providing services and equipment to CLIENTS will make their investment decisions based upon a different basis, dependent only in part on receipts from CLIENTS.
Of course, depending on the project, speed may be: (a) the only significant factor (a court ordered clean up of Boston harbor), (b) one of several significant factors (the rehabilitation of a middle school in Winchester, MA), or (c) an insignificant factor (the restoration of the Boston Public Library).
Miller, J. B. (1995a). “Aligning Infrastructure Development Strategy to Meet Current Public Needs,” Doctoral Thesis, Massachusetts Institute of Technology, Cambridge.
Miller, J. B. (1995b). “Infrastructure Systems Case Study Program.” MIT, Cambridge, MA. Every project is different, and every delivery method produces different results as well. The year savings of time between DBB and DB arises primarily from streamlining the design/construction interface. The additional year’s savings between DB and DBO/DBFO also arises from procurement requirements: the fully integrated delivery methods require governments to complete more of the project planning function before the RFP, such as permitting, fare structure, etc. Projects move very quickly when DBO and DBFO are properly structured, completed and awarded. Miller, J. B., and Evje, R. H. “Life Cycle Discounted Project Cash Flows: The Common Denominator in Procurement Strategy.” First International Conference on Construction Industry Development, Singapore, 364–371.
In fact, we know that public benefit is not only measured by dollars. Our goal, however, is a much more important one. Our goal is to get the numbers out of the way of decision-making by substantially improving our ability to predict cash flows for a variety of projects across the entire collection of Metropolis’s infrastructure projects.
Quick delivery necessarily implies an earlier start towards obsolescence. In essence, the quarterly operations and maintenance cash flow profile is pulled to begin at an earlier date.
One can imagine circumstances where a different conclusion would be reached. For example, completion of Project B is a condition precedent for a developer to obtain a permit to develop a private project on the same or an adjoining site. A couple real examples illustrate the point: Project B is a subway station on Yonge Street in Toronto, with a direct entrance to a major department store in the City, or a subway station in Washington, DC, with a direct entrance to a major office building several blocks from the White House.
Guaranteed“ in the sense that contractor’s bids represent the bidders best estimate of costs and contract revenues associated with the project, with a mark-up for overhead and profit that is acceptable to the bidder. Government agrees, by awarding a DBB or DB contract to pay contract funds in exchange for proper completion of the work.
Recall our definition of DBFO (or BOT) that excludes any government direct financing of initial or operating cost. DBO is defined to include fully subsidized and partly subsidized performance of design, construction, and operations services.
Brealey, R. A., and Stewart C. Myers. (1996). Principles of Corporate Finance, The McGraw-Hill Companies, Inc., New York.
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Miller, J.B. (2000). Three Tools for Managing an Infrastructure Portfolio of Capital Projects and Services. In: Principles of Public and Private Infrastructure Delivery. The Springer International Series in Infrastructure Systems: Delivery and Finance, vol 101. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-6278-5_2
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