A Path Through the Current Confusion: Re-Establishing an Open Framework for Project Delivery and Finance in the United States

Part of the The Springer International Series in Infrastructure Systems: Delivery and Finance book series (ISDF, volume 101)

Chapter Summary

The re-emergence of alternative project delivery and project finance methods in the United States has generated a great deal of activity that can best be described as “self-promotion.” The Design Build Institute of America pushes design-build. The American Society of Civil Engineers pushes DesignBid-Build. The National Council of Public Private Partnerships pushes “Public Private Partnerships” or “PPP,” an undefined “delivery method” that often means restructuring public entities into public “corporations” or publicly controlled monopolies. The Reason Foundation advocates “privatization” often as a synonym for Design-Build-Operate and DesignBuild-Finance-Operate. Each organization and each approach to project delivery and finance has great merit. But, not one of these delivery methods offers a durable or a complete solution to long term infrastructure delivery and finance problems. At no time has America relied on a single project delivery method to produce the entire portfolio of infrastructure. (Chapter 3) The “competition” among groups to establish just one delivery method as “best” is just as futile and wasteful as the competition among Virginia, Maryland, Pennsylvania, and New York to be the “first”, “best”, and “only” productive route across the Appalachian Mountains. In fact, any infrastructure strategy that relies solely on a single project delivery method is sure to be inadequate in the long term.

Chapter 5 describes how another path through the current confusion can be established through a slightly different approach to the use of multiple project delivery and finance methods in an infrastructure portfolio. Rather than choosing among alternative delivery methods one project at a time, this chapter explores a better way to apply multiple project delivery methods across a network of projects. The example is Hong Kong, and how it assigned project delivery methods to each project with the entire portfolio of projects in mind. There are two keys to Hong Kong’s successful use of multiple project delivery and finance alternatives. First, the government (in our public and private lexicon, the Client) kept the basic responsibility of establishing at least a functional scope of work for every project in the collection. Second, the Client made its choice of delivery and finance method with the performance of the overall collection of infrastructure projects in mind.

These two principles — Client-defined scope and choice of delivery method in the context of the portfolio — are at the heart of the recommendations in Chapter 6 and 7.1 These principles also provide the foundation for continuing objections to the enactment of special legislation (or private procurement policies) that define Design-Bid-Build, Design-Build, Design-Build-Operate, or Design-Build-Finance-Operate in ways that prevent public and private Clients from freely mixing and matching project delivery and finance methods across an entire infrastructure portfolio.2 Private Clients, fortunately, are typically under no such statutory constraints.

Chapter 5 describes Hong Kong’s experience in the ten years between 1987 and 1997 with simultaneous use of multiple project delivery and finance methods to a portfolio of infrastructure projects. Hong Kong’s use of Design-Bid-Build, Design-Build, Design-Build-Operate, Design-Build?Finance-Operate, and Pure Operations and Maintenance was important in implementing a fast paced, large investment program to upgrade transportation systems at the same time that water supply, wastewater treatment, and solid waste disposal facilities were substantially extended and upgraded. Hong Kong followed the same Dual-Track Strategy3 to directly finance a group of transportation and waste projects, while simultaneously using an indirect approach to finance and deliver other elements of the transportation system (primarily tunnels and crossings), container facilities, and key elements of the subway system.

Hong Kong’s strategy between 1987 and 1997 is consistent with all the ten key elements set forth in Chapter 4. Pace was driven by the historical situation (turnover of the colony to the People’s Republic of China in 1997) and a crystal clear government commitment to strategic planning, to transparency (all projects were jointly reviewed and approved by the British, Chinese, and Hong Kong governments), and to competition. Privately financed projects (Design-Build-Finance-Operate) were generally large in dollar value. Competition for these contracts was conducted in ways consistent with the fundamental principles set forth in Chapter 4. The government, through private sector competition, confirmed both the technical and financial viability of projects. This competition was based upon a functional description of the project defined by the government in the Request for Proposals. The competition took place at a later point in project development, after the proposers prepared conceptual designs and drawings sufficient to establish fixed priced proposals for the entire contract scope. Life cycle costs, overall quality of service, and the qualifications of the proposing teams were the basis of the government’s strategy for producing “best value” on each project and “best value” across the entire portfolio.

Hong Kong’s experience demonstrates that simultaneous application of multiple project delivery methods is a powerful tool for Clients who need to find innovative ways to step up the pace of infrastructure renewal, maintenance, and replacement. Hong Kong adopted this successful, flexible strategy in response to a specific public crisis. The United States government used a similar strategy throughout the first 150 years of the Republic. Private Clients can make effective use of this strategy today. Chapter 5 ends with a basic question: is crisis a prerequisite to good infrastructure strategy?


Pearl River Delta Delivery Method Infrastructure Project Chemical Waste Project Delivery 
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Copyright information

© Springer Science+Business Media New York 2000

Authors and Affiliations

  1. 1.Massachusetts Institute of TechnologyCambridgeUSA

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