For many facility management (FM) companies, pursuing public-private infrastructure projects, also known as P3s, can be a daunting journey. The process leading to the selection of a design-build-finance-maintain (DBFM) consortium is often long and requires a major commitment of operational and business development resources. While the maintenance partner is only partially responsible for a team’s winning bid, it can have a major hand in a team’s failure to qualify or proceed to financial close.
By making the following 12 considerations, FM companies can set the stage for a successful P3 pursuit.
1. Financial stability
Demonstrating a position of financial stability is the critical first step. This can be a non-starter if the requisite team financing isn’t in place or has significant flaws.
As the maintenance service provider for a P3 pursuit, the FM company must demonstrate at the qualification stage that it has the ability to carry the FM responsibility over the long term. This is typically done through the submission of its audited financial statements, combined with a letter of credit or parental company guarantee. Many times the consortium team will also require FM participation in a credit-ratings presentation to a ratings agency such as Dun & Bradstreet or Standard & Poor’s.
2. Reference projects
It’s critical that all DBFM team players choose their reference projects with the utmost care. Clients should recognize the direct parallels between a company’s past and current work and the project they are tendering. Clients will assess the size, function, geographic area, and operational mandate of the projects an FM company showcases during the request for quotation (RFQ) stage.
3. Dedicated resources
P3 pursuits are lengthy endeavors often involving 45-day RFQ periods and eight or more months of request for proposal (RFP) preparation. Throughout the process, team integration, design progress, legal agreement reviews, commercially confidential meetings, pricing and technical response write-ups place significant demands on resources. It may be tempting, due to conflicting priorities, to fully or partially reassign operational or business development resources halfway through the process.
Remember that the resources build knowledge and familiarity as they work their way through a project. Reassigning resources will require the new participants to learn and catch up on everything that was dealt with prior to their arrival. Switching resources also sends a negative message to both the DBFM team and the client that an FM company’s commitment to this pursuit may be wanting.
4. Team member expertise
P3 pursuits are true team efforts. Members of a DBFM team are assembled based on the fit of their specialized knowledge and related project experience. Leveraging the expertise of each specialist can turn a good solution into a great solution. Long-term maintainability is important, but so are the efficiency and aesthetics of design, the quality of construction, the effectiveness of building mechanical-electrical systems and the right project-financing package.
5. Negotiating window
The long-term nature of a P3 pursuit underscores the criticality of understanding contractual commitments. Reviewing the legal documents should be a total company effort, using its subject matter experts in areas including human resources, information technology, procurement, operations and legal. Any issues worth challenging must be done during the review window. Project and interface agreements will define the next 25 to 30 years or more.
6. KPI regime
Similarly, key performance indicators (KPIs) will define the service expectations for the duration of the contract. Timeliness of service, quality of service and availability of space can be the difference between an FM company making an annual profit on a facility and placing itself in a position of being liable for service penalties.
7. Risk profile
One of the main reasons governments pursue P3s is to transfer operational risks. These risks can take many forms, including health and safety, legal and contractual issues, labour costs, and materials procurement availability and costs.
An example of a procurement risk might be the cost of rock salt escalating in a particularly icy season for the maintenance company who has the contract for a major highway. Also consider the risks associated with service failure such as the quality or timeliness of janitorial work that causes a section of the client facility to be shut down. Lifecycle/asset renewal risk may occur when there is a pre-mature major asset failure such as an early generator breakdown.
Create a risk register which lists risks that could occur during the operational term. Most risk registers list a description of each risk along with an assessment of potential severity of the risk consequence, along with the probability and manageability of each risk. It’s also good to assign a risk owner and outline a mitigation plan for each risk. Once complete, the risk register becomes a living document and is updated throughout the operational term.
Understanding risk ensures that all eyes are open to potential costly situations and that the proper mitigation plans are in place.
8. Stakeholder interests
Like any major pursuit, P3s need to be sold not only to the ultimate client, but also to an FM company’s own internal management team, each member of which has an area of focus. Discuss issues and expectations with all stakeholders throughout the process to ensure that the final service solution addresses their concerns.
9. Deliverable dates and critical paths
Although P3 pursuits appear to be long-term endeavours on the surface, complacency can be a major error. There are many deliverables for all team members that, if not met on an agreed time, can seriously impact the delivery of dependent activities. Make sure operational deliverables get done on time and raise concerns if there are late non-operational deliverables that will impact the delivery of the FM company’s operational solution.
10. Technical response
The technical response, which in essence describes all aspects of the FM solution, will drive the scoring that makes or breaks the service provider portion of the pursuit. It needs to be detailed and compelling to the reader.
11. Operational solution
Make major building asset decisions with a whole life/present value mindset. Low-cost assets that require more frequent lifecycle replacement over the course of the operational term may not ultimately yield the lowest net present value (NPV). Understand the cost and manufacturer’s recommended asset life and do the math for at least the major building assets.
12. Price and profit
From the point a team qualifies for a P3 competition, cost will likely be a major factor leading to a successful bid. Increasingly competitive P3 pursuits are challenging profit margins. Once won, careful management of a P3 facility contract from both a cost and KPI perspective will be crucial to maintaining a profit over the long term.
Notwithstanding the challenges that need to be overcome, a winning P3 pursuit can provide an FM company an opportunity, from the earliest conceptual phases of infrastructure planning, to contribute recommendations to a design-build team that will facilitate the development of an effective, long-term maintenance and asset-renewal solution. Moreover, if done right, success in P3 pursuits will provide the FM provider with a steady source of revenue for 25 to 35 years.
Robin Stewart has provided FM representation for 15 P3 bids and is currently an account manager at Cofely Services, a division of GDF-Suez. He has more than 30 years of client-side and service provider-side operations & maintenance experience including proposal management, operational solution development, proposal writing, project risk assessment, facility operating expense modelling, lifecycle asset renewal modelling, due diligence and mobilization support.
